This article is written by S. Aditya, and further updated by Gautam Badlani. It explains the concept of the formation and incorporation of a company. The article explains the four stages involved in the incorporation of a company. It also sheds light on the various documents that are required to be prepared in the process of registering a company. 

Introduction 

The formation and incorporation of a company are very similar to the birth of a human, as it also goes through various stages of the formation of its body parts during the womb stage. Various groundwork is carried out to bring a company into existence. The process of an idea converting into a company includes various stages; these crucial stages of the pre-incorporation and formation stages are discussed in detail below. 

This article explains the functions, duties, and liabilities of a promoter, along with providing insights into cases regarding pre-incorporation contracts. This article delves into the integrated process of company registration.

Stages of formation of a company

The entire process of the formation of a company can be largely classified into four stages: 

• Promotion,
• Registration,
• Flotation, and
• Commencement of business.

Promotion for formation of a company

The expression ‘promotion’ is a very wide term that includes all the preliminary steps that are taken for the purpose of the formation of a company. All the steps of formation of the company have been explained in detail. 

As the name suggests, this stage of incorporation deals with the promotion of the yet to be incorporated company. It is the stage where the promoter walks into the market of potential investors to collect their investment in an idea, which might be his own brainchild or that of someone else.

A promoter is to a company, as parents are to a child. The promoter, along with convincing investors towards the idea of the company, also brings together the physical capital of the labour, raw materials, managerial ability, machinery, etc. The promoter is passionate about the company’s ideas, but has to SWOT (Strength, Weakness, Opportunity, and Threat) analyse the idea with respect to future prospects and feasibility with respect to societal dynamics. 

The promoter instils confidence in the idea among the investors and tries to build upon the investment so as to be able to incorporate the company. Promoter has been defined under Section 2(69) of the Companies Act, 2013. However, there are certain inherent difficulties in laying down a precise legal definition of a promoter. This expression is a business term and not a legal one. Section 2(69) states that promoter is a person who has been named as promoter in the prospectus issued by the company or who has direct or indirect control over the company’s affairs or on whose advice and directions, the Board of Directors of the company exercise their decision-making power. 

Technically, a promoter is a person so named in the prospectus of the company. The company shall also name their promoter in the annual return made under Section 92 of the Companies Act, 2013.

The idea of a promoter can be seen from three different perspectives: 

• promoter is someone who is identified in the prospectus of the company or is mentioned as a promoter in the annual returns of the company, and/or 
• promoter is a person who has the power to appoint the majority of members of the board of directors or the person who has authority over making policies or decisions for the company, and/or 
• promoter is a person on whose advice the board of directors is accustomed to acting.

Legal status of a promoter 

The promoter has a fiduciary relationship with the company. He is the one who conceives the idea of the formation of the company, ensures that the Memorandum of Association (MOA) and Article of Association (AOA) are prepared and registered, finds the first directors of the company and arranges initial capital for the company. It can thus be said that the promoters are the persons who control the affairs of the company until the formation of the first Board of Directors. 

The promoter is neither a trustee nor an agent of the company. He is not an agent, since the promoter’s role began before the formation of the company. Similarly, he is not a trustee, since no trust is in existence when the promotion begins. 

Functions of a promoter

Spotting a business demand in the market 

The promoter, before promoting a company idea, first identifies a potential business opportunity. The potential opportunity may be any new product or a new service, or it may even be the production or manufacture of an already established product by new means.

The promoter has to evaluate the idea of the new potential company under the magnifying glass of technical and financial feasibility. Therefore, it is important that the promoters undertake detailed studies regarding all aspects of the business idea by using various tools, such as the economic studies of the market, the opinions of the technical experts of such products, opinions of chartered accountants, economists, etc. The idea that the promoter intends to use for perpetrating the market The feasibility of the idea can be evaluated using the below-mentioned three tests.

• Technical conceivability: the ideas of the business may be good, but sometimes they may be technically difficult to conceive into reality given such hurdles regarding the raw material acquisition, the difficulty of making a product with limited funds, etc.
• Budgetary feasibility: Sometimes it may not be possible to gather the large funds required for the business due to limited means and sometimes stipulated time. Also, financial institutions may be hesitant to give huge loans to new ventures.
• Monetary feasibility: A business idea may be technically and financially feasible, but not monetarily appreciable. It may not be profitable or may not return enough profits. In such a case, the promoters refrain from promoting the idea of business.

