Report Writing

` HOW TO SET UP A COMPANY ???

by : DR. T.K. JAINAFTERSCHOOL centre for social entrepreneurship sivakamu veterinary hospital roadbikaner 334001 rajasthan, indiaFOR PGPSE PARTICIPANTS mobile : 91+9414430763

BE A PROMOTOR

A Promotor is a person who sets up a company. As a promotor, you have to think about the idea and convert this idea into a company. As a promotor, you have to set up initial contracts so that company becomes operational.

Duties of a Promotor

Not to make secret profitgive proper accountsnot to set up personal property on company's propertywork honestly, fairly not to have personal interest disclose all information

Qualification shares

Qualification shares have to be purchased by promotors & directors. These are minimum number of shares to be baught. Every director will buy these shares or give a written concent to buy these shares. Every director will also given written consent to act as director. Every director has a unique DIN no.

Legal position of a promotor

He is not an agent, nor an office bearer He has to buy some minimum shares

Legal position....

Sec 56: liable in give false information in prospectus Sec. 519 ; if a promotor is found guilty, he can be examined by court Sec. 203 : if a promotor is found guilty of crimie in formation of a company, the court may suspend him from management / formation of company for 5 years.

Steps ......

Prepare Memorandum of association (as per format) in at least 3 copesPrepare Articles of association (as per format) in at least 3 copes (or apply Table A of schedule I) Prepare agreements with directorsSubmit declaration to Registrar of company that all formalities have been fulfilled (by company secretary)

LEGAL FORMS

Form NO. 1 : declaration of all the formalities of company (to be filed with registrar of comapnies ). for other forms and their structure, click on the following link :http://www.mca.gov.in/MCA21/dca/downloadeforms/Download_eForm_choose.html http://www.vakilno1.com/froms_html/co_form.htm

INCORPORATION

Registrar of companies will issue a certificate of incorporation. (Sec. 33, 34 of companies act) this is conclusive evidence that the company is registered.

Can you start a business ?

Private company can start it immediately on getting certificate of incorporation, but a public company will have to obtain a certificate of commencement of business to start business. See this link also : http://www.legalserviceindia.com/company law/company_formation_procedure.htm

Commencement of business

Public company can start business only on fulfilling following formalities : 1. directors have purchased qualification shares2. prospectus / statement in lieu of prospectus has been prepared and submitted3. minimum subscription has been obtained.

PRELIMINARY CONTRACTS

These contracts are made before a company has been given certificate of incorporation. These contracts have no legal validity against company and the contractor cannot sue the company. The promotors are personally liable for such contracts.

PROVISIONAL CONTRACTS (ONLY FOR PUBLIC COMPANY)

These contracts are made before a company has been given certificate of commencement of business but after certificate of incorporation. These contracts have no legal validity against company until the company obtains certificate of commencement of business. Once the company obtains this certificate these contracts are enforceable against company.

FORMAT OF MEMORANDUM

MOA must be in following format : Schedule I : Table B / C / D / EB : for limited by sharesC : for guarantee D : guarantee + share capital E : for unlimited company

MOA

Memorandum of association must have : NAMEPLACEOBJECTLIABILITYCAPITAL SIGNATURE AND ASSOCIATION CLAUSE

MOA (sec. 13)

Every MOA Must be in paragraphs, printed, signed by the sigatories

MOA

At least 2 subscriber in private companyAt least 7 subscriber in public company no person can withdraw his name after submitting it.

NAME OF COMPANY

Avoid generic terms , names of famous personalities, religious names etc. apply for permission in proper format with at least 3 names, with prescribed fees (Rs. 500) To change name, pass special resolution + obtain permission from central government (sec. 21)

AOA

It gives guidelines about day to day management of company, powers of directors, etc.

Read http://www.taxguru.in/company-law/drafting-articles-of-association.html

How to change office of a company

Chaging office withing a city requires only board resolution, but changing it out of the state is difficult, you have to pass special resolution + permission from company law board + you have to file details with registrar of companies.

Formation is easy ???

Yes, in comparision to wind up (closing a company), formation of company is easier. But formalities are required, which you have to understand to set up a company ... after all it is not very easy.

WHAT IS WIND UP ?

As per sec. 425 of companies act, you can close a company (wind up ) by : 1. court order2. voluntarily 3. under supervision of court

Wind up by court ????

You can go to court and request the court to wind up a company, if it is really not working properly, however, you have to apply to the court in whose jurisdiction the company is

Case : NCL Industries Ltd

Orissa High court refused to take application for winding up of a comapny having registered office in Hyderabad.

Wind up by court process (sec. 433)

Convince the court that the company : 1. is unable to pay debt2. it is just and equitable to wind up the company3. special resolution to wind up by court 3. non-submission of statutory report 4. no business for 1 year (any reason).

Can you apply for winding up ? Sec. 439

If you are any of these :creditorshareholderregistrar representative of government company itself

Voluntary wind up....

As per sec. 488, a company can on its own wind up itself : as per : 1. by members 2. by creditors here the company will set up the process for winding up. However, the court can appoint official liquidator.

Winding up under supervision ....

Liquidator (the person who sells the property of the company and settles its dues) is appointed only by court and he has to work only with the permission of the court. He gives his report to the court and takes permission from the court for all the actions (sale of property is also with permission of court).

Winding up of unregistered company (sec. 583)

When there are 7 or more members in a company / partnership / firm the court may order for winding up if : 1.it is just and equitable 2. it is unable to pay to creditors 3. it has cesed to workso sick comapny (which is in huge losses and has eroded its networth or is not working) can also be wound up.

THANKS....

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5 DECEMBER 09

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