Financial Accounting

Legal requirement for formation & operation of company

Company

According to James Stephen; A company is an association of many persons who contribute money or moneys worth to a common stock and employees it in some trade or business and who share a profit and loss arising there from

Types of companies
There are two major types of company that are; o Public limited company o Private limited company

Formation of public limited company

Promoters are the persons who build up a company. The promoters prepare certain documents and comply with the rules stated in the company ordinance 1984.The document are filed with the provinces registrar. The formation of company is possible under four stages;

A public company needs two certificates from the registrar. The registration certificate and trading can be collected at incorporation and commencement of business stage respectfully bat a private company can start working after receiving incorporation certificate.

Promotion Incorporation Raising Capital Commencement of business

Legal document of a company

There are three necessary legal documents must be required for a company that are under as;

Memorandum of Association(MOA) Article of Association(AOA) Prospectus

Memorandum of Association

Definition

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Financial Accounting Memorandum of association is an official documents setting out the detail of a companys existence
Memorandum of association is the charter of the company. It states the relationship between the company and general public. The shareholders and creditors can know the business activities of the company. The memorandum of association may have 6 clauses;

Clauses of Memorandum of Association (MOA):

Name

As a legal person the company must have the name. The name of the company should be different from the name of existing companies. The name should not suggest link with federal, and the provincial government or department of such government. Situation Every company has a register office. The company must show the name of the province in which the registered office of the Company is situated. The registered office address can be provided to the registrar within 28 days after registration. Objects The objects of the company may be expressed in detail and clear manner. The rights and power of the company are stated in it. The nature and types of the company activities must be known to shareholder and general public.

Liability

The liability of members is limited to the value of share purchased. The liability of member may be limited by guarantee. The shareholder is bound to pay the amount of guarantee. Capital The memorandum of a limited company with share capital states the amount of capital. The total capital is divided into number of shares. For example the share capital is Rs.500000 divided into 50000 shares of Rs 10 each. Association The subscribers to the memorandum express their consult in writing to form an association for any lawful purpose. In case of pubic company any three or more persons can sing the memorandum of association for registration of company, on the other hand one or more persons for signing the memorandum of association of a private company. Each members signs memorandum in the presence of one witness.

Article of Association

Definition

Article of association a document that govern the running a company. Its set out a voting rights meeting, power of a management to the article of association are the bye-laws of a company University of Management And Technology

Financial Accounting
These are the rules to manage the internal affairs of company and to achieve objects stated in a memorandum the article are subordinate to the memorandum of a association and can not beyond the scope of the companies ordinance the article of association regulate the rights of share holder of company every company is allowed to manage its own articles under which the company runs over business.

Contents of Article of Association (AOA);

Rights of various classes of share holder. Alteration of share capital. General meeting of a company. Share capital in its division into different classes. Transfer of share from seller to buyer. Transmission of share to legal heirs. Voting power of members. Appointment of directors. Power and duties of director. Disqualification of a director. Proceeding of the directors meeting. Filling of vacancies. Dividend and reserve. Account and there audit. Winding up a company. Notice to be issued by a company. Indemnity to be paid to company officer or agent.

Prospectus

Definition

Prospectus is a document in visiting the public to buy a new share, stock or debenture in a public company stating the terms and giving certain information by law
A prospectus is a notice to a general public about the information to a new company. A company tries to attract the people that there is a best opportunity for investments in the share and debenture. The prospectus includes terms and conditions about the purchase of share and debenture. There is an application form at the end of the prospectus that is every copy of prospectus. A prospectus can be issued if it is registered with thee registrar of companies. The registrar has the power to register it if the consent, report, consent, and signature are has per law.

Contents of Prospectus;
There are many contents in prospectus some are discussed as under;

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Financial Accounting

Directors remuneration

The rule about the remuneration of the director for their services to the companies as director, chief executive or otherwise. Name of management The name, addresses and occupation of present or proposed Directors, Chief Executive and Secretary should be written in prospectus.

Application money

The application money payable on each share should be stated in it. The value of each share is payable in full at the tie of application received. Underwriters Where any issue of shares or debentures is undertaken the name of the underwriter, and the opinion of the directors that the resources of the underwriters are sufficient to discharge their obligation. Preliminary expenses The amount of estimated amount of preliminary expanse and the person by whom any of the expenses have been paid or are payable. Payment to promoters The amount of benefit paid or given which in the two proceeding years or given to any promoter and the consideration for payment. Voting rights The right of voting at meeting of the company conferred by, and the rights in respect of capitals and dividend to shares Management powers The nature and extent of restrictions imposed by the articles upon members of company in respect of right to attend, speck or vote or upon the directors in respect of their power and management. Business In case of company which has been carrying on business, the length of time during which the business of the company has been carried out Court cases The pending legal preceding which the company or any of its subsidiary of a party this court cases are other than ordinary retain litigation incidental to the business. Auditor report A report by the auditor of a company with respect to profit and loss and assets and liabilities of the company included in prospectus.

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Financial Accounting

Statement in lieu of prospectus:

A company having a share capital which did not issued a prospectus on or with reference to its formation or which has issued a prospectus that has not proceeding a lot any of share offered to any public for subscription shall not a lot any of its share or debenture unless at least three days before the first allotment of their shares or debentures. A statement in lieu of prospectus signed by every person who is named there in as a director of the company.

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