Formation of Company

Formation of Company

In the formation of a public limited company having share capital, mainly four stages are involved namely:

1. Promotion
2. Incorporation
3. Capital Subscriptions, and
4. Commencement of business or trading certificate.

In the case of the formation of a private company, only the first two stages are involved, because, a private company can commence its business immediately after securing the certificate of incorporation from the Registrar of companies. But in the case of formation of a public company, having share capital, there is need for the promoters to secure from the Registrar, the certificate to commence business in addition to the certificate o~ incorporation.

1.      Promotion of Company

The person or persons who undertake responsibility of bring the company into existence are called' Promoters. In other words, the work of promotion is done by a person called "Promoter" or group of persons called "Promoters". Promotion involves discovery of specific business opportunity and subsequent organisation of the factors of production. According to Haney, promotion may be defined as the process of organizing and planning the finances of a business enterprise under the corporate form in other words, the steps which are taken to persuade a number of persons to come together for the achievement of a common objective through the company form of organisation is called promotion. Promotion may be undertaken either for starting a new business or for expanding the existing concern or for forming a holding company for a merger.

 Steps in Company Promotion:

The work of promotion of a company involves four stages namely;

a)      Discovery of an idea and Preliminary investigation

b)      Detailed investigation

c)      Assembling and

d)     Financing the promotion

a)      Discovery of an Idea: The promoter starts out with an idea to start some business either in a new field which has not been commercially exploited or in some existing lines of manufacture or business. He makes a preliminary investigation to find out whether it is worthwhile to make a detailed investigation. He makes a rough estimate of probable revenues and expenditure.

b)      Detailed Investigation: The promoter need to make a detailed investigation of his idea with the assistance of many experts like engineer, chemist, market analyst, financial expert, management consultant, etc,. On the basis of the reports of these experts, the promoters would be in a position to know the capital requirements, place of location, size of the unit, demand condition in the market, price of product, cost of production, probable return on capital, etc,. A detailed investigation will help the promoter to decide...whether the estimated income will be adequate to take care of the estimated cost of production and compension to the owner for risks and services.

c)      Assembling: After a detailed investigation, if the promoter is satisfied with the practicability and profitability of the proposed concern, he starts assembling the proposition. ‘Assembling’ means getting the support and consent of some other persons to act as directors or founders, arranging for patents, a suitable site for the company! .machinery and equipment and making contracts for filling the positions.
d)   Financing the Proposition: After assembling, the proposition, the promoter prepares a 'prospectus' to present to the public and to under writers to persuade them to, finance the 'proposition'. A prospectus contains complete details of the proposition and also the reports of various experts who have investigated the proposition. The promoter also takes steps to incorporate the company, and to secure the certificate to commence the business. For incorporating the company and also for obtaining the certificate to commence business, -the promoter has to full fill many legal formalities.

Promoter:

“Promoter is a person who conceives the idea, studies the prospects of the business critically, chalks out at a tentative scheme of organisation, brings together the requisite men, materials, machinery, money and managerial ability and float the enterprise”.

Position of the Promoter:

 Position of the promoter is fiduciary concerning the company which being the promotes his position is quasi legal. A promoter is neither a trustee nor an agent of the company which he promotes because there is no trust or principal in existence at the time of his efforts. But certain fiduciary duties, like an agent, have been imposed on him under the Companies Act. As such he is said to be in & fiduciary position (a position full of trust and confidence) towards the company and the original allotted of shares. Consequently, a promoter must make full disclosure of the relevant facts, including any profit made.

Functions of a Promoter:

1. Promotion of an Idea: It is the promoter who has to conceive the idea of forming a company. This is the first step towards the formation of a company.

2. Detailed Investigation: The promoter, after forming an idea should make a thorough and detailed investigation of the prospects of the business. It should be done with reference to the sources of supply, nature of demand, extent of competition, capital requirements of the present and future etc. He can also take the help of technical experts.

3. Verification: The promoter should also verify whether the advises or comments or reports made by the experts are free from bias. He should also consult with other impartial and disinterested experts and should see whether the idea is commercially viable.

4. Assembling: After verification of the idea, the promoter should go ahead with the promotion of the projected company. He should find out the first directors and the subscribers to the Memorandum.

5. Financing the Proposition: The promoter, at this stage, has to prepare a plan setting out the mode of getting the necessary finance. He should arrange for finance to meet the preliminary expenses. He should negotiate with the vendors if it proposes to buy an existing business. He should also arrange for underwriting contracts. He should estimate the required capital and the availability of bank loan etc., and also the cost of raising the capital.

6. Presentation of the Proposition: Finally, after making necessary arrangements and modes of raising finance, he gets the necessary documents such as Memorandum etc. printed, filed with the Registrar and then arranges for their publication. He should take the aid of legal experts in preparing the documents and should see that the documents are strictly in accordance with the provisions of the Companies Act.

2.      Incorporation

After taking all the preliminary steps for registration, an application along with the necessary documents, stamp duty, registration and filing fees, has to be made to Registrar for the issue of  the 'certificate of incorporation. The Registrar will scrutinize the documents and if satisfied will enter the name of the company in the register .and will issue the company its birth certificate called the Certificate of Incorporation.

Steps and Formalities for Incorporation of a Company

Promoters have to take certain steps for getting the certificate of incorporation from the Registrar of Companies, on hearing from the Registrar about the availability of names for the proposed company; they have to prepare the following documents and file them with Registrar of Companies' of the state in which the registered office of company is to be situated.

A.    The Memorandum of Association to which at least seven persons have subscribed, their names and each one of them has taken at least one share. In the case of a private company, then number of persons required to subscribe their names is only two.

B.     The Articles of Association similarly signed except where Table' A' attached to the Companies Act 1956, has been adopted as the Company's Articles.

C.     The Address of the registered office of the company.

This is to be delivered in any case within 30 days of incorporation.

D.    A, list of directors with their names, addresses and occupations. The return containing the particulars of the directors should be filed within 30 days of their appointment.

E.     Consent in writing of the directors to act as directors.

F.      An Undertaking by the directors to take and pay for qualification shares, if any,

G.    The statutory declaration by an advocate or an attorney or a chartered accountant practicing of India, who is engaged in the formation of a company or by a person named in the articles as a director manager, or secretary of the company.

At the time of filing these documents with the Registrar of Companies, necessary stamp duty, registration fees and filing fees 'are to be paid. The Registrar will examine these documents and if he is satisfied with the documents, he will enter the name of the company in the Registrar and will issue to the company its birth certificate called the "Certificate of Incorporation".

 DOCUMENTS OF COMPANIES

For the incorporation or registration of a company two important documents are required to be prepared and filed with the Registrar of Companies. They are:

1.      Memorandum of Association

2.      Article of Association

The Memorandum of Association is compulsory for every company. But the Articles of Association are not compulsory for a Public Limited Company. Having share capital. A public limited company having share capital can have its own Article of Association or can adopt Table 'A' (i.e. model articles given in the companies Act) as its Articles of Association by ,merely making an endorsement on Memorandum of Association to that effect. If a public limited company wishes to raise capital or subscribe shares/debentures public, in such cases, the public limited company must issue a prospectus. Therefore, Memorandum of Association, Article of Association & prospectus are important documents of companies.

MEMORANDUM OF ASSOCIATION

The Memorandum of Association is the basic or most important document for the incorporation or registration of every Joint Stock company. The Memorandum of Association is the life-giving document of the company. In other words, it is the document which brings the company into existence. It is the charter or constitution of the company containing the fundamental conditions upon which the company is incorporated. It is the foundation on which the structure of the company is built. It contains the objects or purposes of the incorporation of the company and defines or determines the external operations of the company (i.e. company's relationship or dealing with the creditors & other outsides).

