This material is for PGPSE / CSE students of AFTERSCHOOOL. PGPSE / CSE are free online programme - open for all - free for all - to promote entrepreneurship and social entrepreneurship

1. ` HOW TO SET UP A COMPANY ??? by : DR. T.K. JAIN AFTERSCHO ☺ OL centre for social entrepreneurship sivakamu veterinary hospital road bikaner 334001 rajasthan, india FOR – PGPSE PARTICIPANTS mobile : 91+9414430763

2. BE A PROMOTOR A Promotor is a person who sets up a company. As a promotor, you have to think about the idea and convert this idea into a company. As a promotor, you have to set up initial contracts so that company becomes operational.

3. Duties of a Promotor Not to make secret profit give proper accounts not to set up personal property on company's property work honestly, fairly not to have personal interest disclose all information

4. Qualification shares Qualification shares have to be purchased by promotors & directors. These are minimum number of shares to be bought. Every director will buy these shares or give a written concent to buy these shares. Every director will also given written consent to act as director. Every director has a unique DIN no.

5. Legal position of a promotor He is not an agent, nor an office bearer He has to buy some minimum shares

6. Legal position.... Sec 56: liable in give false information in prospectus Sec. 519 ; if a promotor is found guilty, he can be examined by court Sec. 203 : if a promotor is found guilty of crime in formation of a company, the court may suspend him from management / formation of company for 5 years.

7. Steps ...... Prepare Memorandum of association (as per format) in at least 3 copes Prepare Articles of association (as per format) in at least 3 copes (or apply Table A of schedule I) Prepare agreements with directors Submit declaration to Registrar of company that all formalities have been fulfilled (by company secretary)

8. LEGAL FORMS Form NO. 1 : declaration of all the formalities of company (to be filed with registrar of comapnies ). for other forms and their structure, click on the following link : http://www.mca.gov.in/MCA21/dca/downloadeforms/Download_eForm_choose.html http://www.vakilno1.com/froms_html/co_form.htm

9. INCORPORATION Registrar of companies will issue a certificate of incorporation. (Sec. 33, 34 of companies act) this is conclusive evidence that the company is registered.

10. Can you start a business ? Private company can start it immediately on getting certificate of incorporation, but a public company will have to obtain a certificate of commencement of business to start business. See this link also : http://www.legalserviceindia.com/company law/company_formation_procedure.htm

11. Commencement of business Public company can start business only on fulfilling following formalities : 1. directors have purchased qualification shares 2. prospectus / statement in lieu of prospectus has been prepared and submitted 3. minimum subscription has been obtained.

12. PRELIMINARY CONTRACTS These contracts are made before a company has been given certificate of incorporation. These contracts have no legal validity against company and the contractor cannot sue the company. The promotors are personally liable for such contracts.

13. PROVISIONAL CONTRACTS (ONLY FOR PUBLIC COMPANY) These contracts are made before a company has been given certificate of commencement of business but after certificate of incorporation. These contracts have no legal validity against company until the company obtains certificate of commencement of business. Once the company obtains this certificate – these contracts are enforceable against company.

14. FORMAT OF MEMORANDUM MOA must be in following format : Schedule I : Table B / C / D / E B : for limited by shares C : for guarantee D : guarantee + share capital E : for unlimited company

15. MOA Memorandum of association must have : NAME PLACE OBJECT LIABILITY CAPITAL SIGNATURE AND ASSOCIATION CLAUSE

16. MOA (sec. 13) Every MOA Must be in paragraphs, printed, signed by the sigatories

17. MOA At least 2 subscriber in private company At least 7 subscriber in public company no person can withdraw his name after submitting it.

18. NAME OF COMPANY Avoid generic terms , names of famous personalities, religious names etc. apply for permission in proper format – with at least 3 names, with prescribed fees (Rs. 500) To change name, pass special resolution + obtain permission from central government (sec. 21)

19. AOA It gives guidelines about day to day management of company, powers of directors, etc. Read http://www.taxguru.in/company-law/drafting-articles-of-association.html

20. How to change office of a company Chaging office withing a city requires only board resolution, but changing it out of the state is difficult, you have to pass special resolution + permission from company law board + you have to file details with registrar of companies.

21. Formation is easy ??? Yes, in comparision to wind up (closing a company), formation of company is easier. But formalities are required, which you have to understand to set up a company ... after all it is not very easy.

22. WHAT IS WIND UP ? As per sec. 425 of companies act, you can close a company (wind up ) by : 1. court order 2. voluntarily 3. under supervision of court

23. Wind up by court ???? You can go to court and request the court to wind up a company, if it is really not working properly, however, you have to apply to the court in whose jurisdiction the company is

24. Case : NCL Industries Ltd Orissa High court refused to take application for winding up of a comapny having registered office in Hyderabad.

25. Wind up by court – process (sec. 433) Convince the court that the company : 1. is unable to pay debt 2. it is just and equitable to wind up the company 3. special resolution to wind up by court 3. non-submission of statutory report 4. no business for 1 year (any reason).

26. Can you apply for winding up ? Sec. 439 If you are any of these : creditor shareholder registrar representative of government company itself

27. Voluntary wind up.... As per sec. 488, a company can on its own wind up itself : as per : 1. by members 2. by creditors here the company will set up the process for winding up. However, the court can appoint official liquidator.

28. Winding up under supervision .... Liquidator (the person who sells the property of the company and settles its dues) is appointed only by court and he has to work only with the permission of the court. He gives his report to the court and takes permission from the court for all the actions (sale of property is also with permission of court).

29. Winding up of unregistered company (sec. 583) When there are 7 or more members in a company / partnership / firm the court may order for winding up if : 1.it is just and equitable 2. it is unable to pay to creditors 3. it has cesed to work so sick comapny (which is in huge losses and has eroded its networth or is not working) can also be wound up.

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