Chapter 7: Formation of a Company

Introduction:
- The formation of a company is a legal process that involves the creation of a separate legal entity capable of conducting business activities.
- It provides various advantages such as limited liability, perpetual succession, and ease of raising capital.

Steps in the Formation of a Company:
1. Promotion Stage:
- It is the initial stage where the idea of forming a company is conceived.
- Promoters identify the business opportunity, conduct market research, and prepare a detailed project report.
- They also arrange for the necessary capital, recruit professionals, and draft the memorandum and articles of association.

2. Incorporation Stage:
- This stage involves the registration of the company with the Registrar of Companies (RoC).
- The following documents are submitted to the RoC:
- Memorandum of Association (MoA): It contains the fundamental clauses governing the company's activities, capital, and objectives.
- Articles of Association (AoA): It contains the rules and regulations for the internal management of the company.
- Form INC-7: It includes details of the company, directors, shareholders, and registered office.
- Form DIR-12: It provides information about the directors of the company.
- Once the documents are verified, the RoC issues a Certificate of Incorporation, indicating the company's legal existence.

3. Capital Subscription Stage:
- In this stage, the company invites the public to subscribe to its shares through a prospectus.
- The prospectus contains information about the company's operations, financials, and terms of the issue.
- Interested investors apply for shares and make the required payment.
- The company allots shares based on the received applications and issues share certificates to the shareholders.

4. Commencement of Business:
- After the company receives the Certificate of Incorporation, it can commence its business activities.
- The directors must file a declaration with the RoC stating that the minimum subscription has been received, and the company has complied with all legal requirements.
- Once the declaration is approved, the RoC issues a Certificate of Commencement of Business.

Conclusion:
- The formation of a company involves several stages, starting from the promotion of the idea to the registration and commencement of business.
- It is crucial for the promoters to comply with all legal requirements and ensure proper documentation to establish a successful company.