Page 51 - DCOM106_COMPANY_LAW

Company Law

Notes

Task Shyam forges all the seven signatures on a memorandum of association, and he
obtains a certificate of incorporation. After some time, the registrar comes to know and
wants to revoke the certificate. Can he do so?
Section 33 also requires a declaration to be filed with the Registrar along with the Memorandum
and the Articles. This is known as “Statutory Declaration of Compliance.” It can be made by an
advocate of Supreme Court or of a High Court, an attorney or pleader entitled to appear before
a High Court, or a Company Secretary or a Chartered Accountant in wholetime practice in
India, who is engaged in the formation of the company, or by a person named in the articles as
a director, manager or secretary of the company. The declaration must certify that all requirements
of the Act and Rules made there under in respect of registration have been complied with.
Section 266 requires that if the first directors are appointed by the articles then the following
must be complied with before the registration of articles with the Registrar:

Written consent of those directors to act, signed by themselves, or by an agent duly
authorised in writing; and
An undertaking in writing signed by each such director to take from the company and pay
for his qualification shares (if any), unless he has taken his qualification shares and paid or
agreed to pay for them, or signed the Memorandum for a number of shares not less than
the qualification shares.
Section 266 is applicable only to a public company having a share capital.

4.1.3 Floatation

When a company has been registered and has received its certificate of incorporation, it is ready
for ‘floatation’; that is to say, it can go ahead with raising capital sufficient to commence business
and to carry it on satisfactorily.
We have seen earlier under ‘classification of companies’ that a private company is prohibited
from inviting public to subscribe to its share capital. Therefore, when a private company is
formed, the necessary capital is obtained from friends and relatives by private arrangement.

In the case of a public company also, the promoters may not invite public to subscribe to its
share capital and may arrange the capital privately as in the case of a private company. In such
a case, the intention of the promoters is to take advantages of incorporation not available to a
private company, e.g., to have unlimited number of members, to confer unrestricted right to
transfer shares on the members, etc. However, by far, large numbers of public companies raise
their capital in the very first instance by inviting public to subscribe to its share capital.
Section 70 makes it obligatory for every public company to take either of the following two
steps: (i) Issue a prospectus in case public is to be invited to subscribe to its capital, or (ii) Submit
a ‘statement in lieu of prospectus’ in case capital has been arranged privately. It must be done at
least 3 days before allotment.

Self Assessment

Fill in the blanks:
1. ................................. is a term of wide import denoting the preliminary steps taken for the
purpose of registration and floatation of the company.

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