Corporate Law Project.docx

HIDAYATULLAH NATIONAL LAW UNIVERSITY, UPARWARA, NEW RAIPUR

CORPORATE LAW PROJECT ON PROMOTION AND INCORPORATION OF A COMPANY

SUBMITTED TO

SUBMITTED BY

DR. DIPAK DAS

AYUSHI UPADHYAY SEMESTER V SECTION A ROLL. NO. 48

SUBMITTED ON 08/10/2015

DECLARATION I, Ayushi Upadhyay, hereby declare that, the project work entitled, ‘Promotion and Incorporation of a Company’ submitted to H.N.L.U., Raipur is record of an original work done by me under the able guidance of Dr. Dipak Das, Faculty Member, H.N.L.U., Raipur.

Ayushi Upadhyay B.A. LLB(H) Semester V Roll no. 48

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Promotion and Incorporation of a Company

ACKNOWLEDGEMENTS I would like to sincerely thank the Corporate Law Teacher Dr. Dipak Das for giving me this project on the “Promotion and Incorporation of a Company” which has widened my knowledge on the scope and relevance of it in present time. His guidance and support has been instrumental in the completion of this project. Thank you Sir. I’d also like to thank all the authors, writers, columnists and social thinkers whose ideas and works have been made use of in the completion of this project. My heartfelt gratitude also goes out to the staff and administration of HNLU for the infrastructure in the form of our library and IT lab that was a source of great help in the completion of this project. I also thank my friends for their precious inputs which have been very helpful in the completion of this project.

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Promotion and Incorporation of a Company

TABLE OF CONTENTS

I)

ACKNOWLEDGEMENTS............................................................................................1

II)

CHAPTER I................................................................................................................4  INTRODUCTION.................................................................................4  OBJECTIVES.....................................................................................5  RESEARCH METHODOLOGY...........................................................5  RESEARCH SCHEME........................................................................5  HYPOTHESIS....................................................................................5

III)

CHAPTER II: PROMOTION......................................................................................6  PROMOTER: MEANING AND DEFINITION.......................................6  LEGAL POSITION OF A PROMOTER................................................7  DUTIES OF A PROMOTER................................................................8  REMEDIES AVAILABLE AGAINST A PROMOTER...............................8  LIABILITIES OF A PROMOTER.......................................................9  REMUNERATION OF PROMOTER..................................................11

IV)

CHAPTER III: INCORPORATION OF A COMPANY.................................................12  FORMATION OF A COMPANY........................................................12  INCORPORATION OF COMPANIES: PROCEDURAL ASPECT................12  EFFECT OF REGISTRATION.........................................................17  CERTIFICATE OF INCORPORATION................................................18

V)

CHAPTER IV ........................................................................................................19  CRITICAL ANALYSIS....................................................................19  CONCLUSION................................................................................20

VI)

BIBLIOGRAPHY.....................................................................................................21

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CHAPTER I INTRODUCTION The concept of “Company” or “Corporation” in business is not a new one, but has been in existence since 4th century B.C itself, during the Arthshashtra days. Though, as per the need and the dynamics of society, its shape got revamped over a period of time. The Company Legislation in India has closely followed the Company Legislation in England. The first legislative enactment for joint stock companies was made in the year 1850. Then came Companies Act, 1857 which introduced the concept of limited liability in India. Thereafter in 1866, Companies Act, 1866 was passed. This Act continues till 1913 when it was replaced by Companies Act, 1913. A number of major and minor amendments were made in this Act over the years. Finally, in 1950, a Committee uner the chairmanship of Shri H.C Bhabha was appointed to go into the entire question of revision of Indian Companies Act. Owing to the Report of this Committee, a Bill to enact Companies Act, 1956 was presented in legislature. Until recently, Companies in India were governed by Companies Act, 1956. With the passing of Companies Bill 2012, Companies Act, 2013 has become the most important corporate legislation. The new Act empowers the Government to regulate the Formation, financing, functioning and winding up of companies. Government of India administers this act through the Ministry of Corporate Affairs and the Offices of the Registrar of Companies (RoC), Official Liquidators, Public Trustee, Company Law Board, Director of Inspection, etc. The promotion and incorporation of the new companies and the administration of the running companies is handled by the Registrar of Companies. In this paper, the author will be discussing the process of Promotion, Incorporation and Administration of Companies placing emphasis to understand the major changes that have been brought about Companies Act, 2013 with respect to Companies Act, 1956.

