Formation of a company

What are the stages for formation of a company?

‘Formation of a company’ is a set of multiple stages which are taken by people to form or to establish a company. It is a complex process which requires a lot of legal formalities and consumes time.
Here are the stages involved in formation of a company:

1. Promotion

‘Promotion’ is the first stage for formation of a company. It is the stage in which promoters perform various tasks and submit documents to form the company.  
Here are the steps involved:
    Image result for promotion of a company clipart

  • People go dreaming about the company which they will be creating, putting up views how the company will be and what will be their role.
  • Balanced decision-making and required tasks are done. The shareholders decide who will do what and everyone’s capital and liabilities are discussed by mutual understanding.
  • The promoters bring together the required stuff for the formation like capital, labour, staff, machinery, land and so on. 
  • Promoters need to organised and assist in establishment of the company. Also, deciding the name of the company with agreement of all.
  • Submission of various documents and formalities are to be performed. For example, documents like MoA (Memorandum of Association), AoA (Article of Association), address proofs, consent of all shareholders etc. are to be submitted with required fee.

2. Incorporation

‘Incorporation’ is the process of formation of a corporation i.e a company. It is second stage to form a company.
Here are the steps involved:
  • Promoters need to make an application for request of incorporation which is to be submitted to the registrar of the company.
  • Various other documents are also to be submitted which includes, MoA, AoA, agreement of staff, address proofs, proof for paid fee etc. duly stamped, signatured and witnessed.
  • Other formalities as assigned by the registrar of the company of the particular state
  • Wait for approval from the government, it takes some time.

3. Capital subscription 

The amount allowed by the government with agreement of shareholders to be used as capital in the formation of a company is called capital subscription.
Here are the steps involved:

  • Capital division, shares and distribution of liabilities is finalised between the shareholders and promoters.
  • Shares and debentures are launched in share market to get capital from public with the permission of government.
  • Prospectus is to be issued (compulsory for public companies) to subscribe to the capital.
  • Bankers and brokers are appointed for assisting the process of capital subscription.

4. Commencement

  • Final documents required are to be submitted.
  • A common seal is to be created that can be used for the company as signatures.
  • Commencement certificate is to be passed by the government.
  • The company is be started with respect to the guidelines, rules and regulations laid down by the government.

DHRUV SHAHRAWAT

Content Writer, Author, Founder

http://theprofoundreport.com/

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