Stages of formation of Companies (18) Section 3 to 22 CO(Incorporation) Rule 2014

ii. Stages involved in formation of co. S. 2(20) Company during Previous 5 Y. – Verification of RO in
means incorporated under co act or any previous co law. INC-22-Proof of identity-Consent of director in
A. Promotion of co: Preliminary step-idea-determining amt DIR 12-Power of attorney where promoters
of capital-kind and nature of business. Who promotes are appoints attorney
promoters & it’s in fiduciary position with CO 5. Issue of Certificate of incorporation S. 7(2)-
Mode of forming incorporated co S.3: Any 7 or more person ROC certify that Co is incorporated in INC 11.
or 2 or more in pvt co associated for any lawful Details like Co properly incorporated-MOA-
purposemay form an incorporated co with or without AOA are within law & Complied with law.
limited liability. They shall subscribe their money to MPA 6. Allotment of CIN S. 7(3): CIN no shall be
and also earning with other formation in respect of distinct identity.
registration. A co so formed may be CO ltd by share or Effects of registration S. 9: Became body
limited by Gua or unlimited. corporate –Subscribers to MOA will be
B. Incorporation or Registration stage member of co-Perpetual succession-may sue be
Procedure to Get a co registered sue-power to acquire hold dispose assets.
1. Preliminary activities: Name-RO-Types C. Capital subscription Stage: By inviting public
2. Application for availability of name: In INC-1 with fees- up or pvt placement or offer for sale.
to 6 names can be proposed to be reserved for 60 D-Name D. Commencement of business: S. 11 declaration
should ‘t be identical/resemble to existing CO or such that of payment of value of share Rs 5/1 lakh
will constitute offence/ verification of RO if fail within 180 days of
undesirable as per CG- Create impression of CO with incorporation fine Rs 5000 & further delay
patronage of CG/SG/LB or word may be prescribed with 1000 per day to officer or removal of name
prior approval CG from ROC
3. Preparation of MOA and AOA: iii. Doc of incorporation to be preserved S. 7(4):
4. Filing doc with ROC S. 7(1):Application INC7 for Part 1 Till dissolution of the company
co-INC 32 form for other co-MOA-AOA-Declaration in iv. Punishment for furnishing false or incorrect
INC8 by who engaged in registration process- Affidavit in information at the time of incorporation S. 7(5,6)
INC 9 from each subscriber to MOA and named 1st as per mentioned in S. 447. It provides that
Directors about not convicted-no fraud on formation or who guilty Jail !< 6 M extn to 10Y +fine !<
management of co any previous co amount involved in fraud * may be x 3 times
Pre-Incorporation Contracts (28)
Whether pre-incorporation contracts are binding on co?-No -Such contract warranted by terms of
status of co prior to incorporation-Can’t be sue or sued on incorporation & hence specific performance
this-can’t ratify-contracting agent incus personal liability- maybe obtain.
Natal land & Conlonisation v Pauline Colliery syndicate- 2. When Specific performance of pre-
Kelner v Baxter- incorporation contract may be enforced
Position since 1963: This has gone major change after against co S. 19(e): Warranted by terms of
SRA,1963 incorporation means has been ratify by co. as
1.When CO obtain specific performance of pre- being part of its documents of incorporation &
incorporation contract S.15(h) it is within scope of CO’s object as stated in
MOA
MOA(31)
ii. Meaning & DefinitionS.2(56)-Constitution of CO-MOA c. Change within the same state from the
means MOA of a co originally framed & altered from time jurisdiction of one RO to that of another-
to time in pursuance of any previous CO law or this Act. - Special Resolution-Notice form INC 23 to ROC
Ashbury Railway Carrier & Iron Co ltd v Riche to Regional Director in 30 days-File copy with
iii. Form of Memorandum of associationS.4(6) Form in Table ROC 60 days with copy of resolution in MGT
A to E- LS-LGN-LGW-UNS-UWS 14 –No MOA change
iv. Contents of MOA: Condition prescribed d. Change from one state to another-Special
a. Name clauseS.4(2) INC-1 (NROLCAN) Resolution must be confirmed by CG on
b. Registered office clause S. 12: Within 15 D of its application made in INC 23 with fees-CG must
incorporation CO must have RO.Furnish RO verification dispose within 60 D & before passing order
in Form INC-22 in 30D Name of State where’s RO It satisfy itself about the consent of creditors
Determine domicile debenture holders & sufficient provision made
c. Objects clauseS.4(1)(c):Purpose/ for discharge of debts or adequate security –
Capacity /Ambit & extent of power of CO & negativity File with ROC special Resolution in MGT 14
Universal Mutual aid v A D Thappa Naidu along with order of CG
d. Liability clause: Limited/unlimited-members limited to 3. Alteration in object clause S.13(1),13(9)
unpaid amt on call-incase of CO limited by Gua the amt up A) if no prospectus issued-special resolution
to which member undertakes to contribute to assets in within 30 days with ROC should certify
event of wound up or within 1 year after he ceases to be B. if issued and if any unutilised amount out of
member for payment of debt & liability of CO or such money raised it is to be applied it shall not
liability as may be contracted before cease to be member- change objects for which money raised unless
Liability to the cost, charges expenses of winding up special resolution passed through postal ballot
e. Capital Clause: Reg capital-division thereof into shares of – exist option to dissenting shareholders as per
fix amt-no of share which subscriber to MOA agree !< 1 SEBI- such resolution publish in papers.
