LEGAL FORMALITIES


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: