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FORMATION OF A COMPANY

A company comes into existence when a number of persons come together with a view to exploit some business opportunity.  These persons are called promoters.  The initial step that must be taken by promoters who are desirous of forming a company is the preparation of a document called memorandum of association to which at least seven of them will subscribe their names incase of a public company and two incase of private company, as prescribed by Section 4 of the Act.
The next step is the delivery of the memorandum to the registrar of companies together with the following documents:-

(i)                 Articles of Association:-
This document contains the regulations for management of a company.

(ii)               Consent to act as a director:-
If any person is appointed director of the company by the articles which are to be delivered for registration in lieu of Table A, Form No. 209 must be delivered for registration after being duly completed and signed by him or by his agent authorized to do so.  The form is the statutory signification of the person’s consent to act as a director.

(iii)             List of persons who have consented to be directors. (Form No. 210).

(iv)             Statement of the nominal share capital:-
This statement is delivered for taxation purposes pursuant to Section 39 of the Stamp Duty Act.

(v)               Declaration of compliance. (Form No. 209):-
Form No. 208 when duly completed and signed, constitutes the statutory declaration by an advocate engaged in the formation of the company that all the requirements of the Companies Act in respect of matters precedent to the registration of the company and incidental thereto have been complied with.

If the aforesaid documents are correctly prepared in accordance with the provisions of the companies Act, the registrar grants a certificate of incorporation and the company is formed from the date of incorporation written in the certificate.

Significance of Registration


Section 389 provides that “No company, association or partnership consisting of more than twenty persons shall be formed for the purpose of carrying on any business …unless it is registered under this Act.”  Registration is the condition precedent to the formation of a registered company and failure to register a proposed company will mean that it does not legally exist.

Case Law: Fort Hall Bakery Supply Co. vs. Wangoe
A plaint bearing the name “The Fort-Hall Bakery Supply Co.” filed a case against a defendant for recovery of certain amount of money.  During the hearing it was established that the business called “Fort-Hall Bakery Supply Co.” was being carried on by a group of 45 persons and had not been registered under Companies Act.  The defendant submitted that the action was not properly before the court since the business was illegal under Section 338.

It was held that the plaintiff could not be recognized as having any legal existence and were incapable of maintaining the action.  The court terminated the proceedings without making any order as to costs because a non-existent plaintiff can neither pay nor receive costs.

Effect of Registration

(a)    The date mentioned in the certificate of incorporation is the date from which the company’s legal existence commences.  Consequently, if an incorrect date is written in the certificate, that date would be regarded as the actual date on which the company was registered.
(b)   The company’s registration constitutes it “a body corporate”. It becomes a legal person or “corpora corporata” whose name is that appearing in the memorandum of association.  The certificate of incorporation is regarded as the company’s birth certificate and the date written on it is the company’s birthday.
(c)    Once the company is registered it must be treated like any other independent person with rights and liabilities appropriate to itself.

 
 
 

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