Secretarial Practice · Ch 4 — Documents Related to Formation of a Company
Documents Required for the Formation of a Company
Documents Required for the Formation of a Company
A joint stock company, once it decides to register under the Companies Act, 2013, cannot simply begin functioning on the strength of a verbal understanding among its founders, the way a partnership firm often does. Because a company is an artificial legal person, everything about its identity, its powers and the way it deals with the outside world has to be reduced to writing, filed with the Registrar of Companies (ROC), and kept open for public inspection. The Maharashtra HSC Secretarial Practice syllabus for Std XI groups these papers under four principal documents, each doing a distinct job in the life of a company.
The Memorandum of Association is the company's charter — it fixes the company's name, the State in which it is situated, the business it may lawfully carry on, the extent of its members' liability, and the capital with which it is registered. The Articles of Association are the company's own internal rule book, laying down how the company will actually be run from day to day — how shares are allotted and transferred, how meetings are conducted, and how directors are appointed. Where a public company wants to raise capital by inviting the general public to buy its shares or debentures, it must additionally issue a Prospectus, disclosing in detail everything a prospective investor needs to know before parting with money. And where a company instead arranges its capital privately, without ever inviting the public, the law still insists on an equivalent standard of disclosure through a document called the Statement in Lieu of Prospectus.
This chapter takes up each of these four documents in turn — what it must contain, why the law insists on it, and how the documents limit and relate to one another. Preparing these documents correctly, or checking that they have been properly drawn up, is at the very heart of what a company secretary does, which is exactly why this topic carries real weight for Std XI Secretarial Practice students preparing for the Maharashtra board examination.