The
legal process to form a company (step by step):
FIRST STEP:
(1)
Conceive an idea
(2) To conduct
market survey pertaining to the proposed product unit
(3)
Selection of the location for manufacturing unit
SECOND STEP:
(1)
Prepare preliminary project report.
(2)
Provisional registration of unit.
(3)
Arrangement of land.
(4)
N.O.C. / permission from municipal corporation /other governing authority.
(5)
Consent letter from state electricity board.
(6)
Collect the quotation for machinery and raw materials.
(7)
Search guarantors
(8)
Preparation of detailed project report.
(9)
N.O.C. from pollution control board.
(10)
Discussion with bank or financing authorities and their consent letter.
(11)
Application for the loan and proceed forward for procedure.
THIRD STEP:-
1.
Obtain
sanction for financial assistance from financial institutions.
2.
Submit case
for availing the soft loan.
3.
Deposit
margin money / earnest money with financial institution.
4.
Start
construction for factory building.
5.
Place orders
for required supplies.
6.
Erection and
installation for machinery.
7.
Obtain Power
connection.
8.
Start commercial
production.
9.
Posses’
permanent registration for unit.
There are some formalities
have to accomplish by the entrepreneur to start their venture. The formalities
are described as follows: -
Sole
proprietorship: - There
is no such legal formality for a proprietorship business.
Partnership:
- In a partnership,
concern the maximum number of the partners could not exceed 20 members (in case
of banking business the numbers could not exceed 10 members). At least 2
persons are required to start a partnership venture. A partnership deed has to
be signed among the partners according to Indian Partnership Act. 1932.
Partnership
deed: - Partnership deed has to be registered with
the Registrar of the firm/ society. The following heads should be included in a
partnership deed.
Company :-
Companies are classified into
private limited and public limited companies.
Private limited companies: -
1.
Private
limited company has to register with the registrar of companies (ROC).
2.
Maximum three
names are suggested for the company and one is been confirmed by ROC within the
duration of 30 days.
3.
Prepare the Article
of Association, Memorandum of Articleship simultaneously company must declare
its Corporate Office.
4.
There should
be minimum number of two directors according to the company law.
5.
Memorandum
and Article of association to be signed by minimum two directors and file them
with the registrar.
6.
Registration
fee and filing fee must be submitted with the documents.
7.
After
required inquiry ROC permits the company to start the venture under the seal
and signature of registrar.
Limited
company:-
1.
According to
Indian Company Act 1956 "A company means the company created and
registered under this act or any existing company. Which is created and
amalgamated under any of previous company acts.
2.
Company
formation is compulsory according to the act.
3.
Company is a
fictitious person. It performs like a person.
4.
Company is
limited in its liabilities to the shareholders and shareholders are not
personally towards the company.
5.
Liabilities
of the members of the company is limited up to there investment limit.
6.
Company
performs according to the company rules.
Procedure
for conversion of a private limited company into a limited company.
A private
limited company, if it desires to convert itself into a public limited company,
will have to follow the under-mentioned procedure:
1.
It should
take the necessary decision in its board meeting and fix-up the time, place and
agenda for convening a general meeting to alter the articles of association and
consequently the name by a "special resolution" as well as to alter
by special resolution the "objects clause" of the memorandum subject
to the confirmation of the Company Law Board under Section 17 and by ordinary
resolution the share capital clause under section 94 if the alteration of share
capital is involved in the process.
2.
The has to
see that any change in the articles confirms to the provision of the Companies
Act. [Section 31(1)];also to see that any change does not increase the
liability of any member who had become the member before the alteration.
3.
It must issue
notice for the general meeting in order to pass threat the special resolutions
together with the explanatory statements for the alteration of the articles and
the memorandum.
4.
It will have
to convene the general meeting in order to pass thereat the special resolution:
(i) for the purpose of the alteration of the memorandum and article of
association: and (ii) also for the purpose of deleting those article which are
required to be included in the articles of a private company only [Section 3
(1) (iii)]. Such other articles, which do not apply to a public company, should
be deleted and those that apply should be inserted. Consequent upon the above
changes, it will have to delete the word "private" from its name
[Section 21].
