Formation of a Company

The whole process of company formation may be divided into three distinct stages, namely-

1.      Promotion 2. Incorporation 3. Floatation 
            
      Promotion 
     The process of conceiving an idea and developing it into a concrete promotion or project to be accomplished by the incorporation and floatation of a company is called promotion. The person or persons who take the necessary steps to accomplish this objective is known as a promoter. 

    The promoter discovers the opportunities to make money, investigates, such proposition, assembles and finance them and thereby produces a going concern. A promoter may be an individual, firm, syndicate, association or even a company, as long as it takes all the necessary steps to create, and set it going. Thus, the promoter has in their hands the power of defining how, and when, and in what manner and under what supervision, it shall come into existence and begin to act as a trading company. This being the case they stand in s fiduciary position to the company. As a result, the promoters are accountable to the company just like agents or trustees. They must not make secret profits and must disclose all receipt from the company in whatever form. The company, until in the hands of its own consider its own interest or act on its own behalf, the promoters must, therefore, be extra –cautious and always act honesty and in good faith.