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OBJECTIVES The objectives of this project are: a) To understand the concept of Promotion and Incorporation of Company. b) To compare the provisions of Companies Act, 1956 and Companies Act, 2013 with regard to the concept of Promotion and Incorporation of Company.

RESEARCH METHODOLOGY This project has been made by Doctrinal Research. It is descriptive & analytical in approach. Books & other references as guided by faculty of Corporate Law were helpful for the completion of this project.

RESEARCH SCHEME In this research paper, the author has tried to explain the process of promotion and incorporation of the company. Chapter II is based on Promotion of Company. In this chapter, the meaning and definition on promotion is explained in the very beginning. At the later stage, the meaning and definition of Promoter, his legal position, rights and duties, remedies available against a promoter and his liabilities. While explaining the relevant law, provisions of Companies Act, 1956 and Companies Act, 2013 have been compared. Chapter III is based on Incorporation of Company in which the prodecural aspect related to incorporation of company has been explained. Also, in brief the effect of registration is explained. In Chapter IV, a critical analysis and conclusion of this paper is written.

HYPOTHESIS On the general reading of the topic, I think the process of promotion has been made more simpler and promoter has acquired a statutory position. Also, regarding incorporation, the process has been made a bit stringent. Page | 5

Promotion and Incorporation of a Company

CHAPTER II PROMOTION Promotion is a term of wide import denoting the preliminary steps taken for the purpose of registration and flotation of company.1 It implies the beginning of the company. Various authorities on the subject have defined this term in various ways. As per C.N Gesternberg, “Promotion is the discovery of business opportunities and the subsequent organisation of funds, property and managerial ability into a business concern for the purpose of making profits therefrom."2 H.L Haney has defined promotion as, “the process of organizing and planning the finances of business enterprises under the corporate form.3” The persons who assume the task of promotion are called “promoters.”

PROMOTER: MEANING AND DEFINITION Promoters are person who conceive the idea of forming a company and take the necessary steps to incorporate it by registration, provide it with share and loan capital and acquire for it business or property, which it is to manage.4 In Twycross v. Grant5 it was stated that, “A promoter is the one who undertakes to form a company with reference to a given project, and to set it going, and who takes the necessary steps to accomplish that purpose.” The word “promoter” is used in common parlance to denote any individual, syndicate, association or partnership which has taken all the necessary steps to create and mould a company and set it going.

1

A.K MAJUMDAR , DR. G.K KAPOOR, COMPANY LAW AND PRACTICE 117 (16th edition, 2011). DR. ASHOK SHARMA, COMPANY LAW, 117 (2010). 3 Id. 4 Supra note 1. 5 (1877) 2 C.P.D. 469 2

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 Companies Act, 1956 The term “promoter” was not defined in the Companies Act, 1956, although the term is used expressly in sections 626, 697, 768, 4789 and 51910. Section 62 defines promoter for a limited purpose of that section only. It states that “promoter” means a promoter who was a party to the preparation of the prospectus or a portion thereof containing untrue statement, but does not include any person by reason of his acting in a professional capacity in procuring the formation of the company.11  Companies Act, 2013 As per Section 2(69) of the Companies Act, 2013 promoter is a person: a) who has been named as such in a prospectus or is identified by the company in the annual return referred to in section 92; or b) who has control over the affairs of the company, directly or indirectly whether as a shareholder, director or otherwise; or c) in accordance with whose advice, directions or instructions the Board of Directors of the company is accustomed to act: Provided that nothing in sub-clause (c) shall apply to a person who is acting merely in a professional capacity;

LEGAL POSITION OF A PROMOTER: The promoters of a company stand in a fiduciary position12 to the company they promote and to those persons whom they induce to become shareholders in it.13 He is not an agent of the company because there is no company yet in existence and he is not a trustee because there is no trust in existence.14