Name of the company

The promoter, after fixing the launch of the idea, intends to give a name to the company. The promoter applies to the registrar of companies of that jurisdiction, wherever the promoter intends to make the registered head office of the company. The application to the registrar contains three names, “X or Y or Z,” in order of priority, and the promoter adheres to Rule 8 of the Companies (Incorporation) Rules, 2014.

Preparation of necessary documents

The promoters are the ones who are responsible for collecting documents that are submitted to the Registrar of Companies to get the company registered. These documents are a return of allotment, a MOA and AOA, the consent of directors, and a statutory declaration.

Further, the promoters decide who will be the members signing the Memorandum of Association of the Company, which is to be formed. Generally, the signatories of the MOA are the first directors of the company. The written consent of the signatories to the memorandum is essential to becoming directors of the company.

Hiring professionals

Promoters are required to appoint certain professionals, such as mercantile bankers, auditors, lawyers, etc. These professionals aid the promoter in the preparation of the necessary documents that are to be filed with the Registrar of Companies (ROC) during the registration of the company.

Duties of a promoter 

The relationship of the promoter with the company cannot be described as a principal-agent relationship, as during the pre-incorporation stage, the company has not even come into existence. Various judicial interpretations towards understanding the nature of the relationship between the promoter and the company have taken place in the common law courts as well as the Indian courts, and it has been decided that the relationship between the promoter and the company is fiduciary in nature. 

In the landmark case of Erlanger v. New Sombero Phosphate (1878), it was held that the promoter stands in a fiduciary capacity with the company. He cannot be considered as an agent of the company because there is no principal. Similarly, a promoter is not an agent, as there is no beneficiary in the relationship. The persons who are responsible for the incorporation of the company are known as promoters in the common parlance, and they have a quasi-trusteeship relationship with the company. 

The duties of the promoter shall be discussed herewith: 

Duty to disclose secret profit

As mentioned earlier, the promoters have a fiduciary relationship with the company that will be incorporated. The duty of a promoter is to disclose the secret profit made by him, if any, to the company. The promoter has a right to claim expenses, if any, made during the incorporation stage from the company.

The disclosure has to be made to an independent board of directors. The requirement of disclosure would not be fulfilled if it were made to the mere nominees of the promoter himself.

However, it is not always possible for a promoter to constitute an independent board of directors for the company. For example, private companies are usually floated by the promoters with the object of retaining control over the company. If the company does not have an independent board of directors, then the disclosure should be made to the shareholders of the company. This duty of disclosure continues until the profits are adequately accounted for. 

Duty to keep the company informed about the transactions

A promoter may intend to sell, lease or rent any property of the company. But if such a transaction is made without informing the company, the company may repudiate such a contract of sale, lease, or rent, and the company may even claim the profit made by the promoter from the transaction by allowing such a contract.

Fiduciary duty towards the future shareholders

The promoter is bound by a fiduciary relationship with the company, signatories to the Memorandum of Association and also shows the future allottees of shares in the company. The relationship of trust between the promoter and future shareholders goes to show that the promoter will uphold all the values expected of him by the company.

The promoter stands in a fiduciary relationship with the company. 

Duty to disclose profits gained during promotion

The promoter, during the promotion of the company, may at certain times be subjected to certain private arrangements leading to his personal profit. Given that the promoter stands in a fiduciary relationship with the company, he must disclose the profits gained during the promotion as explained to the company.

Liabilities of a promoter

A promoter is subject to liabilities under the various provisions of the Companies Act, 2013. The liabilities of the promoter are:

Liability to justify the transactions to the company

The promoter stands in a fiduciary relationship with the company; therefore, the company has all rights to inquire into the transactions made by the promoter without the consent of the company. The company, while dealing with such a transaction, may either repudiate such an agreement made by the promoter with the third party or may even sue the promoter to recover the money along with profits so made by him behind the back of the company.

Liability against the misstatement made in the prospectus

Section 26 of the Companies Act, 2013 lists the matters that are to be stated in the prospectus. The promoter may be held liable for not having complied with the provision. 

Section 447 of the Companies Act provides the punishment for fraud, and this provision can be invoked for determining the liability for false statements in the prospectus. The promoters would be liable to be punished with up to 5 years of imprisonment or 50 lakh rupees fine, if the fraud does not involve public interest. The promoters would be liable to be punished with up to 10 years of imprisonment or a fine of up to 3 times of the fraud, if the fraud involves public interest. 

