2What are the four stages of formation of a company?
There are four stages in the formation of a company:
STAGE I- Promotion of a company
STAGE II- Registration and incorporation of a company
STAGE III- Raising of capital
STAGE IV- Commencement of business
What do you mean by ‘promotion of a company’ and ‘promoter’?
Promotion of a Company:
Promotion is the first stage in the formation of a company. Certain persons who wish to carry on some business come together to form a company.
These persons are known as promoters.
- ‘Promotion’ means the preliminary steps undertaken by the promoters to bring a Company into existence.
It refers to all those steps which are taken from the time of having an idea of starting a company to the time of actual starting of a company.
Meaning Of Promoter:
- Promoter’ means a person who thinks of forming a Company and actually brings it into
- He takes all the effective steps to incorporate
- A person, who was not associated with the initial formation of the Company but subsequently helps in floating its capital, will also be regarded as
- Persons assisting the promoters by acting in a professional capacity are not promoters. However, if he goes further than this, like, introducing his clients to a person who may be interested in purchasing the shares in the proposed Company would be regarded as
- “A person who originates a scheme for the formation of the company, has the Memorandum and Articles prepared, executed and registered, and finds the first Directors, settles the terms of preliminary contracts and prospectus (if any), and makes arrangements for advertising and circulating the prospectus and placing the capital, is a
The relationship between the promoter and the company starts from the day the work of floating the company starts and continues up to the time the Directors take into their hands what remains to be done in the way of forming the company. Thus, the status of a promoter is generally terminated when the BOD has been formed and the Board starts governing the company.