6

Section 62: Civil liability for mis-statements in prospectus, Companies Act, 1956. Section 69: Prohibition of allotment unless minimum subscription received, Companies Act, 1956. 8 Sectio 76: Power to pay certain commissions and prohibition of payment of all other commissions, discounts, etc., Companies Act, 1956. 9 Section 478: Power to order public examination of promoters, directors, etc., Companies Act, 1956. 10 Section 519: Application of liquidator to court for public examination of promoters, directors, etc., Companies Act, 1956. 11 Section 62(6)(a), Companies Act, 1956. 12 Erlanger v. New Sombrero Phosphate Co., 39 LT 269. 13 Langunas Nitate Co. v. Langunas Syndicate (1899 2 CH 392). 14 Supra note 1, at 119. 7

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DUTIES OF A PROMOTER: There are mainly two duties of the promoter: a) not to make any secret profit out of the promotion of the company; b) to disclose to the company any interest which he has in a transaction entered into by it. Duty to disclose secret profits: A promoter is not forbidden to make profit but to make secret profit. When a promoter makes some profits in connection with a transaction to which company is a party and does not make full disclosure of his profits; the company has the right to affirm the contract and promoter should handover his profits to the company.15 Duty of disclosure of interest: A promoter must disclose to the company any interest he has in a transaction entered into by it.16  Companies Act, 1956: This Act contains no provision regarding the duties of the promoters.  Companies Act, 2013: Section 102(4) of Companies Act, 2013 is based on the principle that a promoter cannot make either directly or indirectly, at the expense of the company he promotes, without the knowledge and consent of the company and that if he does so, the company can compel him to account for it.

REMEDIES AVAILABLE TO THE COMPANY AGAINST THE PROMOTER If any profit made out of a transaction to which the company is a party is not disclosed by a promoter, the company can follow one of the following two courses: (i) Rescission of contract: It may set aside the transaction or contract with the promoter, i.e., it may restore the property to him and recover its money; or (ii) To recover secret profit: It may sue the promoter for an account of profit not disclosed by him and recover the same with interest. In addition to one of the above remedies, the company may also sue the promoter for damages caused to it because of his fraud or breach of duty.

15 16

Gluckstein v. Barnes, (1900) A.C. 240. Supra note 1, at 119.

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LIABILITY OF PROMOTERS A Promoter is subject to the following liabilities under the provisions of Companies Act 2013 and Companies Act, 1956. 1. Unlike 1956 Act, Section 7(6) of Companies Act, 2013 provides that where, at any time after the incorporation of a company, it is proved that the company has been got incorporated by furnishing any false or incorrect information or representation or by suppressing any material fact or information in any of the documents or declaration filed or made for incorporating such company, or by any fraudulent action, the promoters, the persons named as the first directors of the company and the persons making declaration shall each be liable for action under section 447.

2. Matters to be stated in Prospectus Section 26 of 2013 Act lays down matters to be stated and reports to be set out in the prospectus. The promoter may be liable for the non-compliance of the provision of this section. The corresponding section of 1956 Act is section 56. The 1956 Act provided for only fine upto Rs. 50,000/-. As per 2013 Act, the company shall be punishable with fine which shall not be less than fifty thousand rupees but which may extend to three lakh rupees and every person who is knowingly a party to the issue of such prospectus shall be punishable with imprisonment for a term which may extend to three years or with fine which shall not be less than fifty thousand rupees but which may extend to three lakh rupees, or with both.

3. Criminal Liability for misstatement in prospectus Section 34 of the Companies Act, 2013 states that promoters are criminally liable for the issue of prospectus containing untrue or misleading statements in form or context in which it is included or where any inclusion or omission of any matter is likely to mislead. Section 447 imposes severe punishment for fraud on promoters who make untrue or misleading statements in prospectus with a view of obtaining capital. The punishment prescribed is imprisonment which shall not be less than six months but which may extend to ten years an also a fine which shall not be less than the amount involved in fraud but which may extend up to three times the amount involved in Page | 9

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fraud. If fraud in question involves public interest, the term of imprisonment shall not be less than three years. Section 63 of Companies Act 1956: This section makes a promoter criminally liable for the issue of prospectus containing false or deceptive statements. The punishment under this section may be for a term which may extend to two years or with fine which may extend to fifty thousand rupees or with both.17 The promoter may, however, escape liability if he proves that he had reasonable ground to believe that the statement was true or the statement was immaterial from the point of view of attracting the investors.

