Formation of Company

The formation of company is not an easy job. A number of steps need to be taken for the formation of a public company. However, these are split up into three stages

  • Promotion
  • Incorporation and
  • Commencement of business.

 

(1) Promotion of a Company

The important steps in the promotion of a company are (1) Discovery of business idea (2) Investigation of the business project (3) Verification of the results of investigation. (4) Chalking out a definite course of action for establishing a company (5) Financing of the business.

 

(2) Incorporation of a Company

In the second step of formation of company, the promoters have to prepare and file a number of documents with the registrar for the incorporation of a company. These documents are as under:

  • The memorandum of association
  • The articles of association
  • Notice of the address at which the registered office of the company will be situated
  • A statutory declaration by the secretary or a chartered accountant that all the provisions of the Companies Act
  • Original copies of the receipted challans in respect of payment of duty on share capital and the prescribed filling fee.

 The above documents when submitted must be accompanied with requisite filing fee. The registrar on receipt of all the documents will scrutinize them. If he is satisfied that the requirements of law have been fully met with, he will register the company on the Register of Companies and issue a certificate of incorporation. The certificate of incorporation is a proof of the fact that all the requirements of the Companies Act have been complied with.

 

Documents to be filed after Incorporation

After incorporation, the following documents are to be filed with the registrar. (1) A list of persons along with addresses who have agreed to act as directors and their consent to do so within 7 days of the issue of certificate of incorporation. (2) The address of the office of the company within 28 days of the incorporation of the company. (3) Prospectus on or before the date of its publication.

 

(3) Commencement of Business

In last step of formation of company, a private limited company can commence business on receipt of certificate of incorporation. A public company has, however, to wait to commence business till a certificate of commencement of business is received from the registrar of the joint stock companies. The certificate of commencement of business is granted on fulfilling the following a few other requirements.  Where prospectus has been issued inviting the public to subscribe for shares:

(a) Shares payable in cash have been allotted to the amount of minimum subscription.

(b) Every director of the company has paid the full amount of the shares payable in cash.

(c) There is no money liable to be repaid to applicants for shares which have been offered for subscription.

(d) A statutory declaration by the chief executive or one of the directors and the secretary that the aforesaid conditions have been complied with.

 The registrar on being fully satisfied that:

(a) the verified declaration has been filed and

(b) all other requirements of the Ordinance have been complied with, will issue a certificate called, “certificate of commencement of business”. On receipt of this ‘certificate’ a company is entitled to commence business. A company which has not issued prospectus shall have to file ‘a statement in lieu of prospectus’ for getting the ‘certificate of commencement of business’.

 

>>> Read about Legal Documents of Joint Stock Company

References

Ch., M. A., & Afzal, S. (2010). Advance Accounting. Lahore: Azeem Academy Publisher and Booksellers.

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