UNIVERSITY OF DELHI

COLLAGE OF VOCATIONAL STUDIES

TRIVENI, SHEIKH SARAI-II NEW DELHI -110001

COMPANY

FORMATION
MOHIT VASHIST - 111
MOHIT PAHADIA- 117
NEERAJ KUMAR RAI-107
MOHIT KUMAR-106
ANJALI SONI-109
 PRINICIPALS FOR FORMATION OF
COMPANY

PROMOTION INCORPORATION
PROMOTER

• Promoter is a person who conceives the idea of starting a

business, plans the formation of a company and actually
brings it into existence.
• He may be said “the father of a company”.
• A promoter may be individual, a family, a firm an association
of persons, a company or even the government.
THE PROCESS
1. To conceive an idea of starting a business and jexplores
its possibilities.
2. To understand detailed technical, economic and
commercial feasibility of the business propositions.
3. To conduct negotiations for the purchase of a business in
case it is intended to purchase an existing business.
4. To collect the requisite number of persons.
5. To decide the following:
1. the nature of the company.
2. the location of its registered office.
3. the amount and form of its capital.
4. the underwriters or brokers for capital
issue.
6. To get the memorandum of its association and articles of
association drafted and printed.
7. To enter into preliminary contract with vendors, under-wri
etc
8.To pay preliminary expenses.
9. To arrange funds required by the company
 DUTIES OF PROMOTER

The promoter stands in a fiduciary relationship with the company.

This fiduciary relationship imposes the following obligations on the
promoters:

i.Not to make secret profit: Promoters should not make any secret
profit at the cost of the company without its knowledge and consent.

ii.Disclosure of material facts: It is the duty of the promoters to

disclose fully all material facts relating to the formation of the
company.
 L I A B I LT I E S O F P R O M O T E R

1. Non-disclosure of secret profit.

2. Non-adoption of preliminary contract.

3. Fraud in the promotion of the company:

-In a promoter furnishes any false or incorrect particulars of
any information or suppresses any material information, or which
he is aware in any of the document filed with the registrar in
relation to the registration of a company, he shall be liable for
4. Where it is found that any fraud has be committed in promoting or forming
a company, the Tribunal may order investigation against the promoters any
other directors or officer of the company involved in such fraudulent activities
[Section 282].

5. A company may proceed against a promoter where the promoter has

wrongly obtains possession of any property, including cash of the company or
wrongfully withholds it or knowingly applies it for the purposes other than
those expressed or directed in the articles and authorized by the Act [Section
452].

6.Omission in the prospectus.

7.Misrepresentation in the prospectus.

 R E M U N E R AT I O N T O P R O M O T E R

1.The promoter has to incur the initial expenses in the initial expenses in the
formation of a company besides undergoing a good deal of arduous task.

2.The promoter has a legitimate right to claim for the expenses incurred by him.

3.The claim should be supported by vouchers and should be placed before the
directors of the company when formed.

4.There is no contractual obligation on the part of company to pay him for

the expenses unless the company has expressly agreed to pay.
 T H E P R O M O T E R C A N B E R E M U N E R AT E D I N A N Y O F T H E
F O L L O W I N G WAY S :

• Promoter may sell his own asset to the company at the profit
for cash or shares in the company.
• He may be given commission on the purchase price of the
business taken over by the company.
• He may be granted a lump sum as remuneration either in cash
or in shares or debentures.
• The amount of remuneration payable or paid to the promoter is
required to be disclosed in the prospectus issued by the
company.
 P R E L I M I N A RY O R P R E - I N C O R P O R AT I O N C O N T R A C T

• Preliminary contracts are contracts entered into by the

promoter on the behalf of the company before its
incorporation with third parties.
VALIDITY
• Promoter generally enter into these contract as agent or
trustees of the company, which has not yet come into the
existence.
• Such contracts are legally not binding upon the company
even after coming into existence
 VA L I D I T Y

• Promoter generally enter into these contract as agent or trustees of the company,
which has not yet come into the existence.
• Such contracts are legally not binding upon the company even after coming into
existence.
• A company cannot adopt contracts entered into before its incorporation even by
passing a special resolution or with unanimous consent of its members.
• Thus preliminary contracts will either have to left as mere “gentlemen agreements”
or the promoter will have to take the personal liability; which merely depends upon
the demand.
“Since pre incorporation contracts purported to be made by a company which does not
exist is a nullity, neither the company when formed nor the promoter whose signature is
added can sue or be sued on contract.”
 LIABILITY OF THE PROMMOTER

• He can be held personally liable if he has purported to act as an agent and the non
existence of the company was known to both parties. This is because where a
contract is made on the behalf of a principal known to both the parties to be non
existent, the contract is deemed to have been entered into personally by the actual
maker.
• If the contract is purported to be made by the company itself, the person acting
cannot be held personally liable.
• In case of personal liability, the promoter will continue to be liable until the
company adopts the contract.
• In order to avoid liability, the promoters usually insert a clause to the original
contract to the effect that “if the contract is not adopted by the company after its
incorporation within the limited time, both the promoter and the third party will be
 A D O P T I O N T H E P R E L I M I N A RY C O N T R A C T

•The company may adopt these contract by entering into the new contracts with the
third parties on the same terms as were embodied in the original contract. Such a new
a agreement of adoption may not be expressly made but may be implied by the acts
of company.

