Company Formation Stages

As a company forms, incorporated and commences business, there are four distinct stages, which are described below:

  1. The promotion of
  2. A company’s incorporation;
  3. The capital subscription; and
  4. Business commencement.

Unlike a public company, a private one can begin operations immediately after incorporation; therefore, only the first two stages apply.

  1. As defined by Grettenberger, promotion stage of company implies discovering business opportunities, organizing funds, property, and management capabilities to run a business concern for profit. An individual who undertakes all of these activities is referred to as a promoter. A scheme is developed for forming the company, the Memorandum and Articles are prepared, registered, and funded, contracts and prospectuses (if any) are negotiated, and capital is raised.
  2. A company must be incorporated by filing the following documents with the Registrar of Companies:
  3. The Memorandum of Association,
  4. The articles of association,
  5. The Statement of Nominal Capital,
  6. In addition to the names of the directors, their addresses, occupations, and ages are included in the list.
  7. In addition, the directors must consent to act as directors
  8. Notice of the registered office’s address.


As part of the registration process, a statutory declaration must be filed that states all legal requirements have been met. A statutory declaration may be filed by any of the following:

  1. A Supreme Court or High Court advocate;
  2. Attorneys and leaders who are entitled to appear before the High Court;
  3. A Chartered Accountant practicing in India who is engaged in the formation of the company; and
  4. As specified in the articles, by the person named as Director, Manager, or Secretary.

As soon as the above documents are filed and the necessary fees are paid, the Registrar will register the company and issue a certificate of incorporation under his seal if all legal requirements have been met. A company’s incorporation certificate ensures its existence. as a This document proves the company’s legal status and confirms that all legal requirements have been met.

Private companies can begin operating after receiving their Certificate of Incorporation.

  • Private and public companies without share capital can begin operating immediately after receiving their certificate of incorporation. Before they can commence their business, however, a public company with a share capital must go through the capital subscription stage.
  • When raising capital from the public, a prospectus is required, or a statement in place of a prospectus must be filed with the Registrar of Companies. The Board of Directors approves the draft prospectus or statement in lieu of prospectus at its meeting, and it can be filed with the Registrar and issued. In order to ensure minimum subscriptions are raised, the Board may decide to issue the shares if the share capital is underwritten.
  • The prospectus indicates that application forms for the allotment of shares and the application money will be deposited with the bankers of the company. Following this, the Board of Directors allots shares in consultation with the stock exchange and sends a return to the Registrar of Companies within a month of the allotment.

The commencement of the business stage entails obtaining a certificate from the Register of Companies before a company with share capital can begin operating. The provision of the Companies Act must be complied with in order for the company to receive this certificate. A trading certificate – also known as a certificate to commence business – will be issued by the Registrar of Companies as conclusive proof that the company is eligible for business.

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