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Unit 2


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Promotion

Incorporation orregistration

Capital subscription orraisingof the share

capital

Commencement of the business


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Acc to haney, promotion is theprocess of

organizingand planning thefinances ofa

business enterprise under the corporate

form It refers to the series of theprocesses or

activities designed to bring intoexistenceof

the company tooperatea business

The workofpromotion is done byapersoncalled promoters


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Discoveryof the business proposition or idea

Detailed investigation of the business

proposition

Assembling the various requirement of thebusiness proposition

Financing the business proposition


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Guthumann and the doughall , promoter is

theperson whoassembles themen,money

and thematerials intogoing concern

Individual,partnershipfirm,an associationof thepersons ora joint stock companies


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Promotion of the company

Incorporation of the company

Raising the capital

Nursing the company


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Agent ???

trustee ???


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To doall such acts as the trustee would do

Tomakefull disclosureof therelevant facts

Not tomakeany secret profits

To disclose his interest in theproperty

Not tomakean unfairor unreasonable useof

his position


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Right to claimremuneration for his services

Right toget reimbursement in respect of the

expenses incurred

Right toget therateable contribution fromthe copromoters


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Personalliability in respect ofpre in

corporation orpreliminary contracts

Liability to hand over the secret profits

Liability topay compensation to thesubscribers

Criminalliability

Liabilityformisfeasanceor breach of trust

liabilityforalleged fraud


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These contracts aremade by thepromoters o

behalfof the company before its

incorporation


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Not bidingon the company

Not bindingon theotherparty

Noratification

Personalliabilityofpromoters


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The contract is madeforand on behalfof

the company

Such a contract is warranted by the terms of

the incorporation The company has accepted the contract and

communicated its acceptance to theother

party


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Registering the company with the ROC


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getting theapprovalof the ROC for theproposed nameof the company

Fixing up the signatories to be MOA,

auditors, bankers, underwriters, brokers,etcGetting the MOAand AOAprepared and

printed

Filingan application with ROC along with thevarious documents for theregistration of thecompany

Payment of stamp duty,filingfees andregistration fees

Obtaining the certificates of incorporation


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REGULARITY OF REGISTRATION

BODY CORPORATE

INDEPENDENT LEGAL ENTITY

PERPECTUAL SUCCESSION

LIMITED LIABILITY

COMMON SEAL

BINDINGDOCUMENTS PUBLIC DOCUMENTS

COMMENCEMENT OF BUSINESS


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In caseofprivate co, it needs to have

incorporation certificateto commence its

business

But in the caseof thepublic co, it needs tohaveincorporation certificatealong with the

business commencement certificateto

commence its business

So in apublic co it needs to : Raise the capital

Obtain BCC


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CONVENING THE FIRST BOARD MEETING

APPOINTMENT OF THE REGULAR SECRETARYOF THE COMPANY

APPOINTMENT OF THE BANKERS, AUDITORS,SOLICITORS, BROKERS, ETC

RATIFICATION OR ADOPTION OF PRELIMINARYOR PRE INCORPORATION CONTRACTS

APPROVAL LISTING OF SHARES OF THECOMPANY IN A RECOGANISED STOCKEXCHANGE

ADOPTION OF THE UNDERWRITINGAGREEMENTS


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FILINGA COPY OF THE PROSPECTUS OR

STATEMENT IN LIEU OF THE PROSPECTUS

WITH THE ROC

ISSUE OF THE PROSPECTUS TO THE PUBLIC

AND CALLING FOR APPLICATION FOR SHARES

ALLOTMENT OF SHARES


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A company can proceed with theallotment of the shares only if it

has received applications for the shares foran amount equalto

least theminimum subscription stated in theprospectus

Clause 5 of the schedule II ofpart 1 of the coact defines minimum

sub as theminimumamount which in theopinion of the directors

or signatories to MOAmust beraised by the issueof shares tomeet

theexpenditureon each of thefoll heads :

Purchasepriceofanyproperty bought or to be bought

Preliminaryexpenses

Repayment ofanymoney borrowed

Working capital

Allotherexpenditure

Note ::: min sub amt == exclusiveofanyamt payableother than in

cash

Should be cal with reference to theface valueof the shares

applied for.


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Apublic needs BCC certificatealong with the

incorporation certificate to commence its

business


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MAKING OF THE APPLICATION TO THE

REGISTRAR

FILING OF THE DOCUMENTS AND THE

STATEMENTS PAYMENT OF THE REQUIRED REGISTRATION

FEES

OBATINMENT OF THE BUSINESS

COMMENCEMENT CERTIFICATE


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Brings theprocess of theformation of the

company to theend

Evidence to commence business

Exercise its borrowingpowers

Pre in corporation contracts will not be

bindingon the company


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Everyperson who is responsiblefor the

contravention or non compliance will be

liableforfine which mayextend up

Rs. 500 or every dayof default.


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Basic document

Defination :::

the MOAof the company is its charterad

defies thelimitation of thepowers ofacompany. The MOA contains thefundamentalconditions upon which alone the company isallowed to be incorporated lord cairns

Lord Macmillan, thepurposeof

memorandum is toenable the shareholders,creditors and those who deal with thecompany toknow what is permitted rangeofenterprise


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It informs shareholders about the natureof

the business In which theirmoney would be

employed ad that risk theyare taking I

making their investment It informs the creditors ad all those who deal

with the companyas what activities the

company is authorized to carry.


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Lifegiving document

Foundation

Constitution of the company

Throws light on the nameof the company Determines the jurisdiction of the ROC

Fixareaofoperation of the company

Information about authorized capital

Throws light on theliabilityof themembers ofthe company

Public document

Governs theAOA

Unalterable charterof the company


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Table Specimen of memorandum of a company

B Limited by shares

C Limited byguaranteeand not having share capital

D Limited byguaranteeand having share capital

E Unlimited company


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name clause

Situation clause

Object clause

Liability clause

Capital clause

Association clause, subscription clauseor

declaration clause

Otherprovisions of MOA


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