HomeCompany Law

Introduction, Stages, and Conclusion of Formation of a Company

Introduction, Stages, and Conclusion of Formation of a Company
Like Tweet Pin it Share Share Email

The formation of a company is a very broader concept. The process and legal formalities for establishing a particular company in own or another country are passed from different stages. The stages and formation of company notes are:-

  • Promotion stage of company formation,
  • Registration or Incorporation stage of company formation,
  • Capital Subscription stage of company formation,
  • Commencement of business stage of company formation.

Introduction of Formation of a Company-

Formation of a Company

Image Source: Pixabay.com

The introduction factor is a very major factor to determine the procedures and process of incorporation of a company.

In this, the first step of Formation of a Company is to prepare valid documentation called a Memorandum of Association (MoA). MoA of any company involves valid fundamental conditions so that the nature of a company can be easily ascertained.

Under the Formation of a Company Act 2013, it is assumed that every company has its Memorandum documentation because it is also the charter of the company. If seen, the company’s MoA works to keep their external affairs in control while the Articles of Association (AoA) of the company works to keep control of the internal affairs of the company.

At the time of registration of the company, there are certain conditions which require the approval of the Registrar for the purpose of company’s registration. In order to fulfill the registration, the company will have to include its name and headquarters where it will be located in its documents, after that, they will get an order to get their company registered.

At the time of formation, they will also have to tell that our company is a public limited company or a private limited company.

As you know, the Memorandum has a very large legal document so that we also called the charter of the company and the principal document of the company. Likewise, no company can register without the Memorandum of Association, because it helps to describe the rights and objects of the company.

According to the Companies Act 2013, Memorandum of Association (MoA) is a very important document for any company because this document contains various legal documents like members names, signatures, address, and their holding shares also.

Stages of Formation of a Company-

Image Source: slideplayer.com

The stages of formation of a company are also known as process and procedure of incorporation of a company.

  1. Promotion Stage,
  2. Registration or Incorporation Stage,
  3. Capital Subscription Stage,
  4. Commencement of Business Stage.

The 4 Stages of formation of a company are:-

1.Promotion Stage-

This is the first stage of Formation of a Company and the word promotion refers to the allocation of various activities designed for a particular company or enterprise. At the time of this stage, the company needs a lot of things for the establishment like capital, property, business objects, efficiency, and so on.

The persons, who initiate the particular business or company are known as promoters and any promoter need will-power, capacity, diligence, courage, foresightedness to start a business and become successful.

Promotion of a company is the combination or sum total of all the activities related to the incorporation of a company. The promotion stage includes various stages to fulfill the desired results of the first stage:-

(i) Discovery of an idea-

Discovery of an idea means finding or thinking about a particularly new idea for establishing the new business. This step is a very important step to initiate or expand the new business because it helps to provide the framework attitude of the new business.

(ii) Take action-

(a) Detailed Investigation-

After the time of initiation, the promoters reached the investigation stage for collecting the particular source of data from the market.

(b) Assembly of necessary materials-

After the time of the investigation, now is the time to assemble the resources of the company and keep it in a safe place and prepare it for your company’s formation.

2. Registration or Incorporation Stage-

This is the second stage of formation of a company and at this stage, it is compulsory to decide the name, location, and legal documentation of the company. This stage is very important because, in this stage, the companies transfer our legal documents to the registrar office at the registrar of the company.

Procedures for Registration of a Company-

At the time of registration, there are various legal documents required for the incorporation of the company. The documents are-

(i) Memorandum of Association-

Memorandum of Association (MoA) is a document that is seen as a very important document for any company. This document is required at the time of the incorporation of any company. In this document, the proper description of a seal of the company and its member’s names, address, professions, signatures are the most necessary.

If any company does not have its memorandum then it will not be allowed to do the registration. As we know, the memorandum of the company is an important document which we also know as the charter of the company and it also helps to identify the rights and procedures of the company.

Clauses or Contents of Memorandum of Association-

  1. Name Clause,
  2. Domicile Clause,
  3. Objects Clause,
  4. Liability Clause,
  5. Capital Clause,
  6. Subscription Clause.

(ii) Articles of Association-

Articles of Association (AoA) is another important document that is necessary for any company to at the time of establishment. It also includes the internal and sub-internal rules of the company, which are made for the fulfillment of the works explained in the memorandum document of the company.

When a company is registered, then it is very important to have the Articles of Association, and it is also very important to have the Memorandum of Association because these two reflect the nature and scope of any company.

(iii) Other Agreements-

After both documents, the promoters of the company submit the other documents along with MoA to the registrar office. So, the other agreements are:-

  • Promoters give the notice of the location of the authorized officer of the company.
  • Indicate proper knowledge about the directors,
  • Provide necessary signed articles to the registrar office from each director of the company with their full address, name, and signatures also.

3. Capital Subscription Stage-

This is the third stage of Formation of a Company and in this stage, the promoters of the company will decide the capital structure of their company because managing any company for their capital is an important task.

The private company can deposit its capital from limited members by the company but the public company has to observe with the varied legal rules for the collection of capital.

After this, the question arises, from where to collect the capital? The answer is that The company runs many advertisements around the public, issuing a prospectus for the public, and inform in the share market for the collection of capital.

4. Commencement of Business Stage-

This is the fourth stage of Formation of a Company and it means, at this stage, the company gets a legal approval certificate from the registrar office for the purpose of running a specific company or business. When a company’s legal documents are verified by any registrar under section 149(1) and section 149(2), then the company gets a legal certificate to run the business.

This legal certificate is also known as “Certificate of commencement of Business“.

Conclusion of Formation of a Company-

Conclusion of Formation of a Company

Formation of a Company is a procedure of incorporation of a company. It includes various factors and legal documents for the purpose of incorporation. At the time of establishment, there are two documents play a very important role. Those documents are Memorandum of Association (MoA) and Articles of Association (AoA).

Thus, the Formation of a Company in Company Law includes various major stages for fulfilling the procedure of incorporation. Without these stages, the company cannot be formed and run.

Comments (2)

Leave a Reply

Your email address will not be published. Required fields are marked *