Subscription of the Capital
A Public Company can raise the required funds from the public using an issue of shares and debentures. For this purpose, it has to issue a prospectus which is a kind of invitation to the public to subscribe to the capital of the company and undergo various other formalities. The following steps are required for raising funds from the public-
1. SEBI Approval: Securities and Exchange Board of India which is the regulatory authority in our country has issued guidelines for the discloser of information and investor protection. A company inviting funds from the general public must follow SEBI guidelines of discloser of all the adequate information.
2. Filing of Prospectus: Prospectus is a document that includes any notice, circular, advertisement, or other documents inviting offers from the public for the subscription. It has to be filed with the Registrar of Companies.
3. Appointment of Bankers, Brokers, and Underwriters
4. Minimum Subscription: If Applications received for the shares are for an amount less than 90 percent of the issue size, the allotment cannot be made.
5. Application to Stock Exchange: Application is to be made to at least one stock exchange for permission to deal its shares or debenture.
6. Allotment of Shares
Steps in the Formation of a Company
Modern-day business requires a large amount of funds. The competition and change in the technological environment are also increasing day by day. As a result, the company form of organization is being preferred by more and more business firms. The formation of a company involves several steps, that are required from the time a business idea originates to the time a firm is legally ready to commence business, also referred to as stages in the formation of a company. Those who are taking these steps and the associated risks are promoting a company and are called its promoters.
Table of Content
- 1. Promotion of a Company
- A. Functions of a Promoter:
- B. Documents Required to be Submitted:
- C. Position of Promotor:
- 2. Incorporation of a Company
- Effect of the Certificate of Incorporation:
- 3. Subscription of the Capital
- 4. Commencement of Business
To fully understand the process we will divide the formalities into four distinct stages, which are:
- Promotion
- Incorporation
- Subscription of the Capital
- Commencement of Business
However, it must be noted that these stages are appropriate from the point of view of the formation of Public Ltd. Company. As far as the Private Ltd. Companies are concerned only the first two stages mentioned above are appropriate. A Private Co. can start its business immediately after obtaining the certificate of incorporation as it is prohibited to raise funds from the public.