Incorporation and Formation of a Company

Written by : Sally Ncube, B.A.LL.B , Lovely Professional University

Corporate Law

1. Introduction

Incorporation transforms a business idea into a separate legal entity capable of owning property, entering into contracts, and being sued or suing in its own name.

2. Meaning of Incorporation

Incorporation refers to the legal process by which a company gains separate legal personality, providing benefits such as limited liability and perpetual succession.

3. Process of Incorporation and Registration

Preliminary Steps:

- Name Reservation: Choosing a unique name as per law.

- Drafting of MoA and AoA: Fundamental documents for registration.

Filing Documents with Registrar of Companies (ROC):

- Submitting MoA, AoA, Director details, Office address, and Declarations.

Certificate of Incorporation:

- Legal recognition given through the Certificate by ROC.

Commencement of Business:

- Public companies must file a declaration before starting operations.

4. Key Doctrines Relevant to Incorporation

Doctrine of Constructive Notice:

- Parties dealing with a company are presumed to know its public documents.

Doctrine of Indoor Management:

- Outsiders are protected when assuming internal procedures are properly carried out.

Doctrine of Ultra Vires:

- Acts beyond the company's MoA are void and cannot be ratified.

5. Memorandum of Association (MoA)

The MoA defines the company's constitution and scope, containing clauses on Name, Registered Office, Objects, Liability, Capital, and Subscription.

6. Articles of Association (AoA)

The AoA regulates the company's internal management, dealing with rights of members, directors' powers, meeting procedures, and dividend policies.

7. Legal Effects of Incorporation

- Company becomes a separate legal entity.

- Members enjoy limited liability.

- Company enjoys perpetual succession.

- Right to own property in its own name.

- Ability to sue and be sued.

8. Conclusion

Incorporation legally creates a new entity separate from its promoters. It provides protection, operational flexibility, and legal recognition crucial for conducting business efficiently.

Key Terms

- Incorporation: Formation of a company as a separate entity.

- Memorandum of Association (MoA): Fundamental charter.

- Articles of Association (AoA): Internal governance rules.

- Doctrine of Constructive Notice: Presumption of knowledge of public documents.

- Doctrine of Indoor Management: Protection of outsiders in company dealings.

- Doctrine of Ultra Vires: Limits actions beyond corporate powers.

Summary

The chapter covered the incorporation process, essential documents like MoA and AoA, key legal doctrines, and the effects of creating a separate corporate personality. Understanding these concepts is crucial for any stakeholder interacting with corporate entities.