Stages in the Formation of a Joint Stock Company

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Incorporation:

Company comes into existence only when it is registered with the Registrar of Companies. For this purpose the promoter has to take the following steps:

(a) Approval of Name

(b) Filing of Documents

(c) Payment of Filing and Registration Fees

(A) Approval of Name:

  • Ensured that the name selected for the company does not match with the name of any other company.

  • Promoter has to fill in a “Name Availability Form”.

  • Submit it to the Registrar of Companies along with necessary fees.

  • The name must include the words(s) ‘Limited’ or ‘Private limited’ at the end.

  • Then, promoter can proceed with other formalities for the incorporation of the Company.

(B) Filing of Documents:

Application for registration must be accompanied by the following documents.

  • Memorandum of Association (MOA)

  • Articles of Association (AOA)

  • List of persons who have agreed to become Directors with their addresses etc.

  • Written approval of the proposed Directors to act in that capacity, duly signed by each Director.

  • Notice about the exact address of the Registered Office of the company.

  • A copy of the name approval letter received from the Registrar of Companies.

(C) Payment of Filing and Registration Fees:

  • Necessary filing fees and registration fees at the prescribed rates are also to be paid.

  • Registrar will scrutinize all the documents are issue of Certificate of Incorporation.

  • Moment the certificate is issued, the company comes into existence.

  • So, this certificate may be called as the Birth Certificate of a Joint Stock Company.

Raising Capital or Subscription of Capital

In case of:

Private Limited Company:

Funds are raised from the members or through arrangement from banks and other sources.

Public limited company:

Share capital has to be raised from the public.

This involves the following:

  • Preparation of a draft prospectus and get it inspected (vetted) by SEBI.

  • Filing a copy of the prospectus with the Registrar of Companies.

  • Issue of prospectus to the public by:

    • Notifying in a newspaper

    • Inviting the public to apply for shares as prescribed in the prospectus

  • If minimum subscription has been received, shares should be allotted to the applicants as per SEBI guidelines.

  • File a return of allotment with the Registrar of Companies.

  • Listing of shares in a recognized stock exchange.

  • Consent of a stock exchange for listing should be obtained before issue of the prospectus to the public.