CLA CH-1

A company comes into existence when a group of people unite to exploit a business opportunity by combining resources: men, material, money, and management.
Stages of Formation:
- Promotion Stage
- Incorporation Stage
- Raising the Share Capital Stage/Subscription Stage
- Commencement of Business Stage

The first stage in the formation of a company, initiated by individuals or groups who conceive a potential business opportunity.
These individuals are known as promoters.
Definition of a promoter as per CA 2013:
- (a) Named in a prospectus or identified in the company's annual return.
- (b) A person controlling the company’s affairs, directly or indirectly.
- (c) Whose advice or instructions the Board of Directors typically follow.

Identify business opportunities and conceive the scheme for forming a company.
Conduct feasibility studies: technical, economic, and financial.
Assemble a required number of subscribers.
Apply for Corporate Identification Number (CIN), Global Location Number (GLN), and PAN/TAN.
Draft and file the Memorandum of Association (MOA) and Articles of Association (AOA).
Engage bankers, brokers, and legal advisors.
Prepare and circulate a prospectus.
Ensure compliance with and disclosure to relevant authorities.
Set terms and conditions of pre-incorporation agreements.

Legally, promoters are not considered agents before incorporation or trustees for the company as it does not yet exist.
They act in a fiduciary capacity, controlling the process of the company's creation.
Promoters are responsible for defining the structure and governance of the company.
They must perform fiduciary duties, disclose interests in transactions, and ensure compliance with regulations.

The second stage in forming a company, crucial for bringing the company into existence via registration.
Activities during Incorporation:
- Preliminary activities: Decide on the company name and obtain necessary licenses.
- File documents with the Registrar of Companies.

Selection of Directors: Minimum 3 public and 2 private, with identity proof, address proof, and passport-size photographs.
Apply for a digital signature certificate as a substitute for physical signatures, issued by licensed certifying authorities.
Obtain Director Identification Number (DIN) for all existing or proposed directors with specified documents.

Defined under Section 2(56) of the Companies Act,2013.
Includes clauses: Name Clause, Situation Clause, Object Clause, Liability Clause, Capital Clause.

Alteration Definition: Modifications in any clauses of the MOA.
Change of Name: Requires approval under section 13 and a special resolution. Changes not allowed if there are defaults like missed filings or unpaid debts.
Alteration of Objective Clause: Needs a special resolution, publishing detailed objectives in newspapers and on websites.

Registered Office Clause: Changes need Registrar's registration; required documents include a copy of the MOA and resolutions.
Capital Clause: Includes provisions for increasing share capital, converting shares into stock, or canceling unissued shares.
Liability Clause: Can be modified by passing a special resolution to alter the liability of directors.

Describes the rules for internal management of the company; it must align with the MOA.
Regulates relations among shareholders and directors.
Can include additional management matters as necessary.

Includes topics like interpretation, private company regulations, capital alterations, share controls, meetings, directors' governance, and other operational aspects.

Can include adding, deleting, or modifying contents.
Steps for Alteration:
- Convene a board meeting; obtain necessary resolutions and approvals.
- Notify general meetings and file alterations with the Registrar, including supporting documents.

Memorandum of Association (MOA): Fundamental document specifying details required to incorporate a company.
Article of Association (AOA): Specifies governing rules for management; completing objectives described in MOA.

This legal document proves registration with the Ministry of Corporate Affairs in India.

Pertinent only for a public company with share capital, occurring post incorporation.
Requires a Board of Directors meeting for setting up management roles, drafting a prospectus, and deciding on public offers.

Invitations to the public to subscribe shares; must include company details, issue dates, underwriting details, and capital structure.

Required if a company does not issue a prospectus, containing key company information, directors' details, estimated expenses, and other vital data.

A process for gauging demand for new securities and determining prices through advertisements and offers.

A public company needs a 'Certificate of Commencement of Business' to begin operations post-incorporation, including selling a minimum number of shares.

Limits company actions to those outlined in the MOA; actions beyond these limits are void and unenforceable.
Ensures funds are used for their specified purpose, protects creditors and shareholders.

Legal assumption that individuals dealing with a company are aware of its MOA and AOA, providing security but can result in invalid contracts if outside the powers defined.

Protects outsiders by allowing them to assume that all internal procedures were correctly followed, unless they are aware of irregularities.