4. Civil liability for misstatements in prospectus: Section 35 of Companies Act, 2013 lays down that a promoter is liable for any misleading statement in the prospectus to a person who has subscribed for any of the securities of the company on the face of the prospectus. By virtue of section 35(1) Where a person has subscribed for securities of a company acting on any statement included, or the inclusion or omission of any matter, in the prospectus which is misleading and has sustained any loss or damage as a consequence thereof, the company and certain persons as mentioned in the said section, including a promoter of the company, shall without prejudice to any punishment to which any person may be liable under section 36, be liable to pay compensation to every person who has sustained such loss or damage. Section 62(1)(c) of Companies Act, 1956: A promoter is liable for any untrue statement in the prospectus to a person who has subscribed any shares or debentures on the faith of the prospectus. The aggrieved person may sue the promoter for compensation for any loss or damage sustained by him.

5. Failure to cooperate with Company Liquidator during winding up As per Section 284 of Companies Act, 2013 where any promoter without reasonable cause, fails to cooperate with the Company Liquidator during winding up, he shall be punishable with imprisonment which may extend to six months or with fine which may extend up to Rs. 50,000/- or with both. There was no such provision in Companies Act, 1956.

17

Fine raised from Rs. 5000/- to Rs. 50,000/- by Sec. 23 of the Companies (Amendment) Act, 2000

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6. Examination of Promoters Section 300(1) of Companies Act, 1956 provides that if the company is being wound up by the order of the Court and the liquidator’s report alleges any fraud in the promotion and formation of the company, the promoter or promoters shall be liable to public examination like any other officer or director of the company. Section 478 of Companies Act, 1956 provides for the similar thing.

7. Liability for fraudulent conduct of business Every person who was knowingly a party to the offence of carrying on any business of the company with the intent to defraud creditors or any other persons or for any fraudulent purposes shall be punished with imprisonment of not less than 6 months but upto 10 years and fine of not less than the amount of fraud but which may extend to 3 times the amount of fraud under section 339 of Companies Act, 2013. Under section 542 of the 1956 Act, the punishment was imprisonment which may extend to 2 years or fine up to Rs. 50,000/- or with both.

8. Section 340 of Companies Act, 2013: Where a promoter has misapplied or retained any property of the company or is guilty of misfeasance or breach of trust in relation to the company, he can be sued by the company for breach of duty or deceit, as the case may be. Corresponding section is section 543 in Companies Act, 1956.

REMUNERATION OF PROMOTERS A promoter is not entitled to recover any remuneration for his services from the company unless there is a valid contract enabling him to do so, between him and company. Indeed, without such a contract he is not even entitled to recover his preliminary expenses.18However, in practice, recovery of preliminary expenses and registration fess does not normally present any difficulty because articles generally contain provisions authorizing directors to pay them.19

18 19

Re English & Colonial Produce Company, [1906] 2 Ch. 435 CA. Touche v. Metropolitan Railway Warehousing Company, [1871] L.R. 6 Ch. 671.

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Promotion and Incorporation of a Company

CHAPTER III INCORPORATION OF A COMPANY FORMATION OF A COMPANY As per section 12(1) of Companies Act, 1956 any seven or more persons, or where the company to be formed will be a private company, any two or more persons, associated for any lawful purpose may, by subscribing their names to a memorandum of association and otherwise complying with the requirements of this Act in respect of registration, form an incorporated company, with or without limited liability. However, the Act of 2013 has introduced a new type of company which can be formed. As per section 3(1) of Companies Act, 2013 A company may be formed for any lawful purpose by one person, where the company to be formed is to be One Person Company that is to say, a private company.

INCORPORATION OF COMPANIES: PROCEDURAL ASPECT Before a company is formed, the promoters have to follow certain steps. 1. Type of Company The first thing to be decided is the type of company proposed to be floated. As per section 12 of Companies Act, 1956 only two types of companies can be registered, a) Public company b) Private Company. However, as per section 3(1) of Companies Act, 2013, three types of companies can be registered, a) Public Company b) Private Company c) One Person Company.

