Company Formation and Promoter Role

Overview

This lecture covers Unit 2 of Company Law, discussing company formation, the role of promoters, important documents, and legal doctrines.

Formation of a company means legally creating and registering a new company (as per Companies Act 2013).
Becoming a company is not an automatic process; it requires several legal steps and documents.
After formation, the company has a separate legal identity ("Separate Legal Entity").

Promotion: Idea generation, research, raising capital, deciding name, preparing necessary documents, appointing professionals.
Incorporation: Digital signature, Director Identification Number, name approval, submitting required forms and documents, paying registration fees, obtaining Certificate of Incorporation.
Capital Subscription: (Only for public companies) issuing prospectus, receiving applications for shares, ensuring minimum subscription.
Commencement of Business: Filing declaration within 180 days, starting business.

A promoter is the person/group who takes the initiative to establish the company.
Legal responsibility of promoter: Act honestly in the interest of the company, not keep secret profits.
Role of promoter: Business idea, market research, preparing documents, raising funds, appointing professionals, registering the company.
A promoter is not an agent, trustee, or employee but holds a fiduciary position (trustworthy).

Contracts made by promoters before the company comes into existence.
These contracts apply to the company only if accepted after the company is formed.

Memorandum of Association (MOA): Company's objectives, name, registered office, liability, capital, subscriber details.
Articles of Association (AOA): Rules for internal management and operation of the company.
Others: Director/shareholder ID proof, address proof, registered office proof, declaration forms, etc.

Changes in MOA require special resolution, filing with R.O.C, sometimes approval from Central Government or Regional Director.
Changes in AOA require special resolution and R.O.C filing.
Alterations must be valid, not beyond MOA scope, and not against public policy.

Doctrine of Constructive Notice: Every person dealing with the company is deemed to have read the MOA/AOA.
Doctrine of Indoor Management: Outsiders are not expected to know internal procedures, so they get protection.
Doctrine of Ultra Vires: Acts beyond the MOA are considered void (illegal).

Promoter — Person or group initiating company formation.
MOA (Memorandum of Association) — Company's constitution, objectives, and boundaries.
AOA (Articles of Association) — Internal rules for company management.
Doctrine of Constructive Notice — Everyone is deemed aware of MOA/AOA.
Doctrine of Indoor Management — Legal protection when outsiders lack internal knowledge.
Doctrine of Ultra Vires — Company acting beyond its limits.