CBSE Class 11 Business Studies HOTs Formation of a Company

Question. Define the formation of the company.
Answer : Formation of a company is complicated and include multiple stages of legal formalities and procedures. The formation process comprises of three stages promotion, incorporation, and subscription of a company. Unlike public limited companies, private business is restricted to raise funds from the public, and also they don’t require to issue a prospectus to complete the formalities.

Question. When a company is legally born?
Answer : The date when the certificate of incorporation has printed a company is legally born.

Question. How many members should sign a memorandum of association in a private company?
Answer : Only two members are required to sign a memorandum of association in a private company.

Question. What do you mean by Financial feasibility?
Answer: Fund is an essential element while planning to start a company. The promoters have to estimate and arrange the funds properly for the desired company. If the promoters fail to arrange the funds then the plan has to be dropped.

Question. What are the documents required for the registration of incorporation document?
Answer : The documents required for the registration of incorporation document are.
• Stamped, signed, and witnessed memorandum of association. For a public company, a minimum of seven members are required to sign the memorandum, and for private two members is required.
• The article of association should be stamped and witnessed
• Written approval of the proposed directors to act as the first directors and undertaking to purchase qualification shares.
• A signed agreement if there is any Managing director, manager or whole time director.
• Registrar’s letter with the approved name of the company
• A statutory declaration mentioning that all the necessary legal requirements for registration are completed with signature.
• An address proves documents should be submitted with the required documents.
• Registration fee receipt or any documentary evidence.

Question. What do you mean by the promoter?
Answer : In common, a promoter is a person who has control over the operation of a company directly, indirectly or as a shareholder. According to his advice, the director or the board members of the company takes the decision.