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LEGAL ASPECT OF BUSINESS

Course Code:- BSL201

Submitted by:- Mohammad Abrar Faiaz Sabab

Registration ID:- 11801100

Section:- Q1803

Mittal School of Business

Lovely Professional University
Phagwara, Punjab
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Introduction:-
There are many different forms of businesses like Sole Proprietorship, Partnership Firm, Public
firms , Private firms , LLC , Hindu Undivided Family Business, Limited Liability Partnership,
etc. But Company form of business has certain advantages over another form of business, like
limited liability, perpetual succession, Separate legal identity, etc.
Name of my company is “Gold Leaf”
This is an Indian classic tobacco Company. Starting off as a cigarette with a heritage, this
company have many variants across several price points.Gold Leaf's sold in a multitude of
varieties, including Gold Flake Kings (84 mm), Gold Leaf swiss (64mm), and Gold Leaf
Light.My company has its own innovation in future it we will bring more innovative than others.

Procedure of Company Formation:=

The Companies Act, 2013 details the regulations and company registration papers essential for the
incorporation of a company. In this article, we will see all such rules and documents listed in the Act
and also the procedure of company formation .

To begin with, let’s start step by step and select who is going to be whom or in simple words we
will decide what is going to be done by whom and who is going to take which responsibility in
formation of our firm.Lets start with who is going to be the promoter of a company.

• Promoter

Under the Section 2(69) of the Companies Act, 2013, defines promoters as an individual who:-

• Is named as a promoter in the prospectus or in the annual returns of the company.

• Controls the affairs of a company, directly or indirectly.

• Advises, directs, or instructs the Board of Directors.

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Hence, we can say that promoters are people who originally come up with the idea of the company,
form it and register it. However, solicitors, accountants, etc. who act in their professional capacity
are NOT promoters of the company. They are just workers of the company. They get the salary for
the promoter get the stakes in the organization . So for this company I will going to be the promoter
of the company because I came up with the idea of this company as well as I’m taking all the risk on
my own and also will be going to control the affairs of a company directly by my own.

So coming in Formation of a Company

Under the Section 3 of the Companies Act, 2013, details the basic requirements of forming a
company as follows:

• Formation of a public company involves 7 or more people who subscribe their names to
the memorandum and register the company for any lawful purpose.

• Similarly, 2 or more people can form a private company.

• One person can form a One-person company.

SO if we talk about the formulation of a company this company will be going to be a

private company .

Registration or Incorporation of a Company

Under Section 7 of the Companies Act, 2013, details the procedure for incorporation of a company.
Here is the procedure:

• Filing of company registration papers with the registrar

To incorporate a company, the subscriber has to file the following company registration papers with
the registrar within whose jurisdiction the location of the registered office of the proposed company
falls. Which means that i have to file all of these documents with registrar .

1. The Memorandum and Articles of the company. All subscribers have to sign on the
memorandum.

2. The person who is engaged in the formation of the company has to give a declaration
regarding compliance of all the requirements and rules of the Act. A person named in the
Articles also has to sign the declaration. We need to sign those papers .
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3. Each subscriber to the Memorandum and individuals named as first directors in the Articles
should submit an affidavit with the following details:

i. Declaration regarding non-conviction of any offence with respect to the

formation, promotion, or management of any company.

ii. He has not been found guilty of fraud or any breach of duty to any company in the
last five years.

iii. The documents filed with the registrar are complete and true to the best of his
knowledge.
4. Address for correspondence until the registered office is set-up.

5. If the subscriber to the Memorandum is an individual, then he needs to provide his full
name, residential address, and nationality along with a proof of identity. If the subscriber is
a body corporate, then prescribed documents need to be provided.

6. Individuals mentioned as subscribers to the Memorandum in the Articles need to provide

the details specified in the point above along with the Director Identification Number.

7. The individuals mentioned as first directors of the company in the Articles must provide
particulars of interests in other firms or bodies corporate along with their consent to act as
directors of the company as per the prescribed form and manner.

Issuing the Certificate of Incorporation

Once the Registrar receives the information and company registration papers, he registers all
information and documents and issues a Certificate of Incorporation in the prescribed form. So we
will get this certificate of incorporation in the name of my company .

Corporate Identity Number (CIN)

The Registrar also allocates a Corporate Identity Number (CIN) to the company which is a distinct
identity for the company. The allotment of CIN is on and from the company’s incorporation date.
The certificate carries this date.

Maintaining copies of Company registration papers

After completing all the paperwork my company will for sure going to maintain copies of all
information and documents until dissolution.
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In case of Furnishing false information at the time of incorporation

During the formation of a company, if an individual furnished an false or incorrect information or

Suppress any material information in the documents provided to the Registrar for the
incorporation, on purpose will be liable for it .

In such cases, the individual is liable for action for fraud under section 447. So we shall always
provide the right information and we will do that so her . We should make sure during providing the
information we will provide them the right and real information .

The company is already incorporated based on false information

If a company is already incorporated but it is found at a later date that the information or documents
submitted were false or incorrect, then the promoters, first directors, and persons making a
declaration is liable for action for fraud under section 447.

Order of the National Company Law Tribunal (NCLT)

If a company is incorporated by furnishing false or incorrect information or representation or

suppressing material facts or information in the documents furnished, the Tribunal can pass the
following orders (if an application is made and the Tribunal is satisfied with it):

• Pass an order to regulate the management of the company. It can include changes in its
Memorandum and Articles if required. This order is either in public interest or in the
interest of the company and its members and creditors.

