Private: Company Law Content
Stages of Incorporation of Company
- Incorporation is the first process of giving existence or birth of company.
- Registration or establishment of company is incorporation.
- Incorporation is creation of a legal person by registration of a company with existing law.
- A legal person is created artificially by law and contributed as a legal personality from the process of Incorporation.
- A company is an artificial entity created by law for the purpose of carrying on any objects such as business, sports research, education charity etc. But commonly companies are formed for the purpose of conducting business.
- Basically, there are 4 stages of forming of a company;
- Incorporation or registration
- Capital subscription
- Commencement of Business.
- In case of private company it needs to go through the 1st two stages only, as soon as it receives the certificate of incorporation and it can commence the business.
- Private company cannot invite public to subscribe the shares.
- Private company must arrange the capital privately, not publicly.
- But a public company having a share capital has to go through all 4 stages. Only then it is formed and commences its business.
- Promotion is the 1st stage of formation of a company. It is the discovery of business opportunities. First of all idea of carrying a business which can be profitably undertaken is conceived either by a person or by a group of persons who are called promoters.
- After conceiving the idea the promoters make detail investigations to find out the weakness and strong points of idea to determine, the amount of capital, and to estimate operating expenses and probable income.
- When promoters are satisfied to that idea they come in one place and form a company through incorporation process.
- Preliminary contracts or pre incorporation contracts may be the documents of arrangement before incorporation or at the phase of promotion. Section 17 of the Companies Act.
- Such contracts are generally entered into by promoters to acquire some property or right for and on behalf of the company to be formed.
- Promoters have been defined in section 2(i) of Act. Promoters are the persons who incorporate the companies.
- b) Incorporation
The second stage is incorporation of company. All process relating to filing the application to CRO & getting incorporation certificate come under the stage of incorporation.
- c) Capital Subscription
Third stage is capital subscription
- Private company can commence business immediately on receipt of certificate of incorporation
- But public company commences business after capital subscription stage first among the promoters and second for public.
- Through capital subscription public company makes necessary arrangement for raising capital
- Invite public for subscription
- d) Commencement
- Commencement of business is the 4th Private company can commence business immediately but public company after issuing prospectus and receiving the business commencement certificate. Section 23 and 63.
Incorporation or Registration of Company
(Chapter 2 Section 3, 4, 5, 6 and 7 of the Nepalese Company Act )
Essential documents for Registration of Company are;
- Citizenship/ID certificate
- MOA 2 copies
- AOA 2 copies
- Promoter’s agreement (if necessary etc.)
- Unanimous Agreement (if necessary etc.)
- Approval letter from regulatory, (if necessary etc.)