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FORMATION OF COMPANY OF AUTOMOBILE SECTOR

TERM PAPER

MGT—518
Lovely Professional University

Submitted by Submitted to

Avtar Singh Mr. Amarjeet Saini

Subject Name Corporate and Business Law

Program Code 193

Block Name LSM (Lovely School of Management)

Roll No. RS1902-A13

Regn. No. 10900128

Sem. 1st

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Brief Contents
Chapter nos. Chapter name Page no.

Chapter 1 Introduction to 3
Company and public
company
Chapter 2 Memorandum of 7
Association
Form no. 1 9
Form no. 1A 11
Form no. 1AB 12
Form no. 18 13
Form no. 19 14
Form no. 29 16
Chapter 3 Contracts 18-20

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Chapter 1

Introduction
What is A COMPANY?

A company may be defined as an association of individuals for some common purpose. But it
is an voluntary association of persons. It has a perpetual succession and a common seal. It
has a separate legal entity from its members. It exists only in contemplation of law. It has
capital divisible into parts, called shares. It is formed under the rules and regulations of the
Companies Act, 1956.

CHARACTERSTICS OF A COMPANY

1. Separate legal entity

It means that a company has a separate legal entity from its members .It has an independent
existence. The company’s money and whole property belong to the company and not to the
shareholders of the company.

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2. Limited liability

A company may be company limited by shares or company limited by guarantee. In a

company limited by shares, the liability of members is limited up to the unpaid value of shares.
In a company limited by guarantee, the liability of members is limited to such amount as the
members may undertake to contribute to the assets of the company.

3. Perpetual succession

As it is created by a process of law, so it can be put to an end to only by a process of law. It

continuous to exist even its members are dead.

4. Common seal

Since a company has no physical existence, it must act through its agents and all such
contracts entered into by agents must be under the common seal of the company.

5. Separate property

As company has a separate legal entity it is capable of owning, enjoying and disposing of
property in its own name.

6. Capacity to sue

A company can sue and be sued in its corporate name.

7. Transferability of shares

The capital of company is divided into parts, called shares. These shares are, subject to
certain conditions, freely transferable, so that no shareholder is permanently wedded to
company.

The Companies Act, 1956 sets down the rules for the establishment of both public and
private companies. A company is formed by registering the MoA (Memorandum of
Association) and AoA (Articles of Association) with the Registrar of Companies (ROC) of
the state in which the head office is to be situated. The most commonly used forms of
companies is the limited and unlimited common being relatively uncommon.

What is a Public Limited Company?

A public Limited Company is a Company limited by shares in which there is no restriction

on the maximum number of shareholders, transfer of shares and acceptance of fixed
deposits. The liability of each shareholder is limited to the extent of the unpaid amount of
the shares face value and the premium thereon in respect in respect of the shares held by
him or her. A public company can be indicated as the company which—

(a) has a minimum Rs. 5 lacs as paid-up capital;

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(b) is a private company which is subsidiary of a company which is not a private

company.

The minimum number of persons required to form a public company is 7 and there is
no restriction on maximum number of members or shareholders.

A public company must have at least 3 directors under section 252 of the Company
Act, 1956.

Incorporation of Company

Before a company is formed, certain preliminary decisions are necessary with regard to
what kind of company to be created i.e. Public or Private company, what its capital should
be, whether it is to be formed a new company or taking over an already existing business.
All these decisions are taken by certain persons who are known as ‘Promoters’. A group of
persons who undertakes, does and goes through all the necessary and incidental
preliminaries, keeping in view the object, to bring into existence an incorporated company.

Mode of forming incorporated company

As we are going to make a public company there should be at least 7 or more persons need
to associate with the company to form a new company. For forming a new company we will,
have to filled the following documents with the registrar of company in the nearest ROC’s
office;-

1. The Memorandum of Association duly signed by the subscribers.

2. Articles of Association, if any, signed by the subscribers to the memorandum of

association. a public company limited by shares need not have its own articles of
association.

