The promoter should follow the following procedure for incorporation of a joint stock company:
1) Apply in the prescribed form to the Registrar of Companies for seeking approval to the proposed name of the company. This step is necessary because under the provisions of the Companies Act, 1956, the Registrar of Companies cannot register two companies with the same or substantially the same name. The promoters should propose at least three names in order of preference. Once, the name is cleared by the Registrar of Companies, the promoters should proceed to take the following steps as stated below.
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2) The promoters should fix up the underwriters, brokers, bankers, solicitors, auditors and signatories to the Memorandum of Association.
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3) The promoters should get the Memorandum of Association (M/A) and the Articles of Association (A/A) prepared and printed.
The M/A is the most important document of the company. It is in fact the charter of the company. It lays down the conditions on which the company is registered. It lays down the objects and powers of the company as well as the scope of its operation. Thus, its main purpose is to enable the shareholders, creditors and all those who deal with the company to know what the company can do and what it cannot do.
The Memorandum of Association contains the following clauses:
a) The name clause: It states the name of the proposed company. The name would include the words ‘Private Limited Company’ as the last words of the name in the case of private limited company and ‘Limited Company’ in the case of public limited company.
b) The registered office clause: It specifies the state in which the registered office of the company shall be situated.
c) The Objects Clause: It is the most important clause in the Memorandum of Association. It defines the scope of operations of the company. It describes the main activities (Objectives) and other activities (objectives) that the company shall pursue.
d) The Liability Clause: It states that the liability of the shareholders/members shall be limited
e) The Capital Clause: It states the amount of share capital with which the company is to be registered.
f) The Subscription Clause: It contains the names of signatories to the memorandum of association. These signatories are the promoters of the company.
The Articles of Association is another important document required for incorporation of the joint stock company. It states the rules and regulations for the internal management of the company.
4) Once the M/A and the A/A have been prepared, the promoters should then submit the application for incorporation of the company in the prescribed form to the Registrar of companies having jurisdiction over the registered office the company. The application should be accompanied by the following documents:
a) Copy of the letter from the office of the Registrar of Companies giving approval to the name of the proposed company.
b) Copies of the Memorandum of Association and the Articles of Association
c) A written consent of the proposed directors to act in that capacity along with an undertaking by them to take the required amount of shares (known as qualification shares).
d) The notice of address of the registered office of the company.
e) A statutory declaration stating that all the legal requirements under the Companies Act for incorporation of the company have been complied with. This declaration must be signed by advocate of the Supreme Court or High Court or by an attorney secretary or a chartered accountant or by person named as director of the company.
f) Payment of the prescribed fee.
The Registrar of Companies shall scrutinize all these documents and if he finds them in order, he will issue the Certificate of Incorporation of the company. A private Limited company can start its operations once it has obtained the certificate of incorporation. But a public limited company can start its operations only after obtaining the certificate of Commencement of Business from the Register of Companies. The promoters of a public limited company are required to file the following document with the office of the Registrar of Companies to obtain the certificate of commencement of business:
1) The declaration that the amount of share capital equal to at least the amount of minimum subscription has been received. The company has to issue prospectus to invite general public to subscribe to the share capital of the company.
2) The declaration that the directors have paid the amount due from them of the shares allotted to them.
3) The declaration that no money is liable to be refunded to the applicants by reason of the failure to apply for or to obtain permission for shares or debentures to be quoted in any recognized stock e4xchange.
4) The statuary declaration in the prescribed form by one of the directors or the company secretary that the above requirements have been fulfilled.
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The Registrar of Companies will scrutinize these documents and if he is satisfied then he will issue the certificate of commencement of business.
It is clear that there is a requirement for approval of the name of the business firm only when the form of proposed organization is the joint stock company. In case it is decided by the promoter to start export business in the field of readymade garments as a private or public limited company, then approval to the name of the proposed firm would be required from the AEPC as well as the Registrar of Companies.