Memorandum of association can be defined as,'' The purpose of the memorandum is to enable the shareholders, creditors and those who deal with the company to know what is its permitted range of enterprise"

The Memorandum has to be divided into-suitable paragraphs, constructively numbered and printed. It must be signed by every one of the subscribers in the presence of a witness who shall attest the signature. Every subscriber must give his address and descriptions and must take at least one share. The Memorandum of a company limited by shares must contain the following clauses:

v  Name clause

v  Situation clause

v  Object clause

v  Liability clause

v  Capital clause

v  Association clause

 Importance:

The Memorandum of Association is important for a joint stock company for the following reasons:

1.      It is necessary for the incorporation of the company.

2.      It determines the jurisdiction of the Registrar and the court by stating the registered office of the company.

3.      It states the objectives and powers of the company for the information of the public.

4.      It binds the company to carry out only those acts included in the object clause.

5.      It states the authorized capital of the company and its division into shares of fixed amount.

6.      It throws light on the liability of the members of the company.

7.      It governs the articles of association.

CONTENTS:

 The Memorandum of association of every company must contain the following clauses:

1.      Name Clause:

This clause states the name of the company. 

In the context of the name clause, the following points may be borne in mind:

1)   A name is considered undesirable, when it includes words like 'Government', 'State', 'Municipality', etc., implying patronage or support of the Government, State or Municipality, without the express permission of such authority.

2) A name is considered undesirable when it is identical with or too closely resembles the name of an existing company 

3) The name of the company must end with the word "Limited" in the case of a public company or the words "Private Limited" in the case of a private limited company.

4) The purpose of adding the word "Limited" or the words "Private limited" is to enable all those dealing with the company to know that the liability of the members of the company is limited.

5)      Once a company is registered with a name, the name of the company must be painted on signboards and displayed outside every office or place of business of the company. The name must also be engraved in legible characters on the seal-of the company, on its letter heads, notices, invoices, receipts, bills of exchange, advertisements, etc, .

However, if a company is 'formed not with the object of declaring dividends, but to promote science, culture, etc, .The Central Government may permit the company to drop the word 'limited'.

2.      Situation Clause or Domicile Clause:

1)      This clause states the state in which the registered office of the company is to be situated.

2)      The name of the State, in which the registered office of the company is to be situated, is stated in the Memorandum.

3)      The provision insisting on the mere 'State’ has been made to avoid any unnecessary legal formalities and expenses, if there is a subsequent change in the address of the company.

4)      It determines even the nationality of the company, i.e., whether the company is an Indian company or a foreign company.

3.      Object clause:

1)      Of all the clauses in the memorandum, the object clause is the most important. This clause states the objects or purposes and powers of the company. It should specify in unambiguous languages the objects for which the company is formed. Great care should be taken in drawing up this clause, as the company will not be allowed to do any business, which is not specifically mentioned here.

2)      The objects stated in this clause must not be contrary to the provisions of the Companies Act and the general law of the country. The objects stated should be as wide as possible because a company cannot carry out objects which are not included in this clause. Acts done by 'the company which are not included in this clause are 'Ultra Vires' and void [i.e., invalid}. "Ultra" mean "beyond" and "Vires" means "authority or right". Therefore "Ultra Vires" means acting beyond authority

3)       As it is difficult to alter the object clause later, it is necessary that promoters should include in this clause all possible types of business (activities) in which a company may engage in the future.

4)      According to the amendment to the Companies Act made in 1965, the object clause of a company formed after the commencement of the Amendment Act, must contain

                                                              i.      (a) Main objects of the company and objects incidental or ancillary,  to the attainment of these main objects.

(b) Other objects of the company not included above

                                                            ii.      In case the objects are not to remain confined to one state, states whose territories the objects extend.

4.      Liability Clause

This clause states that the liability of members is limited to the face value of the shares held by them. If a member has already paid some amount on the shares, he can be called upon to pay only the unpaid amount on the shares.

5.      Capital Clause

1)      The capital clause states the registered, authorized or nominal capital of the company (i.e. the minimum capital with which the company is proposed to be registered) and the division of the authorized share capital into shares of fixed amount.

2)      In case the capital of the company consists of different classes of shares, then, the division of the total authorized capital into different classes of shares and the face value of shares of each class are also stated in this clause.

3)      The rights and privileges attached to the different classes of shares are specified in the Articles of Association.

4)      It is better to fix the authorized capital at a sufficiently higher figure so that there would be adequate provision for further issue of shares later on to finance the extension or expansion of the company's business.