2. Application for Availability of Name of company. o Companies Act, 1956 A company is identified by the name with which it is registered. The Memorandum of Association of a company should, according to Section 13 of the Act, state the name of the company. According to Section 20 of the Act a company cannot be registered with the name which is undesirable or which is identical with or too nearly resembles the name of an

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existing company. A company will not be allowed to use a name which is prohibited under the Emblems and Names (Prevention of Improper Use) Act, 1950. For deciding the availability of names, the Ministry of Corporate Affairs has issued NAME AVAILABILITY GUIDELINES, 2011 w.e.f. 24.07.2011. The aforesaid guidelines are issued in supersession of all the previous circulars and instructions regarding name availability, issued by the Ministry of Corporate Affairs from time to time.20 The Companies (Central Government's) General Rules and Forms (Amendment) Rules, 2011 vide Rule 4A, require the promoters of a company under a proposed name to make an application in e-Form No. 1A, to the Registrar of Companies of the State in which the registered office of the proposed company is to be situated, for ascertaining as to whether the proposed name is undesirable within the meaning of Section 20 of the Act. A fee of Rs. 1000 (w.e.f. 24.07.11) is to be paid along with e-Form 1A. In case the name is undesirable, the registrar may reject the same or ask for resubmission of the application with new names or calls for further information, ordinarily within three days of receipt of the application. The applicant shall be given only up to two opportunities for resubmission of their proposal against the fee paid in the first instance for name availability after the original application is filed. Where the Registrar informs the promoters of the company that the name is not undesirable, such name shall be available for adoption by the promoters of the company for a period of sixty days from the date the name is allowed. If the name so allowed is not adopted on or before the expiry of the period of sixty days from the date it is allowed, the name allowed shall lapse and no extension will be granted after expiry of sixty days from the date the name is allowed. In 1956 Act no provision dealt with these procedural aspects.21  Companies Act, 2013 As per Section 4(4) a person may make an application, in such form and manner and accompanied by such fee, as may be prescribed, to the Registrar for the reservation of a name set out in the application as— (a) the name of the proposed company; or (b) the name to which the company proposes to change its name. 20

Supra note 1, at 127. THE INSTITUTE OF COMPANY SECRETARIES OF INDIA, A COMPARATIVE STUDY OF COMPANIES ACT, 2013 & COMPANIES ACT, 1956 (2014). 21

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As per Rule 9 of Companies (Incorporation) Rules, 2014, An application for the reservation of a name shall be made in Form No. INC.1 along with the fee as provided in the Companies (Registration offices and fees) Rules, 2014. According to Section 4(2) the name stated in the memorandum shall not— (a) be identical with or resemble too nearly to the name of an existing company registered under this Act or any previous company law; or (b) be such that its use by the company— (i) will constitute an offence under any law for the time being in force; or (ii) is undesirable in the opinion of the Central Government. Section 4(3) provides that without prejudice to the provisions of sub-section (2), a company shall not be registered with a name which contains— (a) any word or expression which is likely to give the impression that the company is in any way connected with, or having the patronage of, the Central Government, any State Government, or any local authority, corporation or body constituted by the Central Government or any State Government under any law for the time being in force; or (b) such word or expression, as may be prescribed, unless the previous approval of the Central Government has been obtained for the use of any such word or expression. Section 4(5)(i) Upon receipt of an application under sub-section (4), the Registrar may, on the basis of information and documents furnished along with the application, reserve the name for a period of sixty days from the date of the application. Rule 8 of Companies (Incorporation) Rules, 2014 the names released on change of name by any company shall remain in data base and shall not be allowed to be taken by any other company including the group company of the company who has changed the name for a period of three years from the date of change subject to specific direction from the competent authority in the course of compromise, arrangement and amalgamation.

