Lecture 09

How to Form a Company:
Company formation is the process of registering a business as a limited company at Companies House. As a result, the business becomes a distinct legal entity

KEY FACTS ABOUT COMPANY FORMATION ARE:
• Primary/ Initial Phase (Promotion of a company)
• Documentation Phase (Fillings of documents)
• Registration Phase (Obtain Registration Certificate)
• Final/Last Phase ( Beginning of Business)

The phases of formatting a company are described below:
(A)Primary/ Initial Phase (Promotion of a company):
A Company is formatted according to the Company Act-1994. There have some rules & regulation to develop a company. At primary stage some persons must take initiative to start a business with the form of company. They must be prepared to take risk in the business. They are called entrepreneur or promoter of the company.

Following steps are involved:
Idea about business: Before starting the business, promoters have to think about the nature and production of company’s business.
Investigation: After deciding the nature of business, promoters go in preliminary investigation and make out plans as regard to the availability of capital, means of transportation, labor, electricity, gas, water etc
Assembling various factors: After making initial investigation, the promoter starts accumulating various factors in order to assemble them. They arrange license, copyrights, employment of necessary employees etc.
Financial sources: The promoters also decide the capital sources of the company and they work out the ways through which capital can be generated.
Preparation of essential documents: In addition to above discussed matters, the promoters also prepare following essential documents for the formation of company:
• Memorandum of Company
• Articles of company
• Prospectus of Company

(B) Documentation Phase:
In this phase, the entrepreneurs of the company must prepare all necessary documents and papers for registration. They have to make ready two important documents:
• The Memorandum of Association
• The Articles of Association

Following documents are to be submitted by the promoters in the Registrar’s office:

Memorandum of Association: A document indicating name, address, objects, authorized capital of a company

Articles of Association: A document containing laws and rules for internal control and management of a company.

List of Directors: A list of the names, occupations, addresses along with the declaration of directors.

Written consent of Directors: A written consent showing their willingness to act at directors, to be sent to the registrar.

Prospectus: Promoters have to file a prospectus with the registrar.
Statutory Declaration: A statutory declaration is to be sent to the Registrar that all legal formalities have been completed.

(C) Registration Phase: In this phase, the entrepreneurs must apply to the regiser of Joint Stock of companies and Firms (RJSC) for the registration.

For the registration of company, the registration fee is also paid to the registrar. For example:
• Application and documents filing fee
• Registration fee
• Stamp fee on Memorandum and Articles

In order to take registration of the company, the following important documents are needed:
• Online filled up application form printed copy
• Trade License
• Contract paper
• Memorandum of Association
• Articles of Association
• TIN Certificate
• Name and aggresses of promoters attested
• Bank draft of registration fee

(D) Final/Last Phase: After receiving above documents, registrar gives certificate of incorporation. At this stage, the private company can start business, but the public limited company is required to take letter of commencement of business.