Consequences of Incorporation of a company

A company being an imitative person can get only through its consultants. A policy will be binding on a company only. It is obtain only by any person performing under its approval, indicated or suggestion. When the company is being registered, the promoters claiming to make on lieu of the company and their consequences, enter into contracts for the purchase of property or for securing the services of managers or other experts. Such contracts are naturally made before the commencement of company registration.

Consequences of company incorporation

The three major conditions are described below for public limited company in which arrangements are made:

• Agreements are made on place of the company before its registration- initial or pre-registration agreements.
• Agreements made after registration but before getting the certificate to start business- provisional agreements.
• Agreements made after getting the certificate to start business.

So, in the case of private limited company, there are only two-conditions in which agreements are made, i.e. contracts made on lieu of companies before registration and agreements made after registration. A private limited company can start its business quickly after getting a certificate of registration. Hence there is no need for provisional agreements in the case of a private limited company.

Pre-incorporation contracts

In Pennington’s Company Law, the position is described below:

So, a contract made before the company registration cannot join the company. It is not entirely declined of legal effect. Initial contracts are planned to be made on company before its registration commence. Hence, nobody can agreement as consultant on its position because an act is not doing primary himself, rather he may contact through a company registration consultant. If the company takes some advantages from an agreement which is made before its registration.

So, if the company takes some advantages from agreements claimed to have been made before its registration. The promoters alone, thus remain personally liable for any contract they claimed to form on lieu of the company. Unless the company registers into the agreement in terms of such agreement after registration. A company cannot validate a pre-incorporation agreement, but it is open to it to enter into a new agreement after its registration to provide effect to an agreement made before its registration.

A company cannot obtain shares prior to its registration. Where a company was named as the transferee in the share transfer forms prior to its registration. It was held that such transfers could not be registered.

Any pre-incorporation agreement to subscribe shares of a company to be formed, cannot be enforced and is normally revocable unless accepted by the company after its registration.

Provisional Contracts

In case of a private limited company the question of provisional agreements does not arise as it can start business quickly on its registration.

For public limited company, agreements made after registration but before the permit of certificate of commencement of business are provisional and are not attached on the company. Until the company is allowed to start business on the grant of the certificate. If, so a public limited company is wound up before it is qualified to start business.

Agreements made after issue of certificate of opening of business in the case of public limited company and after registration in the case of private limited company.

A company can perform all acts by its Memorandum, it is impliedly or expressly managed to perform any claimed act which is not allowed. The company cannot enforce it, nor can other party enforce it against the company. Such agreement cannot be sanctioned even if all company members accepts it. The company members are obtained from its MOA and the rule creating it consequences.

Common Seal

Since a body corporate is not a living person who can sign, so every company should need have an instrument called as common seal that is used for creating a physical opinion to make as its signature on few vital documents.

Common Seal and contracting under common seal:

The following contracts and deeds are not valid unless build under the company seal:

• Share certificates and warrants
• Power of attorney which would be need to create in favour of person to do the deeds on place of the company.
• Any deed as need by the articles

Conversion of private limited company into a public company

These conversion of companies can be combined under the following heads:

• By operation of law
• By default and
• By choice or violation

Conversion by choice or volition

Under the section 44 of the act 1956, the conversion of a private limited company into public company by choice will need the following:

• Changes of its AoA by particular statement in such a way that they no longer contain the constructive conditions of section 3(1).
• Changes of company name by particular statement by deleting the word “Private”.
• Registering of copy of particular statement with explanatory resolution in Form No.23.
• Filing of statement or prospectus in part of lists with the registrar.
• Improve in the number of members minimum seven and the three directors.
• Increase paid-up capital of Rs.5 lakhs.

Conversion by default

If a private limited company fails, under section 43 of the companies act 1956, to obey with any of the four constrictive conditions need by section 3(1). It is to be registered in its articles, the company quit to be a private limited company. Terminates to have the exemptions and privileges consulted by the act as a private limited company. If it becomes public limited company and all the conditions of the act applicable to such companies.

Conversion by operation of law

The conditions of section 43A of the company’s act 1956 have been made inoperative by the amendment act 2000. This act gives a deemed public company which needs to become a private limited company on or after the start of the companies amendment act 2000. It shall told the registrar about its status of private limited company. The registrar shall include the word private limited company. But a deemed public company makes to become a public company then such deemed public company shall have to improve its members minimum seven and directors at minimum three.

Conversion of a private limited company (which is a subsidiary of public company) into a public company

A private limited company which is a subsidiary of a public company and it is mentioned as a public company by benefit of change in the explanation of the public company under section 3. These kind of private company will have to take the below actions for its conversion into a public company such as:

• Improve the number of members as seven and director as three
• Change its AoA and it’s for public company.
• Register for changing its name for deletion of the word “Private”
• Register for amendment to its certificate of registration.
• Increase its paid-up capital to Rs.5, 00,000.

Conversion of a public company into a private limited company

After getting the approval of government makes only for converting public company into a private limited company or it is not a private limited company till the confirmation of the government.

The company name changes may by certain statement as need under section 21.

Getting the confirmation of the government as need by section 31.

Commencement of business

If there is no share capital for a company or a private limited company having, they may not start their business and use its different powers quickly after registration. Once it has received its registration certificate, nothing is needed for further registration process.

A public limited company may also get a certificate to commence their business from the registrar before it can start business or exercise its borrowing powers.

A public limited company owning its share capital, must get certificate to start business from the ROC. To get this company registration certificate, the company must follow with the conditions of section 149 of the companies act 1956.

“Commence any business” does not mean only the business for which the company was commenced. It also contains the power to borrow and any transaction like purchase of property, sale, etc.

The certificate is certain evidence which a company is qualified to start a business.

Once a certificate is issuing to the company to start a business, a warrant may not cancel the company. For private limited company registration, there is no need to get a certificate to start a business. It can start their business quickly on its registration.

A contract made before registration of a company will not include the company, unless a new contract incorporating the terms of the old one or accepting the old one is made fresh.

In case of public limited company, contracts made by the company itself after registration will become attaching on the company only on its becoming allowed to start business. The statement “provisional” means that the contract will not be attaching to the company until the certificate of start of business is permitted by the registrar.

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