5.
It shall file
either the prospectus in the form prescribed under schedule II or the statement
in lieu of prospectus or the form prescribed under schedule IV within 30 days
of passing of the resolution mentioned in (4) above in the manner stated in
section 44.
The
aforesaid prospectus or the statement in lieu of the prospectus must be in
conformity with parts I and II of schedule IV respectively.
6.
In the matter
of the prospectus or the statement in lieu of the prospectus the company has to
adopt abundant caution against any untrue statement being included therein, because
a statement included in a prospectus or statement in lieu of prospectus shall
be deemed to be untrue if it is misleading in the form and context in which it
is included. Likewise, where the omission from prospectus of a statement in
lieu of prospectus of any matter is calculated to mislead, it shall be deemed,
in respect of such omission, to be a prospectus of a statement in lieu of
prospectus in which an untrue statement is included.
7.
It shall file
with the concerned stock exchange 6 copies of such amendments on both articles
and memorandum, one of which must be a certified copy.
8.
It shall file
with the Registrar the said special resolution together with the explanatory
statement within 30 days of their passing [Section 192].
9.
It must take some
steps regarding further issue of capital under section 81which are not in
common with the steps discussed in relation to further issue of shares.
10.
The company
has to apply to the registrar for the issue of a fresh certificate of
incorporation for the changed name, namely, the existing name with the word
"private" deleted on issue of such certificate shall the name of the
converted company be final and complete [Section 23].
Privileges and Exemptions
A private company can have a
greater degree of secrecy as regards its affairs and enjoys greater freedom on
its operation. It enjoys some privileges and exemption, which a public company
is deprived of. Briefly, these are as follows:
1.
Two or more
persons may form a private company [Section 12 (1)].
2.
The restriction
on the commencement of business contained in section 149 [excepting those
contained in Section. 149(2A) which have been made applicable to all companies]
do not given private companies.
3.
A private
company may allot shares without issuing a prospectus or delivering to
registrar a statement in lieu of prospectus (Section 70).
4.
It need not
hold a statutory meeting of file a statutory report (Section 165).
5.
The
provisions of section 81 as regards further issue of capital do not apply to a
private company [Section 81(3)(a)].
6.
The consent
of directors to act as such, and to take up qualification shares need not be
filed with the registrar (Section 266).
7.
There is no
restriction on the amount of overall managerial remuneration that it may pay
(Section 198).
8.
The consent
of the Central Government for any increase in the remuneration of directors
including managing or whole time director or upon their appointment at
increased remuneration, is not required (Section 310).
9.
The
directorship of a private company is not includible in the maximum number of
directorships that a person may hold (Section 278).
10.The consent of the central
Government for advancing loans to directors is not required (Section 295).
11.There are no restrictions on
the powers of the Board of Directors (Section 293).
12.The Central Government is not
empowered to prevent a charge in the Board of Directors of a company, which is
likely to affect management prejudicially (Section 409).
13.It can advance loans for the
purchase of its own shares [Section 77(2)].
14.Provisions of Section 416
relating to contracts by agents of a company, in which the company is an
undisclosed principal, are not applicable.
15.A director can vote on a
contract in which he is interested [Section 300(2) (a)].
Conversion of public limited
into a private company:
A public limited company can be
converted into a private company by passing a special resolution altering its
articles to include therein the restrictions contained in Section 3(1)(iii) of
the Act. A special resolution passed to convert a public company into a private
company is binding on dissenting shareholders provided it is bonafide,
is in the interest of the company as a whole. And is consistent with the
objects in the memorandum of association under section 31(1), any alteration
made in the articles to convert a public company into a private company shall
not have effect unless such an alteration has been approved by the Central
Government. After obtaining the approval of the Central Government in the
manner just discussed, it must file with the registrar a printed copy of the
articles as altered within one month of the date of receipt of the order of
approval [Section 31(2A)].
The Consumer Protection Act. 1986
Central Consumer Protection
Council is formed under the consumer protection act. to strengthen the consumer
against the mischief faced by them. Following prevention acts are described
here under: