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Question-1

Write short notes on the promotion of a company.

Solution:
Promotion of a Company

Promotion is the first stage in the process of formation. It involves dreaming of a business opportunity and taking necessary steps to form a company so that practical shape can be given to exploiting the provided business opportunity. So it has to begin with someone who has come up with a potential business opportunity. It can be a person or a group or even a company. And if they succeed to form a company, then they are said to be the promoters. A promoter does not have any statory definition . A promoter agrees to take the initiatives to form the company for the given project and and accomplishes the given task. The promoters examine its prospects and bring together the men, materials, machinery, managerial abilities and financial resources to set the organisation going. After thorough analyzation of the feasibility of the idea, the promoters gather resources, prepare required documents, give a name and perform various other activities to get a company registered and obtain the necessary certificate enabling the company to start its business. Hence various functions are performed by the promoters.

Question-2

What are the documents that are to be submitted?

Solution:
Documents Required to be Submitted

A. Memorandum of Association: Memorandum of Association contains all the important objectives of the company. The company cannot undertake any activities which are not stated in the Memorandum of Association. The clauses present in the Memorandum of Association are given:

 

(i) The Name Clause: This clause contains the name of the company which Registrar of Companies has already approved.

 

(ii) Registered Office Clause: It contains the name of the state where the company has got permission to setup by the registrar office. The exact address of the registered office is not necessary to be notified at this stage but the same must be notified with in 30 days after the company has been incorporated to the registrar.

 

(iii) Objects Clause: This is the most important clause as it defines the purpose for which the company has been formed. A company is not legally allowed to do a job beyond the clauses mentioned in this memorandum. This id divided into two subclauses.

Question-3

Write a short note on Articles of Association.

Solution:
Articles of Association: The rules regarding the internal management of a company come under the article of association and are subsidiary to the Memorandum of Association and hence, should not be contradicted or exceeded more than stated in the Memorandum of Association. A public limited company can adopt Table A which is a model set of articles given in the Companies Act. which is a document containing rules and regulations for the internal management of a company. There is no need to prepare separate Articles of Association in such a case. For companies not adopting it separate articles of association.

Question-4

What are the steps to be taken while incorporating the company/organization?

Solution:
Incorporation

After completing all the above given formalities, promoters make an application for the incorporation of their company. The application has to be submitted to the Registrar of Companies of the state where they plan to setup the registered office of the company. This application should be must be accompanied with certain documents which have already been discussed by us. Some are briefly mentioned below:

1. The first document required is the Memorandum of Association duly stamped, signed and witnessed.

2. The Articles of Association duly stamped and witnessed. But however if the company adopts table A then its not required.

3. Written approval of the suggested directors to act as directors and should undertake to purchase of qualification shares.

4. The agreement with the proposed Managing Director or Manager or whole-time director if required.

5. A copy of the Registrar’s approval letter for the company‘s name.

6. A statutory declaration confirming that all legal documents for registration have been complied. The signatories are also suppose to give their address, occupation and the number of shares subscribed by them.

7. A notice about the exact address of the registered office should be submitted along with these documents and if its not submitted at the time of incorporation, it can be done within 30 days of the receipt of the certificate of incorporation.

8. Documentary evidence that the registration fees has been paid. The Registrar upon submission of the application with all the other required documents has to check that all the documents are in order and that all the statutory requirements regarding the registration are complied.

Question-5

What is meant by the term ‘Promotion’. Discuss the legal position of promoters with respect to a company promoted by them.

Solution:
Promotion is the first stage in the process of formation. It involves dreaming of a business opportunity and taking necessary steps to form a company so that practical shape can be given to exploiting the provided business opportunity. So it has to begin with someone who has come up with a potential business opportunity. It can be a person or a group or even a company. And if they succeed to form a company, then they are said to be the promoters. A promoter does not have any statory definition . A promoter agrees to take the initiatives to form the company for the given project and and accomplishes the given task. The promoters examine its prospects and bring together the men, materials, machinery, managerial abilities and financial resources to set the organisation going. After thorough analyzation of the feasibility of the idea, the promoters gather resources, prepare required documents, give a name and perform various other activities to get a company registered and obtain the necessary certificate enabling the company to start its business. Hence various functions are performed by the promoters.

Question-6

What are the Functions of a Promoter?

Solution:
The important ones are given below:

(i) Identification of Business Opportunity: This is the first and the foremost aspect necessary. The opportunity may include any opportunity like producing a new product or service or making some product available through a different channel and which has an investment potential. The technical and economic feasibility is later examined.

 

(ii) Feasibility Studies: Its always not feasible or profitable to setup real projects through the given opportunity. Hence the promoter has to take detailed feasibility studies to investigate the business with all respects which they intend to accomplish. The promoters are normally advised to seek the help of the specialists like engineers, chartered accountants etc., depending on the nature of the project to see if it can be profitably exploited.

 

(a) Technical Feasibility: Sometimes even good ideas are not feasible to execute. The reason for that can vary like non availability of raw materials, improper market, etc., For example, in our previous story avtar required a particular metal to manufacture his product. If suppose that metal is not produced in our country and its difficult to import it then his project may not be feasible until other arrangements are made.

 

(b) Financial Feasibility: Funds are mandatory required for any business. The promoters has to estimate the required amount of funds before trying to setup the company. The project has to be given up if the outlay is very large and the necessary arrangements cannot be made. For example, we may imagine that setting up a township maybe a lucrative job. It maybe that the required investment is so large that it may become impossible by the promoters.

 

(c) Economic Feasibility: Sometimes the project turn out not to be profitable even though all the other factors are favorable and hence the idea may have to be abandoned in such cases also. Promoters normally seek help from the experts to study this problem. But the experts do not become promoters just because they help out the promoters. After all these investigations, if the project turns out to give positive results then the promoters may launch their project.

 

(iii) Name Approval: After finalsing to launch a company, the promoters have to decide a name for it and submit, an application to the registrar of companies of the state where the registered office of the company is to be situated, for its approval. It may happen that another company with the same name or a similar one may exists. This case may lead to misleading the company and hence another name has to be suggested. Hence normally three names are given in the order we prefer from which the registrar approves the appropriate one. (Performa application for availability of names (Form 1A) is given at the end of the chapter.)

 

(iv) Fixing up Signatories to the Memorandum of Association: Memorandum of Association of the proposed company is signed by the people who have been decided by the promoters. The first Directors of the Company are the people who first sign the memorandum. And its necessary to get their written consent to act as Directors and to take up the qualification shares in the company

 

(v) Appointment of Professionals: Some professionals such as mercantile bankers, auditors etc., are appointed to help the promoters in the preparation of necessary documents as required by the Registrar of Companies. The name, address and the number of shares allotted to each share holder is submitted to the Registrar in a statement called return of allotment.

 

(vi) Preparation of Necessary Documents: According to the law the promoters have to prepare certain legal documents and submit to the Registrar of the companies for getting the company registered like the Memorandum of Association, Articles of Association and Consent of Directors.





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