6.      Association Clause, Subscription Clause or Declaration Clause:

1)      This clause contains a declaration by the subscribers to the memorandum that they are desirous of forming themselves into a company in pursuance of the memorandum and agreed to take up and pay for the number of shares in the capital of the company noted against their names. The subscribers should sign their names and state their full addresses and the number of shares taken up by them.

2)      The declaration clause should be signed by at least seven persons in the case of a public company, and by two persons in the case of private company.

3)      Further, the signatures of the subscribes must be witnessed by at least one who should give his signature, name, full address, description and occupation.

ARTICLES OF ASSOCIATION

The articles of association constitute the second important document for the incorporation of a joint stock company. The articles of association are a document, which contains the bye-laws or the rules and regulations for the internal management of a company, i.e., for the day-to-day conduct of the business of the company. They govern the relationship between the company and its members and also the relationship between members themselves. However, they have nothing to do with the outsiders.

The preparation of articles by a company limited by shares is not compulsory. In case the articles are not prepared, the company must adopt Table 'A' of the Companies Act, which contains model rules and regulations. If the company's own articles are silent on any point, the relevant provisions of Table 'A' will apply. It may be noted here that a private company cannot adopt Table 'A' and it should have its own articles. Similarly, an unlimited company and a company limited by guarantee should have its own articles.

Importance of Articles of Association

 The articles of association are next in importance to the memorandum of association. While the memorandum of association lays down the objects or purposes for which a company is formed, the articles of association prescribe the rules and regulations for the attainment of the objects contained in the memorandum of association. The articles of association provide the rules and regulations for the internal management or the day-to-day administration of the company and embody the powers of the directors and the officers of the company as well as the rights and duties of the shareholders or members of the company. They also regulate the relationship between the company and its employees, between the company and its members and between the members themselves.

Contents or Provisions:

 The Articles contain rules and regulations regarding:

1.      Share capital and variation of rights.

2.      Exercise of lien by the company.

3.      Calls on shares.

4.      Transfer, transmission, forfeiture and surrender of shares.

5.      Issues of share warrant.

6.      Alteration and reduction of capital.

7.      Voting powers of members.

8.      Borrowing Powers.

9.      Proceeding at the board and at the general body meetings.

10.  Appointment, powers, duties qualifications remuneration etc.  of directors

11.  Appointment of manager, managing director and secretary.

12.  Dividends and reserves.

13.  Maintenance of books of accounts and their audit

14.  The company's seal.

15.  Winding up. ,

 Distinction between Memorandum and Articles of Association:-

Both the Memorandum of Association and articles of association are important documents of the company. The distinctions between the two are as follows:

1.   The Memorandum is the charter of the company setting out its constitution. It lays down the conditions of incorporation and defines the limits and powers of the company. Articles on the other hand, contain the bye-laws of the company for the conduct of its internal administration. They define the rights and duties of the directors, members, etc,

2.   The Memorandum states the objects for which the company is established, whereas the Articles state the rules or manner of carrying out the business as stated in the Memorandum. They cannot provide anything contrary to the powers and objects set forth in the Memorandum.

3.   A company cannot be incorporated without preparation and filing of the Memorandum with the Registrar, whereas the preparation of article is not compulsory. If the articles are not prepared by any company, Table 'A' of the Companies Act is applied.

4.   The Memorandum governs the external relations of the company i.e., relations between the company and the public including creditors, buyers, sellers, debtors, etc,: outsiders dealing with the company know what its permitted range of business is. The articles, on the other hand, define the relationship between the members and the management of the company. Their main concern is to provide rules and regulations for the internal working of the company.

5.         The Memorandum is a primary and fundamental document. It is the foundation of the company's structure and is responsible for the company's birth. It is .unchallenged on statutory matters. Articles of association are a secondary, subordinate and subsidiary document. They  should be read and understood in the light of the memorandum. They complement and supplement the memorandum.

6.   The Memorandum lays down the scope or area of the company beyond which the company cannot go. All acts of the company which are beyond its scope are ultra vires or illegal and they cannot be ratified by the company.

As Articles are subordinate to Memorandum, their activities should be confined to the area of scope of the Memorandum. However, all acts which are ultra vires the articles (beyond the scope of articles), but intra virus (within) the Memorandum are not void and can be ratified by the company by a special resolution.

7.   The Memorandum can be altered only by a special resolution and subject to sanction of the court or the Central Government as the case may be. The articles can be altered by a special resolution and sanction either from the court or the government is not necessary.

8.   The Memorandum of association is subordinate only to the companies act. But the articles of association are subordinate not only to the companies act, but also to the memorandum of association.

9.   A memorandum of association is deemed to be an unalterable document, as far as the conditions are concerned. So, the conditions in the memorandum of association cannot be altered except in the mode and in the cases and to the extent for which express provision is made in the Companies Act. On the other hand, the articles of association can be altered at any time and any number of times.

10. The procedure required by law to alter the memorandum of association is complicated. But the procedure required by law to alter the articles is simple. The articles can be altered by passing a simple resolution.

3.      Capital Subscription

 A private company and a public company not having any share capital can commence business immediately after obtaining the Certificate of Incorporation, but a public company having a share capital can commence business only after obtaining another certificate called the 'Certificate of Commence Business' from the Registrar of companies. Hence, a public company having a share capital has to undergo two additional stages, namely

1.      The subscription stage and

2.      Commencement of business stage.

In the capital subscription stage, the company has to make arrangements for obtaining the necessary capital of the company. For this purpose, immediately after getting the certificate of incorporation, the company convenes a board meeting to deal with the following business:

1.   Appointment or confirmation of the appointment of the secretary if one has already been appointed by the promoters at the promotion stage.

2.      Adoption of preliminary contracts.

3.     Appointment of bankers, solicitors, legal advisory, brokers, auditors, etc.,

4.     Adoption of draft prospectus or statement in lieu of prospectus.

5.      Listing shares on the stock exchange.

6.      Adoption of underwriting contracts.

PROSPECTUS

 After the receipt of the certificate of incorporation, if promoter of a public company wishes to invite the public to subscribe for its shares or debentures, he must prepare and issue a document know as prospectus, giving the required information. The Companies Act 1956 defines prospectus as “an prospectus, notice, circular, advertisement or other document inviting offers from the public for the subscription or purchase of any shares in, or debentures of a body corporate”.

OBJECTS OF PROSPECTUS

The main objects of the prospectus are:

 To inform the public about the formation of a new company

1. 
   

•      To inform the public about the formation of a new company
•      To state the prospectus of the company and thereby induce the public to subscribe to the shares or debentures of the company.
•    To invite the members of the public to purchase the shares or debentures of the company.
•    To preserve an authentic record of the terms and conditions on which the shares or debentures are issued by the company.
•   To create confidence in the public about the company by providing complete, accurate and reliable information and by making the directors responsible for the information mentioned therein.

Statement in Lieu of Prospectus:

If the promoter can secure capital without public subscription, he need not issue the prospectus but instead can prepare a statement containing similar information for filing with the registrar, in lieu of the prospectus. Thus, there can be a public company without inviting the public to subscribe to the share capital of the company. The statement in lieu of the prospectus must be submitted to the Registrar of Companies at least three days before allotment.

Issue of Prospectus – Rules:

1.    Generally, a prospectus is issued after the formation of a company. However, it can also be issued for a company which is proposed to be formed.
2.      The prospectus of a company must be dated because the date of prospectus is considered to be the date of its publication.
3.     The statement of an expert, (e.g., engineer, accountant, valuer etc.,) may be included in the prospectus if the concerned expert is not engaged in or interested in the formation, promotion or management of the company. In case the prospectus contains expert’s statement it is necessary to obtain his written consent of the issue of the prospectus.
4.     A copy of prospectus which is signed by every director or proposed directors of the company must be filled with the Registrar of Companies for registration before it is issued to the public.
5.     The prospectus must be issued to the public within 90 days after the date of filing the copy with the Registrar. The prospectus issued must state on its face, that a copy has been filed with the Registrar.
6.      After the registration of prospectus, the terms of any contract stated in the prospectus cannot be varied except with the approval of the members in the general meeting.
7.     When the company issues an application form for the purchase of its shares or debentures, then the form must be accompanied by an abridged form of prospectus. In Companies (Amendment) Act, 1988, the word prospectus is substituted by words "by a memorandum containing such salient features or a prospectus as may be prescribed", such memorandum is the abridged form of prospectus. Thus, now the company is not required to issue full prospectus along with the application for shares etc,. The full prospectus is to be issued only on the request of the applicant.

