Steps In the Formation of a Company

Incorporation of a company undergoes a complicated procedure which is also time-consuming. It may take as long as one year's period. The formation requires many step to follow:

1. Getting Promoters Together: Those who form the company are known as promoters who must get together to work out the skeleton of the company. They must be at least seven for public company and two for private company. They are original shareholders and form the first board of directors.
2. Appointment of Advisors: Promoters appoint legal advisers who are expert in legal matters. They, under the guidance and instruction of promoters, prepare memorandum and articles of association, prospectus, and deal with the office of registrar of the company.
3. Preparation of Company Documents: The company law requires the preparation of certain documents in accordance with its provision before the company applies for registration.
4. Submitting Application with the Registrar: When spadework is complete an application for registration is submitted with the registrar of the company who is a competent government authority to grant registration.
5. Payment of Registration Fees: Along with the application registration fee is paid. The fee depends on the amount of registered capital.
6. Printing Share Certificates: After making an application with the registrar the promoter go to the press for getting share certificate printed. These certificates are issued to the shareholders as a token of their ownership in the company.
7. Issuance of Registration Certificate: Once the registrar is satisfied with all legal procedures, formalities, and documents, he issue registration certificate. On its issuance the company legally comes into existence. Private Company can start its business immediately after the receipt of the registration certificates. However, the public company cannot commence its business at this stage unless it gets another certificate known as commencement certificate.
8. Commencement Certificate: Even after obtaining registration certificate the public company cannot stat business unless it receives commencement certificate.
9. Publication Prospectus: On the receipt of the registration certificate the company issues prospectus to the public through advertisements. Prospectus is an invitation to the public to buy the shares of the company. Once the company raises capital through it the actual business starts.