In a legal world, it is best for a company to get registered after its incorporation. In a way, Incorporation and Registration go hand in hand as an unregistered business cannot claim many benefits like taxable claims. The company cannot even file a suit against any third parties.
Formation and Incorporation of Company
We see an unregistered company faces many disadvantages, thus companies get registered under The Companies Act 2013 or any other recognized statutory act.
To register and incorporate a company, an application needs to be filed with the Registrar of Companies. The application is to be accompanied by the names of the members, memorandum of association and articles of association and other important documents. These are also required to be filed with the Registrar of Companies (ROC) of the state in which the company is proposed to be incorporated.
The Mentioned Documents are to be filed with the Application for Registration and Incorporation:
Memorandum of Association (MOA)
Articles of Association (AOA)
The agreement, where the company agrees to enter into any appointment of managing or full-time director.
A copy of the letter where the ROC intimates the availability of time
The documents that mandate the payment of registration and filling of the fees
The documents that mention the directorship and location of the office of the company
A declaration that the company has already complied with all the rules of the Companies Act.
When all these requirements have been complied, the Registrar of Companies (ROC) registers the company and issues a certificate of incorporation in regards to the company that brings the company into existence in the eyes of law, as a legal entity in India. This makes the company bound to all Indian laws and regulations as are applicable to other domestic companies.
Stages of Formation of a Company
There are a few leading steps in the formation of a company. The steps are as follows:
Step 1 – Promotion of a Company
The most important step is the forming of a company, here the promoter talks about the ideas and further business-building process.
Step 2 – Registration of A Company
This is the legal part of the formation process as there is a lot of data, paperwork, relation with people, memorandums, declarations that must be involved.
Step 3 – Certificate of Incorporation
After all the legal formalities, the company need to start functioning, and this validity is provided in this stage
Step 4 – Certificate of Commencement of Business
After receiving the certificate of incorporation, they can now start their own business.
This summation of the formation of a company is a quick version of reality. However, this is the view of how a company is formed.
“A promoter is the one, who undertakes to form a company with reference to a given object and sets it going and takes the necessary steps to accomplish that purpose,” Said by Justice C.J. Cokburn. A promoter devises an idea setting up a business in a given place. He performs various formalities which are required for starting a company. A promoter may be an individual, firm, association of persons (AOP) or a company. A corporate’s promoter is a firm or person who does the preliminary work (initial work) in relation to the formation of a company. This includes its promotion, incorporation and inviting people to invest money in the company, at the time of its formation. An investment banker, a stock promoter or an underwriter may, wholly or in part, perform the task of a promoter. Promoters generally guarantee a duty of utmost good faith, to not fraud any investors and disclose all facts about the company's business.
Types of Promoters
There are importantly three types of Promoters, which are mentioned: -
These promoters are not engaged in the promotion work on a regular basis. They take up the promotion of companies and once it is complete, they resume their original profession.
They act as both promoters and entrepreneurs. They develop the idea of a new business unit, do the base work to build it and may subsequently become a part of the management.
Financial institutions, like investment banks or industrial banks, might take up the promotion of a company to find investment opportunities.
A promoter is the main creator of the business, Discovery of a business idea, Detailed Investigation, Assembling the factors of Promotion, entering into preliminary contracts are the duties of a promoter. A promoter starts a business from scratch.
As in the first stage of company promotion, a promoter formulates new ideas and makes an assessment of the capability of a particular aspect of the business be it technical feasibility or financial feasibility. In a detailed investigation, he investigates the profitability and prospects of the growth of the proposed activity. Here, he may seek the help of specialists such as lawyers or accountants. If the business is promising, he undertakes the risk of forming the business, he takes steps to arrange various factors of production like the land, labour or capital. The promoter also may enter into legal contracts with third parties for the registration of a company. Even the promoter has to select a distinct, non-identical and specific name for the company.
Thus we see how the promoters are important for the company.