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JOINT STOCK COMPANY  a legal entity. It has to follow the procedure for its formation. The law does not interfere in the establishment of a sole proprietorship and partnership. These forms of business organisation may and may not be registered. These forms of business organisation may and may not be registered but a company is formed, brought up and even wound up after following legal formalities. However, in this chapter, we shall take the various stages and steps involved in the formation of a company.


FROM the time of idea of forming a company is first conceived to the time the company is actually formed and incorporated and commence business, there are 4 distinct stages, namely :





A private company can commence business immediately after incorporation. That means, only the first two stages are relevant for a private company.

1.  PROMOTION STAGE: According to Gerstenberger, promotion means the discovery of business opportunities and susequent organisation of funds , property, managment ability and the subsequent organisation of funds, property, mangement ability to run a business concern for the purpose of making profit thereform. The person who undertakes all these activities is a promoter . He originates a scheme for the formation of the company of the company , gets the memorandum and articles prepared and registered and funds the first directors , settles the terms of preliminary contract and prospectus ( if any ) and makes arrangements for raising the capital.

2.INCORPORATION STAGE  :  Forgetting the company incorporated , the following documents have to prepared and filled with the registrar  of companies :




4. A list of directors with their names in full, address, occupation and age

5.consent of the directors to act as the directors of the company

6.notice of the address of the registered office

Along with the above documents, a statutory declaration has to be filed. The declaration should be that all the requirements of the law for the registration have been duly complied with. The declaration may be made by any of the following people :

  1. An advocate of the supreme court or high court.
  2. An attorney or pleader, entitled to appear in high court or supreme court.
  3. A chartered accountant practising in India and who is engaged in the formation of the company.
  4. By any person who is named in the articles as director, manager or secretary of the company.

On filings, all the forms documents and payment necessary a certificate of incorporation has to issued from the registrar. The certificate of incorporation brings the company into existence as a legal person and may be termed as its birth certificate. It is conclusive proof of the fact that the company is duly registered and all the requirements of law have been complied with .

After getting the certificate of incorporation  , a private company can start business operations .

3.CAPITAL SUBSCRIPTION STAGE : A private company or a public company not having share capital can commence business after getting the certificates of incorproation but a public company having a share capital has to pass through the capital subscription stage before it can commence the business .

In order to raise the capital from the public, a prospectus is to be issued or a statment in lieu of prospectus is to be filed with the registrar of companies . The draft prospectus or statement in lieu of prospectus is approved by th board of directors in its meeting before it could be filed with the registrar and issued to the public. The board may decide to get the issue of the share capital underwritten to ensure that minimum subscription is raised .

The application forms for the allotment of shares along with the applicattion money are deposited with bankers of the company mentioned in the prospectus. After this, the board of directors will make allotment of shares in consultation with the stock and a return as to allotment of shares is sent to the registrar of comapnies within one month of the allotment.

4.COMMENCEMENT OF BUSINESS STAGE : A public company having share capital must obtain a certifiate of commence business from the registrar of companies before it can commence business. In order to obtain this certificate , the company must comply with the provisions of the companies act . When these requirements have been compiled with the registrar of companies willl issue a trading certificate to commence the business of the company which is conclusive evidence that the company is entitled to commence the business.