share. 4. Alteration in liability clause-no special
f. Association clause or subscription clause S. 13(4) provision but special resolution and filing with
(c):Declaration of association which is made by signatories ROC
of MOA under their sign duly attested by witness that they 5. Reorganising in share capital S. 230 to 237
desire to form CO & agrees to purchase shares if any. Each 6. Alteration in Share capital S. 61 & S. 61
must purchase min 1 share. He can’t repudiate his liability ordinary resolution file notice in SH 7 with
to subscribe even on ground of inducement to sign by mis ROC within 30 days
representation. 7. Reducing its capital S. 66
v. Alteration of -MOA S. 13 Special resolution after vi. Doctrine of Ultra vires :
complying with procedure b. meaning –Beyond power. There for any
1. Alternation in Name S.13(2):Special resolution-approval action beyond the scope of Moa is ultra vires
of CG. No application if addition/deletion of word Private. the co & hence void. Ashbury Railway Carriage
2. Alteration in Registered office clause: & Iron co ltd v Riche – A. Lakshmanaswami
a. Change of RO within the local limit of same town S. 13(1) Mudaliar v LIC
(9) -Merely Board resolution Notice to ROC in Form IND- c. Consequences of Ultra vires Transactions. 1.
22 within 15 days-no MOA change Void ab initio
b. Change from one city to another city in same state-Special 2. Injunction to restrain co
Resolution-Notice of change in form INC 22 with form 3. Personal liability of directors- Jehangir R Modi
MGT 14 within 15 days-No MOA change v Shamji Ladha
4. Ultra vires to acquired property
AOA(41)
ii. Meaning S. 2(5)-Internal working of CO. AOA of a CO viii. Doctrine of Indoor management- opposed
originally framed or altered from time to time or applied in to previous- Protection to outsiders against CO
pursuance of any previous law or of this Act. that CO will not overlook AOA/MOA known
iii. Form of AOA S. 5(6) (Form in Table F to J – LS-LGW- to - Royal British Bank v Turquand
LGN-UWS-UNS) Statutory recognition of doctrine S. 176
iv. Relation between AOA and MOA: AOA is subordinate to provides validity of Acts of directors recognises
MOA. It lays down rules of its working. Not beyond MOA this doctine & states that no act done by as
else ultra vires. Ashbury Railway carriage v Riche director shall be deemed to be invalid
v. Contents of AOA S.5(1):Contain provisions relating to - notwithstanding that it was after notice that his
Exclusion of wholly or in part of table appointment was invalid by reason of any
F-Number/value/allotment of share-Issue of preference defect /disqualification or terminated.
Share-Winding up-Seal-Adoption of preliminary contract- Application by Indian courts:Laxshmi Ratan
Buy Back Cotton mills v J K Jute mills co ltd
Entrenchment S. 5(3):Attitude-Habit-Belief due to which Exceptions to Doctrine
certain amendment difficult or unlikely-AOA may contain 1. Where the outsider has the knowledge of the
such attitude that AOA altered only under certain irregularity- Howard v Patent Ivory co
conditions. This is for protection of minority share holders. 2. No Knowledge of MOA or AOA- Rama
vi. Alteration of AOA S. 14-Special resolution-INC 27-No Corpo v Proved Tin
retrospective effect-Prior permission of NCLT. 3. Forgery-Rauben v Great Fingal
vii. Doctrine of Constructive notice-AOA 4. Negligence-Anand Behari Lal v Dinshaw & Co
public doc on registered-Can be inspected by any on 5. Where question is in regards to existence of
payment of fees & hence who enter in contracts with CO agency - Varkey Souriar v keraleeya Banking
has means to know powers & delegation & limitation to 6. Where the act done is ultra vires to co
directors & hence deemed to have this notice. If enter ix. Exception to Doctrine of Indoor is Ultra
contract beyond power he can’t acquire rights against CO- vires- Dehradun mussorie v Jagmandar Das-
Protection to co against outsiders- Kotla Venkataswamyy v Pacific coast v Arbuthanot
Chinta Ramamurthy Presumption-Dehradun Mussorie
tramway v Jagmandar Das