Formation/Incorporation of a Company

Formation/Incorporation of a Company

Section 3(1) of the Act states that a company may be formed for any lawful purpose by-

(a) seven or more persons, where the company to be formed is to be a public company;

(b) two or more persons, where the company to be formed is to be a private company; or

(c) one person, where the company to be formed is to be One Person Company that is to say, a private company by subscribing their names or his name to a memorandum and complying with the requirements of this Act in respect of registration:

The process of formation of company consists of different stages, which starts when a person envisage an idea to form a company and ends when a company gets a certificate from the Registrar of Companies after complying with the various provisions relating to the formation of a company. ‘Formation of a Company’ has been divided into four stages:

1. Promotion

2. Registration

3. Capital Subscription and

4. Commencement of Business.

Out of the four stages, the first two stages ‘Promotion and Registration’ are necessary for both public and private companies. A private company can start operating its business immediately after registration, but a public company has to pass through two more stages-capital subscription and commencement of business.

A public company can raise funds from the public by issuing shares. After following all the legal provisions of public issue, which are specified in The Company’s Act, a public company can start operating of its business.