Write about an overview of large related promoting and incorporation of different types of companies .
15/September/2025 22:19
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Here’s a detailed yet simplified overview of the law relating to promotion and incorporation of different types of companies, as per the Companies Act, 2013 (India) (similar principles apply in other jurisdictions too).
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Overview of Law Related to Promotion & Incorporation of Companies
1. Promotion of a Company
Promotion is the very first stage in the formation of a company.
A promoter is a person who undertakes to form a company, prepares documents, and brings together resources (capital, management, business idea).
Legal duties of promoters (under Companies Act):
1. Duty of disclosure – They must disclose all material facts, profits, or benefits from transactions.
2. Duty not to make secret profits.
3. Duty of good faith towards the company.
Steps by Promoters:
Conceiving the idea of business.
Conducting feasibility studies.
Deciding the type of company (Private/Public/OPC, etc.).
Preparing legal documents (Memorandum of Association, Articles of Association).
Arranging initial finance and directors.
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2. Incorporation of a Company
Incorporation is the process by which a company gets registered and becomes a separate legal entity.
Legal Procedure (as per Companies Act, 2013):
1. Name Approval
Apply to the Registrar of Companies (RoC) through RUN/Spice+ for reservation of name.
2. Preparation of Documents
Memorandum of Association (MoA) – defines company’s objectives.
Articles of Association (AoA) – rules & regulations for internal management.
Declaration by professionals (lawyer/CA/CS) that requirements of the Act are complied with.
Consent of Directors (Form DIR-2).
Address Proof of registered office.
3. Filing with Registrar
Forms (SPICe+, eMoA, eAoA) with fees and digital signatures.
4. Issue of Certificate of Incorporation
Once RoC is satisfied, a Certificate of Incorporation is issued.
Company becomes a separate legal entity from the date of incorporation.
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3. Types of Companies and Their Incorporation
1. Private Company
Minimum 2 members, 2 directors.
Restricts transfer of shares.
Cannot invite public to subscribe shares.
2. Public Company
Minimum 7 members, 3 directors.
Can issue shares/debentures to the public.
More compliance requirements.
3. One Person Company (OPC)
Single person as shareholder & director.
Simplified compliance for small entrepreneurs.
4. Section 8 Company (Non-profit)
For charitable objects (education, art, environment, etc.).
Profits cannot be distributed; must be used for objects only.
5. Government Company
At least 51% of share capital held by Government.
6. Foreign Company
Company incorporated outside India but has a place of business in India.
Must register with RoC and comply with FEMA & Companies Act.
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4. Legal Effects of Incorporation
Company becomes a separate legal person (Salomon v. Salomon principle).
It has perpetual succession.
It can own property in its own name.
It can sue and be sued.
Liability of members is limited (except in case of fraud).
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5. Post-Incorporation Compliance
Obtaining PAN & TAN.
Opening a bank account.
Issuing shares and maintaining statutory registers.
Holding first board meeting within 30 days.
Filing of annual returns and financial statements.
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✅ In summary:
The law related to promotion & incorporation ensures that a company is created with transparency, legal compliance, and accountability. Promoters act as visionaries, while incorporation gives the business a distinct legal identity, limited liability, and perpetual existence.
