Presented By:

Vanisha
Assistant Prof.
(Commerce & Management)
Formation of company
Min 2 members are required to form a private
company.
Min 7 persons are required to form a public
company
One person can form a one person company.

Steps to form a company
Promotion of a company
Incorporation of a company
Flotation of raising capital
Commencement of business
1.Promotion
It is the first stage where necessary steps are
taken for the registration of the company.
Promotion is a process organizing and
planning the finance of business under the
corporate form.
In other word we can say that it is the process
of grouping members to achieve the common
objective of the company.
Who is a promoter?
Acc to sec 2(69) of the companies act 2013.
Promoter means a person who has been
named as such in a prospectus or is identified
by the company in the annual return referred
to in section 92
Who has control over the affairs of the
company, directly or indirectly whether as a
shareholder , director or otherwise.
In accordance with whose advice, directions
or instructions the board of directors of the
company is accustomed to act.
A promoter may be an individual , a firm, or
body corporate.
A person who merely acts in professional
capacity on behalf of a promoter such as a
engineer, accountant, is not a promoter in the
eye of law.
functions
Discovery of
ideas
Detailed
Investigation
Assembling of
resource
Preparing
preliminary
document
Entering into
preliminary
contracts
Naming a
company
Appointment
of bankers,
brokers, &
underwriters
Legal position of Promoter
The promoters of a company have hold
fiduciary position in the company.
They have the powers of defining how , when
& in what shape and under what supervision
it shall came in to existence & began to act as
a trading corporation.

Rules for promoters
A promoter cannot make either directly or
indirectly any profit at the expense of the
company he promotes, without the knowledge
and expense of the company.
If he does so in disregard to this rule, the
company can compel him to account for it.
Where the promoter fails to make full disclosure
of the profits that he is making the company may
sue him for damages for breach of feduciary duty,
& recover from him any profit made.

Conti.
A promoter is not allowed to derive a profit
from the sale of his own property to the
company unless all material facts are
disclosed.
If a promoter contracts to sell his own
property to the co without making a full
disclosure the co may either repudiate the
sale or affirm the contract & recover the profit
made out of by the promoter.
Rights of promoters
1. Right to receive preliminary expenses:-
( expenses include in setting up and registering the company from board of directors.
The articles may provide for the payment of preliminary expenses to the promoter.)

2.Right to recover proportionate amount from the co-
promoters:- (the promoters are held jointly and severally liable for the secret
profits made by them in formation of a company , if the entire liability arising out
of mis statement in the prospectus is borne by one of the promoters, he is entitled to
recover proportionately from the co-promoters)

3. Right to Remuneration:- (a promoter having made proper disclosure,
has a right to be paid remuneration for his efforts.)
Incorporation of a company
A co comes into existence when a number of
persons come together with a view to exploit
some business opportunity.
These persons are called promoters , under
section 3 any seven or more persons, 2 or
more in the case of private company, 1 person
in case of one person company may form a
incorporated company.
The purpose for which a company is going to
be incorporated must be lawful.
Steps before proceeding with the procedure
of filing documents.
DIN ( directors identification numbers)
Digital signature of the promoters.
Both DIN & Digital signature will be registered
with the Ministry of corporate affairs portal.