DEPARTMENT OF TECHNICAL EDUCATION

ANDHRA PRADESH
Name : R. Dasharatham
Destination : Lecturer
Branch : DCCP
Institute : GPW, Warangal
Year/Semester : I Year
Subject : Business Organization
Subject Code : CCP104
Topic : Forms of a Joint Stock Company
Duration : 50 Mts
Sub Topic : Introduction to Formation
Teaching Aids : PPTs and Animation
CCP104.41 1
Objectives :

Upon the completion of this period the student will

be able to :
 Explain Introduction to the Formation of Joint
Stock Company

CCP104.41 2
Recap :
In the previous class, we have discussed about:

 Sole Trading Business

 Partnership Business
 Cooperative Society
 Definition and Characteristics of Joint
Stock Company

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Introduction :

 A company is a corporate body

 Enjoying a separate entity of its own
 Distinct from that of individual members
 It can be set up only by following the procedure
laid down for the purpose under Law

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Introduction :

Formation of Joint Stock Company must comply

with:

 Economic and business factors

 Legal procedures under company law

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Need for Formation :

 Scientifically tested business idea

 Adequate capital
 Competent personnel
 Legal recognition

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Need for formation:

 The establishment of a company needs scientific with

economic and business factors and also compliance with
legal procedures under the company law

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Stages for formation:

 The formation of a Joint Stock Company passes

through the following stages

 Promotion
 Incorporation
 Raising of capital
 Commencement of business

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Promotion :
Promotion of a Joint Stock Company involves the
following stages

 Conception or discovery of business idea

 Investigation of business project
 Verification of results of investigation
 Arranging the business requirements
 Financing the business proposition
 The last stage in the promotion of a company is of
getting registeredCCP104.41
with the Registrar of Companies
9
Important Documents Required for
Incorporation :

 The following documents are to be filed with the

Registrar of Joint Stock Companies for
incorporation of the company

Memorandum of Association:
 It is signed by at least seven persons if it is a Public
Company or two persons in case of a private
Company

CCP104.41 10
Articles of Association :

 This document is signed by all those persons

who have signed the Memorandum of
Association
 A list of Directors, their addresses and
occupations
 A written consent by the directors that they have
agreed to act as directors
 A statement of Authorized Capital

CCP104.41 11
Articles of Association:
 A Statutory declaration by the solicitor or Chartered
Accountant or an Advocate of Supreme Court or High
Court that the provisions of Indian Companies Act have
compiled with
 The Registrar after scrutinizing these documents, if found
in order, he will enter the name of the company in the
Register
 He will issue a certificate known as “Certificate of
Incorporation”
 With the issue of this Certificate, the Company takes birth
with a separate legal entityCCP104.41 12
Raising the Capital by Public
Company :

 Issue of prospectus
 Allotment of Shares or Debentures

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Certificate of Commencement of
Business :

 A private company can start its business after

receipt of certificate of Incorporation.
 A Public Company can commence its business
only after getting one more certificate known as
certificate of commencement of business.
 After getting certificate of incorporation a Public
Company issues a prospectus inviting public to
subscribe to its share capital
CCP104.41 14
Certificate of commencement of
business:
 The Company is required to sell minimum number of
shares mentioned in the prospectus
 If shares are subscribed to the extent of minimum
subscription the directors can proceed with the
allotment of shares
 They have to file the following declarations with the
Registrar to secure the Certificate of commencement of
business
CCP104.41 15
 Stages of Company Formation :
COMPANY FORMATION

II. LEGAL ASPECT

I. BUSINESS
ASPECT
1. PROMOTION 3. PROSPECTUS
2. INCORPORATION
A. DISCOVERY OF
NEW IDEA

B. ASSEMBLING A. MEMORANDUM OF B. ARTICLES C. D.

ASSOCIATIONN OF WRITTEN NO
ASSOCIATION CONSENT TI
C. PREPARATION CE
OF FINAL PLAN

4. COMMENCEMENT CERTIFICATE

CCP104.41 16
The whole process of company formation may be
Divided Broadly into two stages:

 Business Aspect
 Legal Aspect

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Business Aspect :

Business Aspect refers to that all the activities

useful for doing the business through Joint Stock
Company

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Business Aspect includes:

 Promotion (Point 1, as shown in Chart)

 Prospectus (Point 3, as shown in
Chart)

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Legal Aspect :

 The activities which are needed for the

formation of a Joint Stock Company in the
eyes of Law

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Legal Aspect includes:

 Incorporation (Point 2 as shown in Chart)

 Commencement Certificate (Point 4 as
shown in Chart)

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Summary :

We have discussed about:

 Introduction to the Formation of a Joint Stock

Company
 Broad aspects in the Formation of a company

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Quiz :
1. Company formation is broadly classified
into how many categories:
a) 3
b) 4
c) 6
d) 2

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2. Which of the following is one of the stage in the
process of Formation?
a) Promotion
b) Incorporation
c) Raising of Capital
d) All the above

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Frequently Asked Questions :

1. What is Formation of a Company?

2. What is the need for Formation of Joint Stock
Company?
3. What are broad categories for Formation of a
Joint Stock Company?

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Assignment :

1. Write short notes on:

a) Business Aspect b) Legal Aspect
2. Draw the Chart showing the process of different
stages for Formation of a Joint Stock
Company?
3. What is necessary for the Formation of a Joint
Stock Company?

CCP104.41 26