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:
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.