3. List of directors who have agreed to become the first directors of the company.

4. A declaration stating that all the all the requirements of the companies act and other
formalities relating to registration have been complied with.

5. Such declaration should be signed by the following persons;-

5.1. An advocate of supreme court or high court.

5.2. A secretary or a charted accounted in whole time practice in India.

5.3. A person named in the articles as a director or a manager or a secretary of the

company.

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Fees

Fee payable depends on the nominal capital of the company to be registered and may be
paid in one of the following modes. Cash/Postal Order (Upto Rs. 501), DD favoring
ROC/Treasury Challan should be payable into specified branches of PNB (Punjab National
Bank) for credit.

When the requisite documents are filled with the registrar, and if the registrar is satisfy with
that then he will register the memorandum, the articles and other documents filled with him
and will issue a certificate of formation of company.

Procedure in obtaining a name approval for the company?

An application in Form No. 1A is to be filled with the ROC (Registrar of Companies) of the
state in which the Registered office of the proposed company is to be situated. The
application is to be signed by one of the promoters. The details which needed to be stated in
the application are as follows:

1. Four alternative names for the proposed company (the name can be the names of the
directors, coined names from the objects of the proposed company but it should be
definitely of the main object of the company. Justification for the name needs to be
specified along with the application);

2. Names and Addresses of the promoters (Minimum 7 for a public company);

3. Authorized capital of the proposed company;

4. Main objects of the proposed company;

Having submitted the application, the ROC examines the same and sends the approval or
objections in about 10 days of the application received. On fulfilling of the objections a
formal letter of name approval is issued.

Formalities before or after Incorporation?

• Obtaining PAN (Permanent Account Number) from Income Tax Department;

• Registration for Import or Export code from Director General of Foreign Trade;

• Obeying Shop and Establishment Act;

• RBI approval for foreign companies investing in India and FIPB approval, if
required;

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• The directors of an Indian Company both Indian and Foreigner Directors, are
required to obtain DIN (Director Identification Number) and DSC (Digital Signature
Certificate).

Setting Up An Automobile Company In India

Setting up an Automobile Company in India involves various steps, however the process can
broadly be classified into three steps:

1) Approval for Investments

2) Incorporation / Formation of Company, Foreign Branch Office / Liaison Office

3) Registration with various Authorities

Company has to take into consideration all the law related to the employees ,wages law,
ecological law. Company also will do a proper study of state govt.`s tax rule and regulation so
that it can select a state which is more beneficial to co.

Chapter 2

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Memorandum of Association

An MoA contains the fundamental conditions upon which alone the company is allowed to
be incorporated. It may be called as the charter of the company. MoA depicts the main,
ancillary and other objects of the proposed company. Its is prepared for the purpose to
enable the shareholders and others who deal with the proposed company to know what its
permitted range is.

A stamp duty is required to be paid on the MoA. This is required to be executed by the
promoters in their own hand in the presence of a witness in with stating their full name,
father’s name, residential address, occupation and number of shares subscribed for etc.

The Memorandum of Association of the company engaging in the Automobile sector will
have the following MoA i.e. the MoA of prospected Automobile Manufacturing Company
will contain the following contents:

1. The name of the company is Alcom automobile Limited.

2. The company is to be public company.

3. The company’s registered office is to be situated in Barnala, Punjab.

4. The liability of the members will be limited.

5. The company’s share capital is Rs. 50,00,000 divided into 5,00,000 shares of Rs. 10
each.

6. Objective:
6.1 Main aim of the company is to produce the four vehiler vehicle of different model.
6.2 It can purchase necessary parts from everywhere it like.
6.3 Co. by passing a special resolution can change or widned it`s area of operation.
6.4 Co. can take its own land for infrastructure or can take on lease.
6.5 Co. can sale the all kind of spare parts of its vehicle .
6.6 The objective of the company is to provide an assortment of automobile parts
including wiper parts, engine mounting plates and others which are acclaimed for
their attributes including robust construction, accurate dimension and corrosion
resistance.
6.7 Co .can join with a financial institution to finance the vehicle to be sold by the co.

