Formation of Company by Samidha Hegde@Lexcliq


A company comes into existence after the incorporation of the Company after the incorporation the Company gets recognized as an artificial person meaning that the company has a separate legal existence then that of its members, this is similar to the birth of the Company and incorporation is a legal process governed by The Companies Act,2013. For formation of Company capital contribution is required and this process of procuring capital is called promotion and the person obtaining capital for the Company is called the Promoter of the Company.

  1. Role of Promoter

A promoter is like the starter or parent of the company. It is defined in section 2(69)

“Promoter” means a person-

(a) someone whose name is in the AR of the company or in the prospectus referred to in Sec 92; or

(b) Someone who has influence over the BoD as a shareholder or a director and is able to control the affairs; or

(c) As per the accordance to his guidance, advice and instructions, the BoD are supposed to act: Provided that nothing in sub-clause (c) shall apply to a person who is acting merely in a professional capacity


  1. Pre-Incorporation Contracts

A company has no contractual capacity prior to incorporation – so contracts cannot be made on its behalf.

  • Effect of Pre-Incorporation Contract on the Company

Company cannot be bound to the contract because it had no contractual capacity Company cannot ratify the contract because it was not in existence at the time the contract was made. Company cannot sue or be sued on the contract.

  • Effect of Pre-Incorporation Contract on Person Purporting to Contract on Behalf of the Company

At Common Law: – if third party knew company was not yet in existence, he could make the purported agent liable on the contract. (Kelner v Baxter). – if it appeared that the contract was with a company already in existence, the court might hold there was no contract at all, and neither the company nor the purported agent could enforce it.


  • Companies Bought “Off the Shelf”- s.36C does not apply where promoter makes contract on behalf of existing company he later buys. The company can then ratify the contract.
  • Companies Struck Off the Register- 36C does not apply where a company has been in existence but has been struck off the register. The section only applies where the company has never been in existence.
  • Avoiding Personal Liability
  • 36C does not apply if the parties have agreed that the promoter will not be personally liable. This requires express agreement – courts will not infer it.
  • Promoter and third party could make an agreement for novation. (novation = substitution of a new obligation for an old one)

Promoter could agree with third party that promoter’s liability will end when the company, once formed, enters new contract on same terms.


  1. Preparation of documents:  INC-9, DIR-2-, NOC from the owner of the property, Proof of Office address (Conveyance/ Lease deed/ Rent Agreement etc. along with rent receipts); Copy of the utility bills which should not be older than two months. In case of subscribers/ Director does not have a DIN, it is mandatory to attach: Proof of identity and residential address of the subscribers. Moreover, all the Subscribers should have Digital Signature.
  2. Filling of the f SPICe+ (Inc-32) form
  3. Preparation of Memorandum and Article of Association ( MoA and AoA)
  4. Filling of e-Form No.32 – Consent of directors, e-Form No.18 – Notice of Registered Address, e-Form No.32. – Particulars of Directors and Statutory Declaration in e-Form No.1.
  5. Payment of Registration Fees
  6. Certificate of Incorporation from RoC



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