Section 34 stipulates criminal liability for false and misleading statements contained in the prospectus. It provides that the persons who authorize the issue of such misleading prospectus would be punishable under Section 447 of the Act. 

Similarly, Section 35 entails civil liability for the persons who authorize the issue of a misleading prospectus. Such persons would be liable to pay compensation to the persons adversely affected by the misleading statements

Personal liability towards the contracts

In all the contracts entered into by the promoter during the pre-incorporation stage of the company, the promoter may be held personally liable for the aforementioned contracts until they’re discharged according to contract terms or when the company takes up the liability from the promoter after it is incorporated.

Status of contract in pre-incorporation and the principle of promoter’s liability in pre-incorporation of a company

The pre-incorporation contracts are the contracts entered into by the promoter before the company is incorporated, and these are essential for the successful running of the company in the future. The nature of these pre-incorporation contracts is, however, different from that of an ordinary contract. These contracts are bipartite, and their effects are tripartite. The promoter enters into a contract with the service providers or interested persons and the consequential effect of these contracts helps the prospective company, which is still lingering in its non-incorporated stage. The instruments of contract are essentially used for quid-pro-quo transactions between two parties, but here they are remarkably used for the benefit of the non-party to the contract, as legally, the company is non-existent. 

The company is essentially the beneficiary of the pre-incorporation contracts, as inferred from the above paragraph. Now, it might stir up doubt as to why a company is not liable for the pre-incorporation contracts. The answer to the question, to be simply put, is that one cannot make someone liable if they are non-existent and hence not a party to the aforesaid pre-incorporation contract. 

When a company is liable for pre-incorporation contract

The non-liability of the company with respect to the pre-incorporation contracts was the same as the common law court in India until the passing of the Specific Relief Act, 1963. The Specific Relief Act, 1963, essentially under Section 15(h) and Section 19(e), makes the pre-incorporation contracts and agreements valid, deviating from the trajectory followed under the common law.

Section 15 (h) provides details as to who may obtain specific performance of the contract from the company. Clause (h) provides that when a promoter gets into a contract before incorporation on behalf of the company and the company warrants such contract, such company must have sent a communication of acceptance to the other party of the contract.

According to Section 19(e), a party may seek specific performance relief from the company if the company’s promoter entered into a contract before incorporation and the contract was justified at that time. The company must have accepted the contract and communicated such acceptance to the other party.

The aforementioned provisions of the Specific Relief Act, 1963, change the course of action in a case between parties where a contract was made before incorporation; unlike the regular course of action against the promoter, here the company can be made liable if it has accepted the contract and has communicated such acceptance to the other party to the contract.

Various cases have come before the judiciary. In order to understand the liability of promoters and company in case of pre-incorporation contracts, we shall be discussing such cases below:

In the case of Weavers Mills vs. Balkis Ammal and Ors. (1976), the promoter had agreed to purchase some properties on behalf of the company. After incorporation, the company took possession of the properties and also constructed structures upon it. It was held that, although conveyance of the property had not taken place through a proper sale deed, the company’s title over the properties was valid and couldn’t be set aside. The Madras High Court had extended the scope of interpretation of the principle mentioned above. Promoters are generally held personally liable for the pre-incorporation contract, unless the company ratified the contract.

The landmark case of Kelner vs. Baxter (1866), which is a case where “the principle of promoter’s liability in a pre-incorporation contract”, was explained. In this case, the promoter of a company was approached by one Mr. Kelner to purchase his wine, and the promoter had agreed to purchase the same on behalf of the company. Later on, the company was unable to pay Mr. Kelner, who sued the promoter. It was interpreted as determining whether the promoter was in a principal-agent relationship with the company and if liability could befall the company. The learned judge interpreted that the principal agent relationship was not in existence, as the principal of the agent cannot have existed without the incorporation. It was further added that a company cannot take the liability of pre-incorporation contract through adoption as the company is not privy to the contract and the company was not even existent at the time of the contract.

In the case of Newborne v Sensolid Ltd., (1954), wherein the Director (Newborne) of the company had entered into a contract before the company was incorporated. Subsequently, Newborne approached the Court of Appeal seeking enforcement of the contract. He contended that he had the locus standi to seek the specific performance of the contract, as he was a party to the contract. The defendants contended that the contract was not valid as it was entered on behalf of a non-existent company. The court concluded that since the company was not existent at the time of the signing of the contract, the contract was invalid. 

