STAGES OF FORMATION OF COMPANY

STAGES OF FORMATION OF COMPANY

There are four stages of formation of company;

1.        Promotion

2.       Incorporation

(Applicable to both public and private company)

3.       Subscription

4.       Commencement of business

(Only Applicable to private company)

1.       Promotion:-

The promotion of a company involves the following steps;

a.       Emergence of pioneer

b.      Discovery of opportunity of profitable business

c.       Detailed investigation of profitability of idea

d.      Persuading others to join in formation

e.      Estimating capital requirement and planning procurement of funds

f.        Acquiring necessary assets

g.       Recruitment of staff

h.      Incorporation of company

2.       Incorporation of company:-

After promotion of company is completed, the promoters make an application to the registrar for registration of the company.

The application for registration shall be accompanied by the following documents;

·         Memorandum of association

o   Properly stamped, and

o   Signed by subscribers and witnesses.

·         Article of association

o   Properly stamped, and

o   Signed by subscribers to the memorandum and witnesses.

·         Consent of directors to act in that capacity along with written undertaking to take qualification shares.

·         Notice of address of registered office of the company can be filed within 28 days of incorporation of company.

·         Statuary declaration as to compliance with legal and regulatory requirement.

·         Registration fees.

The registrar will scrutinize these documents and if found complete will enter the name of company in the register of the company and issue a certificate of incorporation.

3.       Subscription:-

Every company needs minimum capital to carry on business.

·         A public company can invite general public to subscribe for its shares and debentures to raise necessary capital.

·         A private company cannot approach general public and has to raise required capital from friends and family.

4.       Commencement of business:-

a.       Public Company:-

·   A public company having share capital, but not issuing prospectus, shall file with the registrar Statement in leu of prospectus and thereafter certificate of commencement of business shall be issued.

·   A public company, having share capital, issuing prospectus, shall file with the registrar

ü  Declaration that shares payable in cash has been allotted to raise minimum subscription.

ü  Declaration that every director has paid full cash in respect of shares taken up by him.

ü  Declaration that no money is liable to be refunded to the applicant by reason of failure to apply for or to obtain permission for shares or debentures to be dealt in stock exchange.

ü  Statuary declaration by chief executive or one director and secretary that the above requirements have been complied with.

  to obtain certificate of commencement of business.

The registrar shall on filling of duly verified declaration and after making such inquiries as he   may deem fit to satisfy himself that all the requirements of commencement of business has been complied with issue a certificate of commencement of business.

b.      Private Company:-

A private company can commence business immediately after the issue of certification of incorporation.

Duties of Registrar:-

The registrar of company on filing of registration documents is bound to examine and scrutinize the same to satisfy himself that;

ü  All the requirements of registration of company has been complied with.

ü  Memorandum and article of association are in accordance with companies ordinance.

ü  All the objects set out in memorandum are lawful.

ü  Name of company is not contrary to ordinance.