Question

Write short answer for the following.
What is company formation? Explain in brief (a) Capital raising stage, (b) Commencement of business stage.

Answer 1

Company formation is the term for the process of incorporation of a business. It is also sometimes referred to as company registration.

A private company or a public company not having share capital can commence business immediately on its incorporation. As such ‘capital subscription stage’ and ‘commencement of business stage’ are relevant only in the case of a public company having a share capital. Such a company has to pass through these additional two stages before it can commence business.

After getting the certificate of incorporation, a private company can start its business. A public company can start its business only after getting a’ certificate of commencement of business’.

As per the Companies Amendment Act, 2015, Certificate of Commencement of Business is no longer required.