1. Introduction : Any person within the limit of legal restriction, start sole proprietorship, partnership and company. Sole proprietorship firm is easy to establish. The registration of partnership firm is voluntary. In order to start partnership firm partners can registered the partnership documents. In comparison of both form, the incorporation procedure of company is very expensive, complex and lengthy. For this, follow the provisions of company act and the necessary documents are to be registered with the registrar.
2. Incorporation of Company : Those person who establish company are known as promoter and the procedure to be followed are known as promotion work. Without registration of private or public company with registrar, its incorporation cannot be done. In short, the registration of a company is essential.
3. Stages for the Incorporation of Company:
The following stages are to be followed for incorporation.
(A) Preliminary Stage (B) Incorporation Stage
Preliminary Stage : This is the first stage involving the conception of the idea of setting up a company and the primary and extensive investigation of the feasibility of the idea, the requirement of resources and capital etc. Thus, the promotion of the company can be explained through the following sub-steps.
(1) The idea for the promotion of a Company/Business : Initially the concept or the idea of a business by one person or a group of persons starts the process of business formation and consequently the idea of establishing a company for the same. The idea is the seed of a business and the promoter who conceived the idea uses his imagination and creativity to give it a concrete form and he is also ready to bear many risks. He converts idea into implementation by mobilizing manpower, materials and capital resources to carry out business. Thus, company comes into existence. Company is known as brain child of promoters.
(2) Primary investigation : After considering the idea and its possibility, the economic durability is checked out with the help of experts. The expenditure and income estimate is taken and if the result is satisfactory, further detailed survey is carried out.
(3) Extensive Investigation : There can be adverse result if entire investigation is not undertaken. The following matters are investigated by accountant, chartered accountant and various other experts of market.
(1) Place of factory
(2) Method of production
(3) Market Demand
(4) Transportation
(5) Availability of Labour
(6) Availability of raw material
(7) Necessary capital investment
(8) Field of market
(9) Competition
(10) Driving force
(11) Water supply
(12) Machhrery
If the above investigational matter are carefully checked, then a clear picture is created, which will help to decide whether to proceed with the plan to establish a company or not.
(4) Mobilizing resources If it is decided to proceed with the project the arrangement for resources like equipment, machinery, tools, land will be made and necessary correspondence, contracts and formalities will be undertaken.
(5) Financial arrangement : For mobilizing the resources and for the promotion. expenses, finance will be required. To purchase asset, primary production, for wages and for other expense finance is required. Management tries to acquire finance from his own personal saving, from his relatives, financial institutions or shorffs or by issuing shares.
Incorporation (Registration) Stage : A private company has limited members and its share transfer is restricted. According to the provisions of company law a private company can start functioning after certificate of incorporation. A private as well as a public company need the following documents in order to get certificate of incorporation.
(1) Preparation of Memorandum of Association : It is the basic document of the company with this the registration of company is not possible. The details/clauses mentioned in it define the scope of activities of the company. It includes the name of the proposed company, its objectives, and the address of its registered office, the capital and the liability of its members. It established the relations between the company and the third parties. It is useful for creditors, traders, bank, shareholders and public. For every company it is mandatory to prepare Memorandum and registered with the company registrar.
(2) Articies of Association : Articles of Association is an important document of the company which contains or defines the rules and regulation for the internal management of the company. It shows the issue of capital into different shares, authority of members, responsibility, share transfer, forfeiture, reissue the forfeited shares, share warrant and information regarding share certificate, share issue as well as its call procedure, responsibilities and power of management, abilities remuneration, meeting management, accounting audit and various rules are described.
(3) List of Directors : A list of the names, addresses, occupation, age, nationality etc. of the persons who take responsibility of the work as directors has to be prepared and submitted before the Registrar of Companies as per the Companies Act. There has to be at least one woman director for certain companies among the List of Directors decided by company Act.
(4) Written Consent and Affidavit of the Directors : Each subscribers/director has to give a written consent to the registrar that he has accepted the responsibility of work as a director willingly. Moreover the subscribers and First Director has to file affidavit before the Registrar of company containing following facts:
He has not been convicted for any offence.
He has not been found guilty of any fraud/misfeasance.
The information supplied to the Registrar of Companies are correct and complete.
(5) Declaration : A declaration in the prescribed form signed by an Advocate, a Chartered accountant, Cost Accountant or Company Secretary in practice, who ever is involved in formation of the company and also signed by persons named in the Articles of Association of the company as a Director, Manager or Secretary of the company.
(6) Disclosure of Interest in other Company:If the Directors, Subscribers, Manager or Secretary are also associated with other firm or company then have to furnish the information regarding their association.