AP Inter 1st Year Commerce Notes Chapter 7 Formation of a Company

Students can go through AP Inter 1st Year Commerce Notes 7th Lesson Formation of a Company will help students in revising the entire concepts quickly.

AP Inter 1st Year Commerce Notes 7th Lesson Formation of a Company

→ Promotion is considered as putting an idea into practice. The creation of business is known as promotion.

→ Discovery of an idea, detailed investigation, assembling the requirements, and financing proposition are the steps of promotion activities.

→ Professional promoters, accidental promoters, financial promoters, technical promoters, and institutional promoters are the five types of promoters.

→ A Joint Stock Company whether private or public limited must file all the necessary documents with the registrar to obtain the Incorporation Certificate. With this certificate, the company gets the status of a legal entity. A number of steps have to be taken for the incorporation of a company. They are :

  1. Memorandum of Association
  2. Articles of Association
  3. List of Directors
  4. Consent letter from Directors
  5. Statement of Capital
  6. Statutory Declaration

The above documents are to be submitted to the company registrar for incorporation of a company.

→ Memorandum of Association is the constitution of a company. It is the charter of the company. The contents of the memorandum of association known as clauses are explained in Section B of the Companies Act, 1956.

AP Inter 1st Year Commerce Notes Chapter 7 Formation of a Company

→ The rules and regulations framed for the internal management of the company, which are set out in a document are named Articles of Association. It is defined in the Companies Act, 1956 Section 2 (2).

→ Prospectus is an invitation to the public to subscribe to the shares and debentures of a public company. It is defined in the Companies Act, 1956 Section 2 (36)

→ A public company invites people to offer to purchase shares and debentures through an advertisement. Such an advertisement or notice containing detailed information about the company is known as Prospectus.

→ In case a company makes any misstatements or misrepresentations in the prospectus, it gives rise to imposing Civil or Criminal liability on

  1. The Company
  2. Promoters and Directors
  3. Expert who drafted the Prospectus.

→ In case a public company raises its capital privately, there is no need to issue a prospectus, but a “Statement in lieu of prospectus” must be filed with the registrar at least three days before the first allotment of shares.