• Make the liability of its members unlimited

• Order removal of the name of the company from the Registrar of Companies

• Order the company to wind-up

• Pass any other order as it deems fit

Before passing an order, the Tribunal has to give the company a reasonable opportunity to state its
case. Also, the Tribunal should consider the transactions of the company including obligations
contracted or payment of any liability.

So we will not going to show any false information .

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• Effect of Registration of a Company

According to Section 9 of the Companies Act, 2013, these are the effects of registration of a
company:

• From the date of incorporation, the subscribers to the Memorandum and all subsequent
members of the company are a body corporate.
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• A registered company can exercise all functions of a company incorporated under the Act.
Also, the company has perpetual succession with power to acquire, hold, and dispose of
property of all forms. Also, it can contract, sue and be sued by the said name.

• Further, the company becomes a legal person separate from the incorporators from the date
of incorporation. Also, a binding contract comes into existence between the company and
its members as mentioned in the Memorandum and Articles of Association. Until the
company dissolves or the Registrar removes it from the register, it has perpetual existence.

• Formulation of objectives of company

An organization's objectives are the specific, measurable goals it wishes to achieve. Objectives
may not be obvious when an organization begins operating or looks to launch a new enterprise.
Every organization, from a multinational corporation to a non-profit agency or small business,
needs an effective approach to objective formulation to succeed. It will not only help them to
achieve the success but also help them to make competitive advantage in the market which leads
Objectives of Flash Network Ltd are:-

❖ To increase public awareness about our solar system and other planets .

❖ To influence policy and set appropriate legal precedents on space travel of normal people .

❖ Make space travel less cheaper so anyone can afford it . To undertake any other activity or
business that will contribute towards increased access to the public of such technologies at
the lowest possible costs.

❖ To demonstrate through research and space pilot projects the benefits of new related
technologies, and to promote their deployment in space travel.
❖ To promote informed debate on telecommunications, broadcasting and related sectors
through workshops, seminars and any other such vehicles from time to time.
❖ To undertake research studies or activities, action research, capacity building activities on
space technology, international space hub for people who need it, studies related to
facilitation or, promotion of free access of information about human existence , space
programme , gravity and make human an traveller between stars.
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Memorandum of Association (MOA):- Memorandum of Association (MOA) is a legal

document prepared in the formation and registration process of a limited liability company to
define its relationship with shareholders. The MOA is accessible to the public and
describes the company’s name, physical address of registered office, names of shareholders and
the distribution of shares etc.

Purpose of the MOA

For Prospective Shareholders:
To know how the money is going to be used and what risk the investment is prone to
For Outsiders:
To know the objects of the company
If the contracts entered are within those objects
Printing of the Memorandum
• Neatly and Legibly Laser Printed

• Divided into paragraphs and numbered

• Signed by 7 (2 in case of private) Subscribers

MOA of “ Gold Leaf” are mentioned below:-

❖ Legal Name of the Company: “GOLD LEAF.”

Physical Address of the Registered Office:- “Esplaned, 33, M G Road,Sealdah,Kolkata

700009,West Bengal ”
Objectives of the Company:-

• To establish , run and maintain there business of selling tobacco products like cigeratte .
• To carry on the business as importer, exporter,buryers,lesser,and sellers and dealers in all
types of tobacco and equipments necessary for attaining the above objects.
• Liability of Shareholders: “Limited”
• Authorized Share Capital: 4,00,000
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MOA OF GOLD LEAF

This is the MOA of Gold Leaf which shows its business and objective .

• Division of capital into various heads:-

Various sub-capitals are as:

❖ Authorised capital :- Authorised capital means the sum mentioned in the capital clause of
Memorandum of Association. It is the maximum amount which the company raise by issuing
the shares and on which the registration fee is paid. Here we are having 5lac worth amount of
authorised capital with us .

❖ Issued Capital:- Issued capital are that part of the authorised capital which has been offered
for subscription to members and includes shares alloted to members for consideration in kind
also. So we will be issuing our 90% of shares which means 4,50,000 worth of stock at RS
10/per share .Which means we are having 45,000 shares to issue .
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❖ Subscribed Capital: Subscribed capital means that part of the issued capital at nominal or
face value which has been subscribed or taken up by purchaser of shares in the company and
which has been alloted.

❖ Called-up Capital: Called-up capital means the total amount of called up capital on the
shares issued and subscribed by the shareholders on capital account. For example, the face
value of a share is Rs. 10/-but the company requires only Rs. 2/-at present, it may call only
Rs. 2/-now and the balance Rs.8/-at a later date. Rs. 2/-is the called-up share capital and Rs.
8/-is the uncalled share capital.

❖ Paid-up Capital :Paid-up capital means the total amount of called up share capital which is
actually paid to the company by the members.

Conclusion:-
Formation of a Company is a procedure of incorporation of a company. It includes various
factors and legal documents for the purpose of incorporation. At the time of establishment, there
are two documents play a very important role. Those documents are Memorandum of
Association (MOA) and Articles of Association (AOA).Thus, the Formation of a Company in
Company Law includes various major stages for fulfilling the procedure of incorporation.
Without these stages, the company cannot be formed and run . And also misinformation could
put you in jail . So we are require to cross check everything.