Formation of a company

by • 10/06/2011 • B.COM PART 1 Introduction to BusinessComments (0)753

Q3-What procedure is to be followed in the formation of a company? Explain.





Incorporation of a company undergoes a complicated procedure which is also time-consuming. The formation requires many steps 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.

2.   Appointment Of Advisors.

Promoters appoint legal advisors who are expert in legal matters and company laws. They, under the guidance and instruction of promoters, prepare memorandum and article of association, prospectus , and deal with the office of the registrar of the company.

3.   Preparation Of Company Documents:

The company law required the preparation of certain documents in accordance with the provision laid down in the Companies Ordinance 1984 before the company applies for registration.

These documents are as under:

  • Memorandum of association
  • Article of association
  • Prospectus

4.   Submitting Application With The Registrar:

When the 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 Fee:

Along with the application registration fee is paid. The fee depends on the amount of registered capital. The greater amount of capital the higher will be the fee.

6.   Printing Share Certificate:

After making an application with the registrar the promoters 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 procedure, formalities, and documents, he issues registration certificate. On its issuance the company legally comes into existence. Private company can start its business immediately. However, the public company cannot commence its business at this stage unless it gets another certificate known as commencement certificate.

8.   Publication Of Prospectus:

On the receipt of the registration certificate the company issues prospectus to the public through advertisement. After raising capital through prospectus the company applies for the commencement certificate. On obtaining it the company starts its business.

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