Usually some of the following important regulations form a part of the Articles of Association.
1. The amount of capital issued, giving the details of types of shares, rights of each class of shareholder, lien, and calls on shares, forfeiture, reissue, transfer and transmission of shares.
2. Adoption of preliminary contracts.
3. Powers to alter share capital.
4. Procedure and conduct of Meetings, Notices, Proxies, Polls, Voting procedure etc.
5. Matters relating to Directors, their remuneration, appointment, qualification and disqualification, rights, duties and liabilities of Directors.
6. Matters regarding accounts, audit etc.
7. Matters relating to dividends, reserves, capitalisation of profits etc.
8. Matters relating to appointment, remuneration, rights and duties of secretaries, manager, if any.
9. Procedure relating to use and custody of the Company Corporate Seal.
10. Procedure relating to the winding up of the company. Prospectus
A Public Company has to generate its capital from the public. For this purpose it is required to draft a statement known as ‘Prospectus’.
This statement is an invitation to the investing public to subscribe towards its share capital and debentures, a copy of which signed by all Directors must be delivered to the Registrar before it is issued to the public.
The prospectus should contain all the material facts about the company like its promoters, its agreements, its future prospects, objects etc in brief. But it should not contain any mis-statement that may mislead the public, for which the Directors and other officers will be held responsible and heavy penalties imposed.
Statement in lieu of prospectus
In case companies can raise the entire capital through their acquaintances, they need not prepare a prospectus and issue to public the same. However, they must file with the Registrar a statement in lieu of prospectus at least 3 days before allotting shares to the members. This statement should also contain all the information as would be given in a prospectus.
Contents of prospectus
A prospectus must contain the following information as specified in schedule II of the Indian Companies Act. 1956.
1. Name and address of the company.
2. Main objects of the company.
3. Details of shares
4. Details regarding listing of shares at the stock exchange.
5. Details regarding Debentures and redeemable preference shares if any.
6. Rights of shareholders and dividend structure.
7. Details of share qualification of Directors.
8. Names and addresses of Directors, Secretaries, Promoters, Bankers, Managing Agents etc.
9. The minimum subscription details.
10. Details of subscription list.
11. Details of calls on shares.
12. Details about Underwriters.
13. Details of estimated preliminary expenses.
14. Details regarding reserves and surpluses likely to be maintained etc.
15. Details regarding voting rights, meetings of shareholders, Directors etc.
Certificate of Incorporation
After examining the documents to be submitted, the Registrar of Companies, if satisfied that all the statutory requirements have been met, will issue a certificate known as Certificate of Incorporation. The issue of this certificate marks the beginning of the existence of a Joint Stock Company. It is a birth certificate issued to a Company.
A Private Company can commence its business activities as soon as obtaining the Certificate of Incorporation, while a public company has to get a certificate of Commencement of Business after following a few additional formalities, in order to commence business activities.
However, the public company can enter into initial contracts and start making arrangements for commencing the business.