•The company may adopt these contracts under the “Specific Relief Act, 1963.”
section 15(h) and 19€ of the act provides that a contract entered into by the
promoters on the behalf of the company before its incorporation can be enforced by
or against the company, if the following two conditions are satisfied:
• The contract is entered into, for the purposes of the company
and such contracts are warranted by the terms of
incorporation. The term “for the purposes of the company”
implies that the contract should be for the working purpose
of the company.
• The company accepts the contract after its incorporation and
communicates such acceptance to the other party to the
contracts.
 S T E P S T O R E G I S T E R C O M PA N Y I N I N D I A

DIGITAL UPLOADING OF
PAYMENT OF FEES
SIGNATURE DOCUMENTS
CERTIFICATE

CERTIFICATE OF
DIRECTOR REGISTRATION ON INCORPOARTION
IDENTIFICATION MCA PORTAL
NUMBER
 FORMS

• DIN 1:- To obtain DIN(Director Identification Number)

• INC-7 For incorporation of a company
• INC-2 For application for incorporation of OPC within 60 days of
name approval
• INC-22 Notice of situation or change of situation of registered
office based on the option chosen in FormINC-7
• DIR-12 Particulars of appointment of directors and the key
managerial personnel and changes among them
 D O C U M E N T S R E Q U I R E D F O R C O M PA N Y R E G I S T R AT I O N

• PAN card and Aadhaar card of each of the proposed directors.

• Address proof of the proposed directors like Aadhaar cards, utiility bills,
Voter-ID cards, ration cards, driver's licenses, passports.
• Contact details of the proposed directors along with their Email IDs.
• Passport-sized photographs of each of the proposed directors.
• Proof of ownership of the office space, for the proposed company. If the
office space is on rented premises, then the lease deed/rent agreement of
the office space along with NO Objection Certificate' from the landlord
• PAN card and Aadhaar card of each of the proposed directors.
• Address proof of the proposed directors like Aadhaar cards, utiility
bills, Voter-ID cards, ration cards, driver's licenses, passports.
• Contact details of the proposed directors along with their Email IDs.
• Passport-sized photographs of each of the proposed directors.
• Proof of ownership of the office space, for the proposed company. If
the office space is on rented premises, then the lease deed/rent
agreement of the office space along with NO Objection Certificate'
from the landlord
 C E RT I F I C AT E O F I N C O R P O R AT I O N

Certificate of incorporation is a legal document relating to

formation of a company which confirms the name by
which the company is registered under the Companies Act
and date of incorporation. The Registrar of Companies
issues certificate of incorporation in the prescribed form on
the basis of submission of the required documents and
information laid down by the Companies Act
Thus, the consequences of certificate of incorporation are :-
• The certificate of incorporation brings the company into existence from the
date mentioned in the certificate.
• It grants legal personality, corporate existence and perpetual succession to the
company.
• The subscribers to the Memorandum together with such other persons, as may
from to time become members of the company, become a body corporate with
a distinct entity from such members having a perpetual succession with a
common seal and with the liability of the members limited to the amount for
the time being unpaid on the shares held by them.
• The Memorandum and Articles of Association become binding upon the
members and the company as if they have been signed by the company and by
each member.
 COMMENCEMENT OF BUSINESS [SECTION 10 A]
A company incorporated after November 1, 2018 [i.e. after the commencement
of companies (Amendment) Act, 2019] and having a share capital shall have to
fulfill the following procedural requirement before commencing any business or
exercising any borrowing powers:

(a) Filing of declaration to the Registrar of Companies : A declaration by a

director Within 180 days of incorporation of the company in the prescribed form
to the Registrar of Companies must be filed stating that every subscriber to the
memorandum has paid the value of shares agreed upon by them at the time of
making such declaration.
(b) Verification of the registered office : The company is required to file with the
Registrar of Companies a verification of its registered office as per section 12(2)
of the Companies Act.
 DEFAULT
In case of default by a company in complying with the requirement of this provision on
commencement of business, the company shall be liable to a penalty of Rs.50,000 and
every officer in default with a penalty of Rs.1000 for each day during which such
default continues which may go up to t 1 lakh.
Further, the Registrar of Companies may initiate action for the removal of the name of
the company from the register of companies when the Registrar has reasonable cause
to believe that the company is not carrying on any business.

PROVISIONAL CONTRACT
Provisional contracts are the contract entered into by a company having share capital
between the date of incorporation and the date on which the company has fulfilled the
requirement of section 10A on commencement of business. These are valid contracts if
company meets the requirements and would be non-operative in case the company fails
to do so.
Thank You!