To achieve our objective we are offering customized solutions for our range and can
meet all kind OEM specifications from customers. Our own modern tool room will helps
us to produce these parts precisely and accurately.

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7. The following subscribers to this memorandum of Association wish to be formed into

a company pursuant to this Memorandum; and agree to take the number of shares
shown opposite our respective –names.

__________________________________________________________________________
_________

Name & Addresses of Subscribers Number of shares taken by each

Subscriber

__________________________________________________________________________
__________________________________________________________________________
__________________

1. Resham Upadahy 10 shares

138, Rohini, Delhi

2. Harshmeet singh Brar 10 shares

Brar estate, Haroli, Thesil Ratia, Distt. Fatehabad (Haryana)

3. Hargunpartap singh 10 shares

Aulakh nagar, Mansa (Punjab)

4. Abhinav Sharma 10 shares

74, Shanta Vihar, Rurkee (UttraKhand)

5. Dya Shankar Prasad 10 shares

37, Indraprasat Marg, New Delhi

6. Ramdas Thirkey 10 shares

562, Preet Vihar, Jodhpur (Rajyasthan)
10 shares
7. Kaushal Kishore
64, Rajguru MahaMarg, Amritsar (Punjab)
_______________________________________________________________________
______

Total Shares Taken: Seventy

______________________________________________________________________
_______________
DATED: 18th Nov. 2009
Witness to the above Signatures:-
Bhagat singh colony
patiala (Punjab)

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FORM NO. 1

Registration No. of Company .......... Nominal Capital : Rs.

50,00,000 (Fifty Lacs only)

THE COMPANIES ACT, 1956

Declaration of compliance with the requirements of the Companies Act, 1956 on

application for registration of a company

[Pursuant to section 33(2)]

Name of Company Alcom automobile Limited

Limited/Private Limited

Presented by ..

I, ., of do solemnly and sincerely

Declare that I am [1] Gokul sachdeva who is engaged in the formation of the
company, or a person

Named in the articles as a director/manager/secretary of the Alcom,automobile

Limited Limited/Private Limited.

And that all the requirements of the Companies Act, 1956, and the rules thereunder in respect
of matters precedent to the registration of the said company and incidental thereto have been
complied with. And make this solemn declaration conscientiously believing the same to be
true.

Date 28th Nov. 2009

Place Barnala Signature

Witness

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Designation

1. An advocate of the Supreme Court of the Punjab/Haryana High Court, an attorney or a

pleader entitled to appear before the ..Punjab/Haryana High Court or a chartered
accountant practising in India.

2. State whether director, manager / secretary /advocate/ chartered account.

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FORM NO. 1A

THE COMPANIES ACT, 1956

Application form for availability of names*

The registrar of Companies,

Sir,

Subject: AVAILABILITY OF NAMES---INFORMATION---FURNISHING OF

We, the following applicants, are desirous of forming a company to be registered under the
companies Act, 1956 in the state of-

1. Name and full address of the person(s) applying for

the availability of the name (in block capitals)
2. Proposed name of the company
3. State whether public or private
4. In case the proposed name mentioned in item (2) is
not available, 3 names to be considered in the order
of preference
5. Main object of the proposed company
6. Name and addressees of the prospective directors or
promoters, etc.
7. Particulars of the names and situations of registered
offices of other companies in the same group or
under the same management
8. Proposed authorised capital
9. Please furnish particulars and results of any
application moved to this or any other Registrar
previously for availability of name
10. Particulars of remittance of fee (Draft/IPO) Rs.
Situation

Dated Signature of the applicants

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*Refer rule 4A

FORM NO. 1AB

THE COMPANIES ACT, 1956

Consent of the person charged by the Board with the responsibility of complying with
the provisions of the Act

[Pursuant to section 5(f)]

To

The Board of Director of Ltd.