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3. Preparation of Memorandum of Association and Articles of Association The Memorandum of Association is the constitution of a company. It is a document, which amongst other things, defines the area within which the company can act. It is, therefore, required to state the object for which the company has been formed, the business that it would undertake, the liability, the capital which it shall be allowed to raise, the nature of liability of its members, the name of the State where the registered office of the company shall be located etc. The other important document is the Articles of Association which contains the rules and regulations relating to the internal management of a company.22

4. Filing of Documents with Registrar of Companies  Companies Act, 1956 a) Power of Attorney With a view to fulfill the various formalities that are required for incorporation of a company, the

promoters

may

appoint

an

attorney

empowering

him

to

carry

out

the

instructions/requirements stipulated by the Registrar. This requires execution of a Power of Attorney on a non-judicial stamp paper of a value prescribed in the respective State Stamp Laws.23 b) Printing and signature of memorandum As per section 15, the memorandum shall: (a) be printed, (b) be divided into paragraphs numbered consecutively, and (c) be signed by each subscriber (who shall add his address, description and occupation, if any), in the presence of at least one witness who shall attest the signature and shall likewise add his address, description and occupation, if any. c) e-Form No. 18: Notice of Registered address Under Section 146, a company shall as from the day on which it begins to carry on business, or as from the 30th day after the day of its incorporation whichever is earlier, should have a registered office. Where the location of the registered office is finalised prior to Incorporation of a company by the promoters, the promoters can also file along with the Memorandum and Articles, the notice of situation of the Registered office in eForm No. 18 of the Companies (Central Government's) General Rules and Forms (Amendment) Rules, 2006. Where the

22 23

Supra note 1, at 128. THE INSTITUTE OF COMPANY SECRETARIES OF INDIA, COMPANY LAW 74 (July 2014).

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location of the registered office is not finalised, e-Form No. 18 can be filed later but within 30 days from the date of incorporation. d) e-Form No. 32: Particulars of Directors Where a company by its Articles of Association appoints any person(s) who are to act as a director, manager or secretary it may also file their particulars, in duplicate, in e-Form No. 32 of the Companies (Central Government's) General Rules and Forms (Amendment) Rules, 2006, with the Registrar at the time of registration. However, e-Form No. 32 can also be filed within 30 days of the registration of the company or appointment of first directors. e) Statutory Declaration in e-Form No. 1 Section 33(2) requires that a declaration in e-Form No. 1 of the Companies (Central Government's) General Rules and Forms (Amendment) Rules, 2006, by an advocate of the Supreme Court or a High Court, or an attorney or pleader entitled to appear before the High Court or a Secretary or a Chartered Accountant practising in 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 a company, that all the requirements of the Companies Act, 1956 and the rules thereunder have been complied with in respect of registration and matters precedent and incidental thereto to be filed with the Registrar. The Registrar may accept such a declaration as sufficient evidence of such compliance.  Companies Act, 2013 As per section 7, there shall be filed with the Registrar within whose jurisdiction the registered office of a company is proposed to be situated, the following documents and information for registration, namely:— (a) the memorandum and articles of the company duly signed by all the subscribers to the memorandum in such manner as may be prescribed; (b) a declaration in the prescribed form by an advocate, a chartered accountant, cost accountant or company secretary in practice, who is engaged in the formation of the company, and by a person named in the articles as a director, manager or secretary of the company, that all the requirements of this Act and the rules made thereunder in respect of registration and matters precedent or incidental thereto have been complied with; (c) an affidavit from each of the subscribers to the memorandum and from persons named as the first directors, if any, in the articles that he is not convicted of any offence in connection with the promotion, formation or management of any company, Page | 16

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or that he has not been found guilty of any fraud or misfeasance or of any breach of duty to any company under this Act or any previous company law during the preceding five years and that all the documents filed with the Registrar for registration of the company contain information that is correct and complete and true to the best of his knowledge and belief; (d) the address for correspondence till its registered office is established; (e) the particulars of name, including surname or family name, residential address, nationality and such other particulars of every subscriber to the memorandum along with proof of identity, as may be prescribed, and in the case of a subscriber being a body corporate, such particulars as may be prescribed; (f) the particulars of the persons mentioned in the articles as the first directors of the company, their names, including surnames or family names, the Director Identification Number, residential address, nationality and such other particulars including proof of identity as may be prescribed; and (g) the particulars of the interests of the persons mentioned in the articles as the first directors of the company in other firms or bodies corporate along with their consent to act as directors of the company in such form and manner as may be prescribed. Under Section 12, a company shall, on and from the fifteenth day of its incorporation and at all times thereafter, have a registered office capable of receiving and acknowledging all communications and notices as may be addressed to it. The company shall furnish to the Registrar verification of its registered office within a period of thirty days of its incorporation in such manner as may be prescribed.

