Formation of a Joint Stock Company Stages: Private Limited Company: Promotion Incorporation Public Limited Company: Subscription of Capital Commencement of Business

Stages in the Formation Stage 1: Promotion of a Company: Functions performed by Promoter/s: Identification of a business opportunity Feasibility studies Technical feasibility – resources & technology Financial feasibility – availability of funds Economic feasibility – profitability of the business Name approval “The Emblem and Names Act 1950”

Stages in the Formation Fixing up signatories to the MOA members to sign the MOA- first Directors written consent from members to act as Directors First Directors- Qualification Shares Pvt Co. – 3 signatories Pub Co. – 7 signatories Appointment of professionals Preparation of necessary documents – MOA, AOA, Directors’ consent

Documents Required MOA – Doctrine of outdoor management Principal document Defines the powers and objectives of the company Scope of operations Relationship with all stakeholders Also called as the charter of the company A company can legally undertake only such activities which are mentioned in its MOA

Documents Required Contents of MOA: Name Clause Registered Office/ Domicile Clause Liability Clause Capital Clause Association Clause- signatories’ consent Object Clause: Main Object Clause Other Object Clause Alteration in the object clause- permission from the company law board

Documents Required 2. AOA – Doctrine of Indoor Management Defines the rules regarding the internal management of the company States the duties, rights and powers of the BOD, managers and officers AOA should not contradict MOA Public Ltd Co may adopt any of the 99 model articles given in table A of the companies act It is mandatory for a company with their own AOA to register a duly stamped and signed copy of AOA

Documents Required Contents of AOA: Amount of share capital Different classes of shares Rights of each class of shareholders Procedure for allotment of shares Procedure for issuing share certificates Procedure for conducting meetings Procedure for appointing, remuneration and removal of directors Duties, powers and rights of directors, mangers and other officers Procedure for declaration and payment of dividends Procedure regarding winding up of the company

Documents Required 3. Prospectus: It is an invitation to the general public to subscribe for shares and debentures Companies Act- “ A prospectus can be a document, a notice, a circular or an advertisement inviting deposits or offers from public for the subscription or purchase of any shares or debentures of a body corporate. Statement in lieu of Prospectus – 3 days before the allotment of shares

Documents Required Contents of the Prospectus: Company’s name and address Qualification shares of the directors Number and classes of shares and debentures The nature of business and the main objective of business Name and address of the signatories to the MOA Names and addresses of the MD, other Directors and managers Details of underwriters Amount of minimum subscription

Documents Required 4. Consent of the proposed directors “We, the several whose names and addresses are submitted are desirous of being formed into as company in accordance with the MOA and we undertake to take the qualification shares”. 5. Agreement- company proposes to enter with the individuals to be appointed as managing director, whole-time director or a manager. 6. Statuary Declaration – that the all the formalities are complied with To be signed by an advocate of High Court/ Supreme Court/ Chartered Accountant/ person named in the AOA as a director/ manager/ secretary of the company

Formation of a Joint Stock Company Stage 2: Incorporation of a company: Promoters file an application with Registrar of the companies for incorporation The documents to be submitted: MOA AOA Written Consent of the Directors Agreement A copy of Registrar’s letter approving the name of the company Statutory Declaration A notice about the exact address of the registered office Documentary evidence of payment of registration fees Certificate of Incorporation is the Birth Certificate of the Company

Formation of a Joint Stock Company Stage 3: Capital Subscription: Comply with the following formalities: SEBI Approval – to ensure that the company has disclosed all the relevant information to the investors Filing of Prospectus Appointment of Bankers, Brokers, Underwriters Minimum Subscription – minimum no of share applications before the allotment of shares. (90% of the issued capital) Application to Stock Exchange- Permission from atleast one Stock Exchange to deal in its shares and debentures within 10 weeks of date of closure of subscription Allotment of Shares Director/ secretary of the company to file “Return of Allotment” with the Registrar of the Companies within 30 days of allotment

Formation of a Joint Stock Company Stage 4: Commencement of business: Company applies to the Registrar of companies for the issue of COC. Documents to be submitted: Declaration that the shares have been subscribed and allotted Declaration that the cash is received from every Director Declaration that no money is payable to share applicants A Statutory Declaration duly signed by a Director or a Secretary of the company stating that all the requirements are complied with This certificate acts as a conclusive evidence stating that the company is entitled to do business.

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