I son of hereby given my consent for being

charged by the board of directors of the company above named with the responsibility of
complying with the under-mentioned provisions of the Companies Act, 1956.

1.

2.

3.

Signature

Date this day of 19 Name of the Person

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FORM NO. 18

Registration No. of the Company Nominal Capital: Rs

THE COMPANIES ACT, 1956

Notice of the situation/change of situation of registered office

[pursuant to section 146]

Name of the company

Notice is hereby given that ----

1. (a) the registered office of the company is situated .with effect from

[date]
(b) the situation of the registered office of the company of was changed from to
with effect form .
[date]

2. Situation of registered office falls under the jurisdiction of

(name of the police station).*
Dated this Day of 19

Signature

Name

(In Block Capitals)

Designation

*State address of nearest police station with district and tehsil.

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FORM NO. 19

Registration No. of the Company Nominal Capital: Rs

THE COMPANIES ACT, 1956

Declaration of compliance with the provisions of section 149(1)(a), (b) and © of the
Companies Act, 1956

[pursuant to section 149(1)(d)]

[To be used by a company which issued a prospectus on or with reference to its formation]

Name of the company Alcom automobile Limited

Presented by

I of being a director/the secretary of …….. Limited do

solemnly and sincerely declare:--

1 That the amount of the share capital of the company

. offered to the public for subscription is Rs..
2 That the amount stated in the prospectus as the
. minimum amount which, in the opinion of the board of
directors, must be raised by the issue of share capital
in order to provide for the matters specified in clause(5)
of schedule II of the Companies Act, 1956, is Rs.
……………
3 That shares held subject held subject to the payment of
. the whole amount thereof in cash have been allotted to
the amount of Rs. ………..
4 *That every director of the company has paid to the
. company on each of the shares taken or contracted to
be taken by him , and for which he is liable to pay in c
ash a proportion equal to the proportion payable on
application and allotment on the shares offered for
public subscription* except the following directors,
namely

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who has/have not taken or contracted to take any

shares for which he is/they are liable to pay in cash.

*That no director of the company has taken or

contracted to take any shares for which he is liable to
pay in cash.
5 That no money is, or may become liable to be repaid to
. applicants for any shares or debentures which have
been offered for public subscription by reason of any
failure to apply for, or to obtain, permission for the
shares or debentures to be dealt in on any recognized
stock exchange.
6 The statements in paragraphs ………………… above
. are true to my knowledge and those in the remaining
paragraphs are true to the best of my information and
belief.

Dated this . Day of . 19

Signature

Designation: Director/Secretary

*Delete paragraphs not applicable.

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FORM NO 29

Registration No. of Company ........................ Nominal Capital Rs. ............................

THE COMPANIES ACT, 1956

Consent to act as director of a company and/or undertaking to take and pay for
qualification shares

[pursuant to section 264(2)/266(I)(a) and 266(1)(b)(iii)]

Name of company .Alcom auto..............................................

Limited ..........................................

Presented by ..................................................................................................................

To the Registrar of Companies .......................................................................

I, the undersigned, hereby testify my consent to act as director of the ..........................

limited, ................................ pursuant to section 264(2)/266(1)(a) of the Companies Act, 1956
and certify that I have not been disqualified to act as a director under sections 267 and/or 274
of the Companies Act, 1956.

I, the undersigned having consented to act as director of the ..............................

Limited, also hereby undertake to take from the said company and pay for ....................
shares of Rs. ................. each, being the number/value of the shares prescribed as the
qualification shares for the office of director of the said company.

Name and Address Occupatio Date of Nationality Signature

surname in full n birth
and father’s
names

1 2 3 4 5 6

Signature ..............................

Designation ...........................

Dated the ........................... day of .................... 19

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Notes: (1) Delete the portion not applicable.

(2) If a director signs through his agent authorized in writing, the authority must be
produced
before the Registrar.

(3) In case of undertaking to take and pay for qualification shares, the form should be
accompanied by the necessary stamp duty.