EFFECT OF REGISTRATION Section 34 of Companies Act, 1956 states, on the registration of the memorandum of a company, the Registrar shall certify under his hand that the company is incorporated and, in the case of a limited company, that the company is limited. From the date of incorporation mentioned in the certificate of incorporation, such of the subscribers of the memorandum and other persons, as may from time to time be members of the company, shall be a body corporate by the name contained in the memorandum, capable forthwith of exercising all the functions of an incorporated company, and having perpetual succession and a common seal,

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but with such liability on the part of the members to contribute to the assets of the company in the event of its being wound up as is mentioned in this Act. The corresponding section is 9 in Companies Act, 2013.

CERTIFICATE OF INCORPORATION  Companies Act, 1956 As per Section 35 of 1956 Act, a certificate of incorporation given by the Registrar in respect of any association shall be conclusive evidence that all the requirements of this Act have been complied with in respect of registration and matters precedent and incidental thereto, and that the association is a company authorised to be registered and duly registered under this Act.  Companies Act, 2013 Section 7(7) of Companies Act, 2013 enables the Tribunal to direct the removal of the name of a company from the register to run counter to the concept of certificate of incorporation being a conclusive evidence that all formalities and requirements of incorporation have been duly completed. Hence, Companies Act, 2013 omits section 35 of the 1956 Act.

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CHAPTER IV CRITICAL ANALYSIS Companies Act, 2013 has not completely departed from the provisions of Companies Act, 1956. The new Act has compressed the law pertaining to companies. Also, unlike the act of 1956, where several scattered sections were given pertaining to one area of discussion, Companies Act, 2013 has tried to put together the law with respect to one specific context. This is very helpful and convenient for students, academicians, etc. The concept of promotion and incorporation is the very basis of the act of formation of a company. Companies Act, 2013 has given exhaustive guidelines regarding the procedure to be followed by promoting or incorporating a company. Also, with a view to protect the interests of the creditors, shareholders, etc., the liability of promoters, directors, and persons involved in the formation of company has been increased. The punishment given for wrongful act during the promotion or incorporation of company has also been increased as compared to Companies Act, 1956.

.

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CONCLUSION While looking at the provisions related to Promotion and Incorporation of a company in Companies Act, 1956 and Companies Act, 2013, I came to the conclusion that my hypothesis was correct. The word “promoter” has been defined under the 2013 Act; his liabilities have been increased for safeguarding the interests of the creditors, shareholders, etc. Also, unlike the 1956, the entire process of incorporation has been given under section 7 and is not spread across a number of sections. The process of Incorporation has been tightened. The 2013 Act has ushered in a new era of corporate democracy making a titanic shift from "government control" to "self-governance". The 2013 Act has a number of measures for protection of minority holders like tighter norms on companies from raising public deposits, filing class action suit etc.

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BIBLIOGRAPHY Statutes: 1. The Companies (Central Government's) General Rules and Forms (Amendment) Rules, 2011. 2. The Companies (Incorporation) Rules, 2014. 3. The Companies Act, 1956 (1 of 1956). 4. The Companies Act, 2013 (18 of 2013).

Books 1. A.K MAJUMDAR , DR. G.K KAPOOR, COMPANY LAW AND PRACTICE, Taxmann Publication (16th edition, 2011). 2. DR. ASHOK SHARMA, COMPANY LAW (2010). 3. THE INSTITUTE OF COMPANY SECRETARIES OF INDIA, A COMPARATIVE STUDY OF COMPANIES ACT, 2013 & COMPANIES ACT, 1956, Taxmann Publication (2014). 4. THE INSTITUTE OF COMPANY SECRETARIES OF INDIA, COMPANY LAW (July 2014).

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