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The formation of a company goes through a number of steps, starting from idea generation to

commencing of the business. This whole process can be broken down into 4 major phases or
steps, which we will be discussing in the lines below.

The major steps in formation of a company are as follows:

1) Promotion stage
2) Registration stage
3) Incorporation stage
4) Commencement of Business stage
5) Also see: Kinds Of Companies

Let us discuss these steps in detail.

Promotion Stage: Promotion is the first step in the formation of a company. In this phase, the
idea of starting a business is converted into reality with the help of promoters of the business
idea.

In this stage the ideas are executed. The promotion stage consists of the following steps:

Identify the business opportunity and decide on the type of business that needs to be done.
Perform a feasibility study and determine the economic, technical and legal aspect of executing
the business.
Interest shown by promoters towards the business idea and supply of capital and other necessary
procedures to start the business.
Registration stage: Registration stage is the second part of the formation process. In this stage,
the company gets registered, which brings the company into existence.

A company is said to be in existence, if it is registered as per the Companies Act, 2013. In order
to get a company registered, some documents need to be provided to the Registrar of Companies.
There are several steps involved in the registration phase, and are as follows:

Memorandum of Association: A memorandum of association (MoA) must be signed by the


founders of the company. A minimum of 7 members are required in case of a public company
and 2 in case of a private company. The MoA must be properly registered and stamped.
Article of Association: Article of Association (AoA) is also required to be signed and submitted.
All members who previously signed MoA, should also be signing the AoA.
The next step is preparing a list of directors which should be filed with the Registrar of
Companies.
Directors of the company should provide a written consent agreeing to be directors, should be
filed with the Registrar of Companies (RoC).
The notice of address of the office needs to be filed.
A statutory declaration should be made by any advocate of either the High Court or Supreme
Court, or a person of the capacity of Director, Secretary or Managing Director. This declaration
shall be filed with the RoC.
Certificate of Incorporation: Certificate of incorporation is issued when the registrar is satisfied
with the documents provided. This certificate validates the establishment of the company in the
records.

Certificate of commencement of business: Certificate of commencement of business is required


for a public company to start doing business, while a private company can start business once it
has received the certificate of incorporation.

Public companies receiving the certificate of incorporation can issue prospectus in order to make
the public subscribe to the share for raising capital. Once all the minimum number of required
shares have been subscribed, a letter should be sent to the registrar along with a bank document
stating the receiving of the money.

The registrar will issue a certificate upon finding the provided documents satisfactory. This
certificate is known as certificate of commencement of business. The company can start business
activities from the date of issue of the certificate and the business shall be done as per rules laid
down in the MoA (Memorandum of Association

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