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Unit 8: Formation of Company

Certificate of Incorporation/Consequences of Incorporation Notes

When the aforesaid documents have been filed with the Registrar and the necessary fees paid,
the Registrar will, if he is satisfied, enter the name of the company on the Register of Companies

maintained by him (s.33) and then will issue a Certificate of Incorporation under his signature in
token of registration of the company on the date noted on it (s.34). This certificate serves the same

purpose in the case of a company which a birth certificate does in the case of a natural person.
On registration, the company comes into existence as a legal person distinct from its members
who constitute it from the earliest moment of the day of incorporation stated in the certifi cate
of incorporation, with rights and liabilities similar to a natural person, competent to enter into
contracts (s.34).
The certificate of incorporation is conclusive evidence that all the requirements of the Companies

Act in respect of registration and of matters precedent and incidental thereto have been complied
with. Accordingly, if memorandum is found to be materially altered after signature but before
registration (Peel’s case), or is signed by only one person for all the seven subscribers or the
signatories be all infants (Moosa Goolam Ariff v. Ebrahim Gulam Ariff), the certificate would be

nevertheless conclusive and would not affect the status and existence of the company as a legal
person although such irregularities might give rise to claim between the subscribers.
This provision prevents the reopening of matters prior and contemporaneous to the registration
and essential to it and it places the existence of the company as a legal person beyond doubt.
In the case of Moosa v. Ebrahim, the memorandum was signed by two adult persons and by a

guardian of the other five members, who were minors. The Registrar, however, registered the

company and issued a certificate of incorporation. The court held the certificate to be conclusive
for all purposes.
In another case of Jubilee Cotton Mills Ltd. v. Lewis, the Registrar issued a certificate of incorporation

on January 8th, but dated it January 6th, which was the date he received the documents. On
January 6th, the company made an allotment of share to Lewis. Held, that the certifi cate was
conclusive evidence of incorporation on January 6th and that the allotment was not void on the
ground that it was made before the company was incorporated.
However, if a company has been incorporated with illegal objects, the illegal objects would not
become legal by the issue of the certifi cate.
Section 36 states that, on registration, memorandum and articles of the company bind the
company and its members to the same extent as if they respectively had been signed by the
company and by the members and contained covenants on its and their part to observe all the
provisions contained in the Memorandum and Articles.

8.1.3 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

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