INCORPORATION OF THE COMPANY .

PROMOTER

Promoter is a person who is involved in the formation of the company. He is not the agent of the company as the company has not come into existence. The promoters should not make a secret profit from the company. He can make a profit IRO any transaction with the company ONLY if he makes a full and fair disclosure of such profit to the BOD. If the company becomes aware of the secret profit made by the promoters after entering into the contract, the company can

Cancel such contract and recover the secret profit made by the company. The company can also sue the promoters for breach of contract.

PROMOTERS RIGHT TO REMUNERATION Promoters do not have any right to remuneration or recover any expenses incurred IRO incorporation of the company. Even if the AOA provide for payment of remuneration or reimbursement of expenses, it is not binding on the company. Remuneration to the promoters can be paid in any of the followings ways.

Issue shares at discount

Paying lumpsum remuneration Paying commission to promoters on purchase of any property purchased by the company. Payment of commission to promoters on shares sold by the company.

STEPS FOR INCORPORATION OF A COMPANY

There must be a an association of persons interested in forming a company. Minimum 2 members are required to make a private company and 7 for a public company The AOP should have a common object The object should be lawful

The requirements of the companys act should be fulfilled. Application in form no 1A should be made to the ROC to check the avaliability of the proposed name. On obtaining approval of name, the following documents should be filed with the ROC. MOA and AOA statutory declaration that all the legal formalities have been complied with aggrement for appointing MD,wholetime director or manager consent form IRO directors holdiong qualifying shares On incorporaton,the address of the registered office of the company should be intimated to the ROC within 30 days

Name , address , occupation of directors,manager and secretary should be submitted to the ROC. The ROC shall examine the total documents and if he is satisfied,he shall issue the certificate of incorporaton(COI) The COI issued is conclusive evidence that all the legal requiremants have been complied with.

EFFECTS OF INCORPORATION On incorporation, the company becomes a body corporate with a name in whoch it shall carry on business. It acquires a legal recognition ad comes into existence.

COI IS CONCLUSIVE EVIDENCE The term conclusive evidence means that no inquiry shall be made regarding the corectness/incorrectness of the COI and it canoot be challenged in any court of law

PRE-INCORPORATION CONTRACTS These are comntracts that are entered by the promoters on behalf of the proposed company .

ADOPTION OF PREINCORPORATION CONTRACTS As per sec. 15 & 19 of the specific relief act, IRO pre-incorporation contracts, if the company adopts such a contract, abinding contract arises between the company and the third party.the promoters are then not personally liable. If the company does not adopt the pre-incorporation contract, such contract is not binding on the company even if the company has taken the benefit under the contract. The promoters are personally liable on such a contract.

CONDITIONS FOR OBTAINING THE CERTIFICATE OF COMMENCEMENT OF BUSINESS.. Sec 149(1)

WHEN THE COMPANY HAS ISSUED A PROSPECTUS, the cocob will be issued only if the the following conditions are fulfilled: The company must apply to 1 or more of the stock exchange for listing of its shares.if any stock exchange refuses to list the shares of the comoany,COCOB will not be issued Where the company has issued shares to the directors and manager, it should have received the entier application and allotment money orelse the COCOB will not be issued. The company must have recived minimum subscription and the company must have made minimum alootment of shares. The company shall file a declaation with the ROC that

all requirements of sec 149(1) have been duly complied with. Sec 149(2) WHEN THE COMPANY HAS NOT ISSUED A PROSPECTUS,the COCOB shall be issued only if the following conditions are fulfilled The company must have filed a statement in lieu of prospectus. Where the company has issued shares to the directors and manager, it should have received the entier application and allotment money orelse the COCOB will not be issued. The company must have recived minimum subscription and the company must have made minimum alootment of shares.

PROVISIONAL CONTRACTS A contract entered by a public company having a share capital before issuing COCOB but after obtaining the COI They can only be entered into by public companies as only they need t obtain a COCOB It is a valid contract If the company obtains a COCOB, then the contract is binding on the company But if the company doesnot obtain a COCOB, then it ios not binding on the company. Ratification/adoption of provisional contracts is not required.

DIFFERENCE BETWEEN PREINCORPORATION CONTRACTS

PREPROVISIONAL INCORPORATIO CONTRACT N CONTRACT ENTERED BY ENTERED BY PROMOTERS THE ON BEHALF COMPANY OF THE PROPOSED COMPANY ENTERED ENTERED BEFORE AFTER INCORPORATI INCORPORATI ON ON BUT BEFORE OBTAINING COCOB

CAN BE MADE BY PRIVATE AS WELL AS PUBLIC COMPANIES IT IS GOVERNED BY SEC 15 & 19 OF THE SPECIFIC RELIEF ACT IF THE COMPANY ADOPTS SUCH CONTRACT, IT IS BINDING ON THE COMPANY ELSE THE PROMOTER

CAN BE MADE ONLY BY PUBLIC COMPANIES HAVING A SHARE CAPITAL IT IS GOVERENED BY SEC 149 (1) &(2) OF THE COMAPIES ACT ADOPTION OF THESE CONTRACYS IS NOT REQUIRED.IF THE COMPANY OBTAINS COCOB, THE CONTRACT IS

IS PERSONALLY LIABLE

BINDING ON THE COMPANY OR ELSE ITS NOT BINDING ON THE COMPANY .