What Are the Various Stages in the Formation of a Company

A business cannot function without capital. Just as food is necessary for the survival of a human body, sufficient capital is also necessary for the survival of a business and the creation of a business. After incorporation, one of the most important steps is to organize the financing of the company. There are various sources of funding such as private equity, venture capital, bank loans, etc. However, the best known and most widely used source is to obtain capital from the public. It refers to the process by which the company came into being. This involves filing various documents with the Registrar of Companies (ROC) for the incorporation of a company. Image: 4 Important Steps in Company Formation Upon completion of the above formalities, the directors of the corporation submit a copy of the “prospectus” to the Registrar and invite the public to subscribe for the shares of the corporation by circulating the “prospectus”. 2. Articles of Association: AOA contains the internal management rules of the company. A public corporation may adopt Table A, which is a model set of elements specified in the Companies Act.

Table A is a document that contains rules and regulations for the internal administration of a company. If a company adopts Table A, it is not necessary to draw up separate articles of association. Of course, a business can`t just set up; One or more people need to start the business. Therefore, it must be promoted in order to exist. If something is to be promoted, it must also have a promoter. The promoter is the individual who conceives the idea of education and then takes steps to launch the business. Once a private company has received the certificate of incorporation, it can start its business. A business corporation can only commence its activity after obtaining the “certificate of commencement of activity”. After receiving the certificate of incorporation, a public company issues a prospectus inviting the public to subscribe to its share capital. It defines the minimum subscription. Then it is necessary to sell the minimum number of shares specified in the prospectus.

Promotion stage: Promotion is the first step in starting a business. In this phase, the idea of starting a business is transformed into reality with the help of the promoters of the business idea. It is the registration that gives life to a business. A corporation is only duly incorporated if it is duly registered under the Companies Act. 1. SEBI Approval: The Securities and Exchange Board of India, our country`s regulatory body, has issued guidelines for disclosure and investor protection. A company soliciting funds from the public must follow SEBI guidelines to disclose all appropriate information. A private corporation or a corporation without share capital may commence operations immediately after its incorporation. Therefore, the `capital subscription phase` and the `start-up phase` are relevant only in the case of a public limited company. Such a company must go through these two additional phases before it can begin operations. According to SEBI rules, it is important that at least 90% of people subscribe to the company`s shares. This is to ensure that the company has to obtain applications for a certain minimum number of shares before proceeding with the fundraising, bankers, brokers, etc.

have played a very important role. The money from the request is received by the company`s bankers. Brokers sell the shares by distributing forms and encourage the public to request the shares. If the company is not fully convinced of a good public reaction, it may appoint a subscriber for this purpose. Underwriters undertake to subscribe for shares of the company if they are not subscribed by the public. They charge a commission for this service. The promotion of a company refers to the sum of the activities of all the people involved in the construction of the company until the organization of the company and the finalization of the exploitation plan of the idea. It starts with a serious look at the ideas the business should be based on.

At this point, the final document is a statement that the company has complied with all legal requirements and that all required documents have been submitted to the Registrar. If this information proves to be incorrect, criminal proceedings may be initiated against the administrators and organisers. The incorporation of a company is a complex process that involves the completion of formalities and legal procedures. To understand the whole process, the formalities are divided into three different project promoters, which can be professionals, occasional financial contributors, contractors or a variety of other types. When a company is created, it becomes its own corporate legal structure. It is separate from its owner(s) and is an entity that operates as a separate legal entity. In addition, a company enjoys liability protection and can raise capital by selling shares in the company. Eligible pension funds and pension plans will also be set up more easily. States differ in the requirements for the formation of a company.

The articles of association govern how the company is to be managed, managed and owned. In order to register the company, the most important documents must be submitted to the Commercial Register. The letters of allotment are then posted, the report of the award is filed with the Registrar, and share certificates are issued to the letters of allotter in exchange for the letters of grant. If the subscribed capital is below the subscription minimum or if the company has not been able to obtain the minimum subscription within 120 days of the publication of the prospectus, all the money will be refunded and no allocation can be made. It should be noted that a public limited company that has share capital but does not issue a “prospectus” must file a “declaration instead of a prospectus” with the registrar at least three days before the first allocation decision. The creation of a company involves both procedural and legal requirements. Various documents, from articles of association to articles of association, are submitted to the commercial register. The Registrar, after completing all legal formalities, issues a certificate of incorporation, which is proof of the existence of the corporation. This is the first step in starting a business. It`s about creating a new business idea and taking initiatives to start a business in order to turn that idea into reality. An individual, a group of individuals or even a company may have discovered an opportunity.

These people or groups of people are called sponsors of the company. Do not conceal important information from potential investors in order to protect their interests. Therefore, SEBI`s prior approval is required before funds can be raised from the public.