       4.      Commencement of Business

A public company cannot commence business without obtaining from the Registrar a certificate called 'certificate to commence business'. To obtain this certificate the following conditions must be fulfilled:

1.      A prospectus or a 'statement ill lieu of prospectus' has to be filed with the Registrar of companies. A statement in lieu of prospectus has to be prepared by those companies, which do not find it necessary to issue a prospectus for the issue of their shares. The statement must include all the information which a prospectus must contain under the law; that is:

2.      The number of shares allotted is not less than the minimum subscription mentioned in the prospectus (or a statement in lieu of prospectus).

3.      The directors have taken up and paid for their qualification shares. The amount paid on a share by them is not less than the amount paid by other members.

4.      The declaration that no money is liable to become refundable to applicants for shares for reason .of failure on the part of the company to apply for, or to obtain permission for, the shares or debentures dealt !n any recognized stock exchange.

5.      A declaration by one of the directors or the secretary, or secretary in whole time to the effect that all the conditions regarding the commencement of business have been complied with.

6.      An application must be made by the company to the register of companies requesting him to agent the Business Commencement Certificate.

Minimum Subscription:

The minimum subscription is the minimum amount, which in the opinion of the directors or signatories to the memorandum, is required to commence business. In the case of a public company the registrar will issue the certificate to commence business only when the amount raised by allotting shares, is not less than the amount equivalent to the minimum subscription mentioned in the prospectus.

The amount fixed, as 'minimum subscription' must be sufficient to provide for:

(a)    Purchase price of any property bought or to be bought;

(b)   Preliminary expenses and commission payable by the company;

(c)    The repayment of sums borrowed to provide for the foregoing;

(d)   Working capital; and

(e)    Any other expenditure.

Certificate of Commence of the Business

The Registrar after receiving the declaration of compliance with the provisions of Section 149 from the secretary or one of the directors along with the required filing fees, will scrutinize the declaration and, if satisfied, will issue a certificate to commence business. From the date of the issue of this certificate, the company is entitled to commence business and also empowered 'to exercise its borrowing powers.

Further the company should get this certificate within one year of its incorporation. All contracts entered into between the date of incorporation and the date of commencement of business are provisional and would become binding on the company automatically only after it is entitled to commence business.

Meaning of Book Building:

Every business organisation needs funds for its business activities. It can raise funds either externally or through internal sources. When the companies want to go for the external sources, they use various means for the same. Two of the most popular means to raise money are Initial Public Offer (IPO) and Follow on Public Offer (FPO).

During the IPO or FPO, the company offers its shares to the public either at fixed price or offers a price range, so that the investors can decide on the right price. The method of offering shares by providing a price range is called book building method. This method provides an opportunity to the market to discover price for the securities which are on offer.

“a process undertaken by which a demand for the securities proposed to be issued by a body of corporate is elicited and built up and the price for such securities is assessed for the determination of the quantum of such securities to be issued by means of a notice, circular, advertisement, document or information memorandum or offer document”.

Merchant Bankers to the issue or Book Running Lead Managers (BRLM),syndicate members, Registrars to the issue, Bankers to the issue, Auditors of the company, Underwriters to the issue, Solicitors, etc. are the intermediaries to an issue. The issuer discloses the addresses, telephone/fax numbers and email addresses of these intermediaries. In addition to this, the issuer also discloses the details of the compliance officer appointed by the company for the purpose of the issue.

Role of Merchant Bankers in Public Issues: 

·         Deciding on the size and timing of a public issue in the light of the market conditions.

·         Preparing the base of successful issue marketing from the initial documentation to the preparation of the actual launch.

·         Optimum underwriting support.

·         Appointment of bankers and brokers as well as issue houses.

·         Professional liaison with share market functionaries like brokers, portfolio managers and financial press for pre-selling and media coverage.

·         Preparation of draft prospectus and other documents.

·         Wide coverage throughout the country for collection of applications.

