Explain the steps taken by promoters in the promotion of a company.

Q.2:- Explain the steps taken by promoters in the promotion of a company.



The important steps taken by promoters in the promotion of a company are as follows

(i) Identification of Business Opportunity The first step to be taken by a promoter is to identify a business opportunity. The opportunity may be in respect of producing a new product or service or making some product using a different process or any other opportunity having an investment potential.

(ii) Feasibility Studies All the identified business opportunities may not be feasible or profitable as real projects. The promoters, therefore, undertake detailed feasibility studies to investigate all aspects of the business they intend to start. Various types of feasibility have to be assessed which include

(a) Technical Feasibility
(b) Financial Feasibility
(c) Economic Feasibility

These feasibility studies are undertaken with the help of the specialists like engineers, chartered accountants etc and only when these investigations throw up positive results, the promoters may decide to actually launch a company.

(iii) Name Approval The promoters have to select a name for the company and submit an application to the registrar of companies of the state in which the registered office of the company is to be situated, for its approval. The proposed name may be approved if it is not considered undesirable. According to the name clause the name of a company should not be identical or resembling the name of an existing company and should not violate the provisions of The Emblem and Names (Prevention of Improper Use) Act, 1950. Three names, in order of their priority are given in the application to the Registrar of Companies so that alternative; name may be allotted in case the first preference does not fulfill the name clause.

(iv) Fixing up Signatories to the Memorandum of Association Promoters have to decide about the members who will be signing the Memorandum of Association of the proposed company. Usually the people signing memorandum are also the first Directors of the Company. Their written consent to act as Directors and to take up the qualification shares in the company is necessary.

(v) Appointment of Professionals Certain professionals such as mercantile bankers, auditors etc, are appointed by the promoters to assist them in the preparation of necessary documents which are required to be submitted with the Registrar of Companies. The names and addresses of shareholders and the number of shares allotted to each is submitted in a statement called return of allotment to the Registrar with the help of these professionals.

(vi) Preparation of Necessary Documents The promoter takes up steps to prepare certain legal documents which include Memorandum of Association, Articles of Association and Consent of Directors These documents have to be submitted under the law, to the Registrar of the Companies for getting the company registered.