Chapter 3
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Contracts:

Contract No 1:
The first contract is about purchase of chairs by company.

Offer by Company, Terms and Conditions:

There is invitation of offer by newspaper contained a detail price of chairs along with no of
specification of chairs and quality types.
• The Alcom automobile limited requires 200 chairs of x model whose price is Rs.200 per chair.
Acceptance by Wooden Company:

The terms and condition specified by company was accepted by wooden Accouterna Company
but there were some terms and conditions put forward by consultancy Company. They are as follows:

• After the delivery of chairs they want payment on the spot.

Acceptance by both:

We accepted their terms and conditions without any further obligation and both the party signed
for the contract.
Breach of contact:
The wooden L Company sends the 200 chairs to the Alcom company but the chairs were different
delivered by the wooden company and Alcom company refuses to take the delivery of chairs because
chairs were of not that quality which they had ordered so the wooden company sued in court to Alcom
company for not taking delivery of chairs.
Decision by Court:

The decision by the court was in favor of Alcom ltd because the chairs which were delivered by the
wooden company was not of that quality as it was mentioned in the contract the terms of the contract
was violated by the wooden company and then wooden company made the chairs as was agreed and
delivered the chairs to Alcom ltd.

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Contract No 2:
The second contract is about warranty of cars.

Offer by Company, Terms and Conditions:

The offer contained a detail price of vehicle model name , no and car name along with warranty
period and was tested before sale there was no defect in cars.
• The price of car is 4,51,000.

• The warranty of car is 1 year or 36000 km which may be earliar.

• The car name is ZIP and model is U56.

Acceptance by Buyers:

The terms and condition specified by company are accepted by 500 buyers. There is no
condition by buyers for company.
Acceptance by us:

We accepted their terms and conditions without any further obligation and both the party signed
for the contract.
Breaking of contact:
The buyers used the cars for 8 months and later on they found that there are some defects in engine and
all buyers sued to company for violating the contract.
Decision by Court:

The decision by the court was in favor of buyers, buyers returned the cars to company and repaired the
technical defects as they had given the warranty of cars for one year.

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Contract No 3:
This contract is about the dealer of a comapny .

Offer by Company, Terms and Conditions:

A dealer of company in Fatehabad he is being given a fixed rate of percentage of

commission on the sale made by him it was agreed that he will give free service to
the entire vehicle in first year of sale or 20000 km which is earlier.

Acceptance by y:

Y agreed to purchase car from A without any condition.

• Acceptance by both:

We accepted their terms and conditions without any further obligation and both the party signed
for the contract.
Breaking of contact:
The car purchased from dealer refused to give free service during second time and
y sued to company for violating the contract.

Decision by Court:

The decision by the court was in favor y as Y was having the direct agreement with
Company, the company forced the dealer to provide free service to Y’s car.

Contract No 4:
The contact is about violating the terms and condition of MOA by company.
Company has given its four new car to a foreign deliberate free of cost. Company main aim was
to gain the publicity that foreigner are using these cars according to the term, the foreigner will
bear all the expenses during the time they owns the car. During this time two cars met with the
accident company sued on the foreigner to recover loss but court has given decision that it is not
described in the memorandum of association of company to give car on bailment. Its areas was
manufacturing and selling of cars in this company was violating the condition of MOA so it
cannot recover any loss from foreigner.

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5- case – promissory note

Alcom automobile ltd`s one debtor gave a promissory note to the co. for the settlement of
a part of the sum.

_________________________________________________________________

Rs. 1,00,000 Date-12 july,2009

I promise to pay Alcom automobile ltd. Rs.1 lac and all the sums due to co.

To

Alcom Automobile ltd. Stamp…////////

Barnala, (Punjab) __________

!_________ !

-__________________________________________________________________

Company asked to debtor for payment on due date .Debtor refused for payment on that
date .co. take the advice of a layer on that issue . He told that this promissory not is not made
in a proper manner , it should be made only for a certain sum of money. So it is not possible
for the company to take money on date written in the promissory note.

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