·         Preparation of advertising and promotional material

Book Building in India:

The introduction of book-building in India was done in 1995 following the recommendations of an expert committee appointed by SEBI under Y.H. Malegam. The committee recommended and SEBI accepted in November 1995 that the book-building route should be open to issuer companies, subject to certain terms and conditions. In January 2000, SEBI came out with a compendium of guidelines, circulars and instructions to merchant bankers relating to issue of capital, including those on the book-building mechanism.

What is a 'Follow on Public Offer - FPO?'

A follow-on public offer (FPO) is an issuing of shares to investors by a public company that is already listed on an exchange. An FPO is essentially a stock issue of supplementary shares made by a company that is already publicly listed and has gone through the IPO process. FPOs are popular methods for companies to raise additional equity capital in the capital markets through a stock issue.

An initial public offering (IPO) is the first time that the stock of a private company is offered to the public. IPOs are often issued by smaller, younger companies seeking capital to expand, but they can also be done by large privately owned companies looking to become publicly traded.

In the pre-issue process, the Lead Manager (LM) takes up the due diligence of company's operations/ management/ business plans/ legal etc. Other activities of the LM include drafting and design of Offer documents, prospectus, statutory advertisements and memorandum containing salient features of the prospectus.

Deutsche Equities India Private Limited, Centrum Capital Ltd and Kotak Mahindra Capital Company Ltd are the book running lead manager.

Duties of the Secretary before and after incorporation

                                                       

Duties before incorporation

Before incorporation, the secretary has to assist the promoters in performing preparatory work and in fulfilling many legal formalities. He has to assist the promoters in convening and conducting meetings, .drawing up preliminary contracts and documents required for registration. At this stage, he may also take the help of specialists such as a solicitor and a chartered accountant. The duties to be performed by the secretary before incorporation are as follows:

1.      To help the promoter in making a detailed, investigation of the proposed venture.

2.      If necessary, on the advice of the promoters to secure the opinion of the experts in different fields on the proposed venture.

3.      To help the promoters in drawing up the financial plan for the proposed venture.

4.      To attend to all preliminary meetings of the promoters, keep a record of proceeding of their meetings and to help in the discussion

5.      To secure the approval of the Registrar for the proposed name of the venture.

6.      To help the promoters in the preparation of preliminary contracts

7.      To help the promoters in the drafting and finalizing of documents such as memorandum, articles of association etc,.

8.      To follow the guidelines issued by SEBI

9.      To see that all requirements of the Acts as to incorporation and registration are complied with and that documents such as memorandum, articles, etc., with the required stamp duty, filing fees and registration charges are duly  filed with the Registrar.

10.  To collect the certificate of incorporation from the Registrar.

11.  To send a notice of the registered address of the company to the Registrar within 30 days of the date of registration.

Duties of the Secretary after Incorporation:

1.      To make himself thoroughly conversant with the contents of the memorandum and articles of association.

2.      To prepare the draft of prospectus or statement in lieu of prospectus.

3.      To call the first board meeting and get the draft prospectus, preliminary contract etc.  approved by the board.

4.      To see that his own appointment is made and confirmed at the first board meeting

5.      To get the necessary resolution passed for the appointment of bankers, legal advisers and other responsible officers of the company.

6.      To arrange for the listing of securities of the company

7.      To arrange for the opening of a bank account as per the directors of the board.

8.      To secure the necessary forms and stationery and to arrange for the preparation of the common seal of the company.

9.      To see that the prospectus or statement in lieu of prospectus is filed with the Registrar and to arrange for the issue of the prospectus to the public.

10.  To arrange with the bankers to receive the application money from the intending investors

11.  To arrange a board meeting as soon as the minimum subscription is reached and to get the necessary resolution passed for allotment of shares.

12.  To arrange for the refund of application money to those who have not been allotted shares.

13.  To issue letters of allotment/regret to applicants as per the decision of the board.

14.  To see that all the legal requirements for commencement of business are complied with.

15.  To see that a declaration is filed with the Registrar by one of the directors or the secretary himself, stating that the conditions required to be fulfilled for getting the certificate of commencement of business have been complied with

16.  To collect the certificate of commencement from Registrar.