1574074968827_BCB 403 -COMPANY LAW - NOTES_JMS 2019..docx -...

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BCB 403.COMPANY LAW.(I) FORMATION AND INCORPORATION OF A COMPANY: LAW AND PROCEDURE.The formation of a company is a lengthy process indeed. There are several stages in the formation of a company. These stages are:1.Promotion.2.Incorporation or Registration.3.Capital subscription.4.Commencement of Business.Of these stages, only the first two are necessary for the formation of a private Company, and of a public company not having any share capital. They may commence business immediately after they have received a certificate of incorporation. But a public companyhaving a share capital has to pass through all the four stages mentioned above before it can commence business or exercise any borrowing powers.We shall now study these stages one by one.1.PROMOTION.The Promotion is the first stage in the formation of a company. Promotion may be defined as “the discovery of business opportunities and the subsequent organisation of funds, property and managerial ability into a business concern for the purpose of making profits therefrom.Promotion begins when someone discovers an idea regarding some business which can be profitably undertaken by a company and includes preliminary and detailed investigation of the feasibility of the idea, assembling of business elements and making provision of the funds necessary to launch the enterprise as a going concern. Any person who assumes primary responsibility for these matters is termed a “promoter”The Promoter.There is no statutory definition of a promoter, although the term is used expressly in the act. In the words of Bowen L.J.”The term promoter is a term not of law but of business, usefully summing up in a single word a number of business operations familiar to the commercial world by which a company is generally brought into existence.”Justice C.Cockburn described a promoter as one who undertakes to form a company with reference to a given project and set it going and who takes the necessary steps to accomplish that purpose. The promoter is usually an Industrial expert who with the help of a big team of experts does all the preliminary work before can be brought into Be
existence. He selects and settles with persons to become signatories to the Memorandum and the first directors ,instructs and directs the solicitors to prepare the memorandum, the articles and other documents necessary to be filed with the Registrar of Companies ,finds funds for the registration expenses and prepares the climate to secure the initial capital forthe company. Where to situate the registered office of the company, from where to get necessary plant and equipment e.t.c are the worries of a promoter.A Promoter may be an individual, a firm, an association of persons or even a company.

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