INCORPORATION OF A COMPANY

 INCORPORATION OF A COMPANY

 

Here's a step-by-step process of incorporating a company, starting from the promotion stage, and then moving on to registration, capital subscription, and commencement of business:

 

1. Promotion Stage

 

   -Conceptualization and Market Research**: Promoters conceive the business idea, conduct market research, and assess the feasibility of the proposed venture.

 

   - Formation of Promoter Group**: Promoters assemble a group of individuals or entities who share the vision and are willing to invest in the company's formation.

 

   - Pre-incorporation Contracts**: Promoters may enter into contracts on behalf of the proposed company, termed as pre-incorporation contracts, for various purposes such as property acquisition or employment agreements.

 

   - Preparation of Incorporation Documents**: Promoters prepare essential documents required for incorporation, including the Memorandum of Association (MOA) and the Articles of Association (AOA), which outline the company's constitution and rules.

 

   - Legal and Regulatory Compliance**: Promoters ensure compliance with legal and regulatory requirements, obtain necessary approvals and fulfill statutory obligations.

 

   - Appointment of Professionals**: Promoters engage legal advisors, chartered accountants, and other professionals to assist in the incorporation process and ensure compliance.

 

2. Registration Stage

 

   - Name Approval: The promoters propose a name for the company and apply for its approval with the Registrar of Companies (ROC). The name should comply with the naming guidelines and should not infringe on any existing trademarks.

 

   - Memorandum and Articles Drafting: Promoters draft the Memorandum and Articles of Association, specifying the company's objectives, rules, and regulations governing its operations.

 

   - Filing of Incorporation Documents: Promoters submit the required incorporation documents, including the MOA, AOA, and other relevant forms, to the ROC along with the requisite fees.

 

   -Verification and Approval: The ROC verifies the documents for compliance with legal requirements and issues a Certificate of Incorporation upon approval.

 

   - Obtaining PAN and TAN: After incorporation, the company applies for Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN) with the Income Tax Department.

 

3. Capital Subscription Stage:

 

   - Allotment of Shares: The company offers shares to subscribers in exchange for capital. Subscribers may include promoters, initial investors, and other individuals or entities.

 

   - Subscription Agreement: Subscribers sign a subscription agreement, agreeing to purchase a specified number of shares at a predetermined price.

 

   - Payment of Share Capital: Subscribers make payment for the subscribed shares as per the terms of the subscription agreement. The payment may be made in cash, cheque, or through electronic transfer.

 

   - Issuance of Share Certificates: After receiving payment, the company issues share certificates to subscribers as evidence of their ownership of shares.

 

4. Commencement of Business Stage:

 

   - Bank Account Opening: The company opens a bank account in its name and deposits the share capital received from subscribers.

 

   - Appointment of Directors: The Company appoints directors as per the requirements of the Companies Act and holds the first board meeting to finalize operational matters.

 

   - Statutory Compliance: The company complies with various statutory requirements, such as filing of statutory forms, maintenance of statutory registers, and compliance with tax laws.

 

   - Business Operations Begin: With all formalities completed, the company starts its business operations as per its objectives outlined in the Memorandum of Association.

 

   - Reporting and Compliance: The company adheres to ongoing reporting and compliance requirements, including filing of annual returns, conducting board meetings, and complying with regulatory norms.

 

MINIMUM SUBSCRIPTION (SECTION 39(1) OF THE COMPANIES ACT 2013 AND PROVISIONS OF SEBI)

Section 39(1) of the Companies Act, 2013, pertains to the requirement of minimum subscription for the allotment of shares. According to this section:

 

- A company making a public offer of shares must receive a minimum subscription equivalent to the value of the shares offered for subscription.

- If the minimum subscription is not received within the specified time frame (which shall not be less than 30 days from the date of the prospectus), the company is required to refund all the application money received within a certain period, typically within 15 days from the closure of the subscription list.

 

On the other hand, SEBI (Securities and Exchange Board of India), which is the regulatory authority for securities markets in India, also lays down guidelines regarding the minimum subscription requirement for initial public offers (IPOs) and rights issues.

 

- For IPOs: SEBI typically mandates that a minimum of 90% of the total issue size should be subscribed to before the issuer can proceed with the allotment of shares. If the minimum subscription criteria are not met, the issuer is required to refund the entire subscription amount within a specified time frame.

 

- For Rights Issues: SEBI requires that a minimum subscription of 90% of the total issue size should be received before the issuer can consider the issue successful. If the minimum subscription is not met, the issuer may have the option to either extend the subscription period or cancel the issue and refund the subscription amount to the applicants.

 

 

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