Formation and Incorporation Of Company

A company is an artificial law coming into existence by law, with companies’ goals. A company is an artificial, invisible, and intangible person in the eyes of law. As per Companies act 2013, ”Company means a company registered under this act or under any former act.” Here in this article we’ll be looking at the formation and incorporation of company.


Section 3 of companies act 2013

Maintain minimum number of members [Section 3A]

If at any time the members of the company are reduced, in case of public company below seven in case of private company below 2 and the company carries on the business for more than six months and those members who are involved in carrying the business which are less than seven members or two members i.e. after six months are responsible to pay all the debts of the company contracted during that time and may be sued therefore.

Procedure of Formation of company:

1. Promotion:

The idea to bring a company into being and to make preparations for the same. The executor of idea of promotion of a company is called promoter. At this stage following points are to be considered by promoter.

  • Idea of the promotion of a company

The idea of promotion series in the mind of promoter. He considers to promote a company in order to implement a research or to place a new product in the market. Promotion is the child- child of the promoter.

  • Primary and detailed investigation

After having an idea of promotion of company promoter has to undertake business oriented empirical scrutiny in the direction of implementing. Selection for business location, profitability is to be evaluated.

  • Mobilization of resources:

Promoter has to enter into contracts to obtain land, raw material, machinery, services etc for the implementation of promotion.

  • Financial arrangement:

It is to be considered from where and how to procure capital for procuring the equipment’s and assets. Newly established company raises capital through shares.


According to Section 2(69) Promoter is the one whose name has been written in the prospectus or annual return or controls the affairs of company directly or indirectly. Promoters give advice, direction and instructions according to which BOD acts. It Randers services more than the professional capacity, undertakes services to form a company for specific project or purpose as well as engaged and interested in the formation of company.

Incorporation of company:

Incorporation means to register the company under the companies act,1956. To register a company following documents are to be submitted:

1. Memorandum of association: It is a basic document and constitution of a company on which building of a company is constructed. Provisions of following clauses are compulsory in Memorandum.

2. Name clause: A public which has limited liability by the share has to insert the word “limited” and a private company has to insert words “private limited” at the end of their company name. Company cannot adopt the name which already resembles to the company that is registered to the registrar.

3. Address of the registered office clause: The company has to mention the address of the registered company to the registrar office and so that public can correspondence with company.

4. Object clause: object clause has been considered the most important clause. The company has to mention for what type of business the company is established and the company cannot perform the work except for the goal for which the company is established.

5. Liability clause: the liability of the member is limited, unlimited or limited by the guarantee is indicated in this clause.

6. Capital clause: under this clause the authorized capital and its division among the shares of fixed value is stated.

7. Association clause: minimum 7 members in a public company and minimum 2 members in private company have to give a statement with their signature stating that, they desire to establish a company.

8. Articles of Association: it is a document determining the internal administration of the company. Rules of administration are mentioned in articles within the boundary of the memorandum. Both the documents Memorandum and Articles become public after their registration.

9. List of directors: The list of persons who are ready to works as the director are to be registered before the registrar of companies along with their name, address, age, business, nationality, etc.

10. Written consent of directors: Those persons whose name have been registered as the directors have to give the written consent as a proof that they are ready to work as directors.

11. Declaration of interest in other company: if the directors, manager, secretary are interested in other company then they have to file a written statement regarding it.

12. Payment of fees: Necessary registration fees are to be paid along with the above documents.

13. Certificate of incorporation: After the scrutiny of the above documents the registrar of companies record in the books of companies, if the documents are found satisfactory. The registrar issues a Certificate of incorporation after completing this procedure. The date which is stated in the certificate of incorporation is considered as the date of the commencement of the company. Along with the certificate of incorporation, the registrar of companies allots the corporate identification number. Which becomes the identity of the company and is mentioned in the certificate of incorporation, company has to preserve original documents and statement of information at its registered office till the winding up of the company.

Priyanshi Shah
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Priyanshi Shah

Priyanshi Shah is a college student pursuing BBA. She is very much passionate to learn new things and working on her way to start her own business.

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