Finally, it can be concluded regarding the pre-incorporation contracts and the principle of promoter’s liability in pre-incorporation that common law clearly shows that the promoter shall be held personally liable for the pre-incorporation contracts of the company and the same was followed in England and India prior to the legislation of the Specific Relief Act, 1963. It basically goes on to suggest that there is no escape from the liability of the promoter. In cases of pre-incorporation contracts, there are recognised ways in Indian law to shift the liability of the promoter to the company, such as novation of contract. India has uniquely legislated the Specific Relief Act, 1963, providing provisions wherein if the contract was entered upon by the promoter during the pre-incorporation stage, the party to such a contract can make the company liable, if the company ratifies such contract and sends communication to such a party of the ratification of the contract. But otherwise, the promoter is held liable in the case of pre-incorporation contracts.

Incorporation of a company

The registration of the company is a legal recognition given to the body corporate under the Company law. The procedure for registration has been clearly stated in Section 7 of the Companies Act, 2013. This provision clearly lays down the requirements for the incorporation of the company. The details of the documents, namely:

• Memorandum of Association, which is the constitution of the company, wherein the signatories, in case of a public company, has been fixed to a minimum number of 7 and for a private company, a minimum number of 2. This document is duly stamped; 
• Articles of Association, this is the document filed along with the MOA; 
• List of directors, wherein the details regarding their names, occupation, and address is mentioned; 
• Written consent of the directors is to be submitted to the registrar of the companies; 
• Verification document, wherein such document is to be digitally signed by any recognised chartered accountant, company secretary, advocate.

Procedure for registration of a company

The promoters have to decide certain aspects, such as the type of company and the name of the company, before they can file an application for registration of the company. Moreover, they have to oversee the preparation of several documents, such as Memorandum of Association, Articles of Association, consent, particulars of the directors, etc. 

Types of companies

The promoters have to decide the type of company they want to float. The various types of companies are

1. Private company: A private company has been defined under Section 2(68) of the Companies Act, 2013 and a private company can be formed by two more persons. A private company is one that restricts the maximum number of members to 50, limits the rights of its members to transfer the shares, and prohibits the issue of shares to the public. 
2. Public company: A public company has been defined under Section 2(71) of the Companies Act, 2013. A public company is a company that is not a private company and has a paid up capital of Rs. 5 lakhs or more. At least seven members are required to form a public company.  

Name of the company

The promoters have to decide the name of the company. Section 4 of the Companies Act provides that the name of the company must not be identical to or nearly resemble the name of an existing company. Moreover, the name must not appear to be undesirable to the Central Government and the use of the name should not be an offence under the law of the country. For example, the name of the company should not infringe on the registered trademark. Thus, the promoters are expected to exercise caution while choosing a name for the company. 

Once a company gets its name registered, it acquires a monopoly right to use that name. No other company can thereafter register with an identical or similar name. The name of the company is considered to be an inherent part of its public reputation. Section 13 of the Companies Act provides that a company can change its name only with the prior approval of the Central Government. 

Preparation of documents 

Various documents, such as the memorandum of association and articles of association, have to be prepared. 

Memorandum of Association 

A Memorandum of Association (MoA) is also known as a company’s constitution. It defines the scope of a company’s actions. The Memorandum of Association states the object of the company’s formation, the authorised share capital that the company can raise, the extent of liability that the members undertake and other particulars such as the name of the company and location of the registered office. 

The MoA of a private company has to be signed by at least two people, while the MoA of a public company needs to be signed by at least seven people. The signatories to the MoA are known as the subscribers, and each subscriber, has to take at least one share in the capital of the company. 

Articles of Association 

Articles of Association (AoA) are the byelaws that govern the functioning and management of a company. They represent the ethics and values of the promoters. 

All the subscribers to the MoA are required to sign the AoA. It is pertinent to note that the AoA is a document that is subordinate to the MoA. If the AoA and MoA contain inconsistent provisions, then the MoA would prevail over the AoA. The MoA states the object for which the company is formed, while the AoA embodies the manner in which the object is to be achieved. 

Integrated process of company registration

On the website of the Ministry of Corporate Affairs, there are options through which one can register their company online, integrating various legal steps of incorporation into the same portal. By filling Form INC-29, the company can seek integrated incorporation. The certificate of incorporation can be obtained in a few days by choosing this method. 

The process then involves filling out the form online; the form is named “simplified proforma for incorporation”. The performa gives a viable option to incorporate a company online, which starts by filling up the details regarding the information of the promoter of the company. Secondly, the electronic form numbers INC-33 and INC-34 provide the option of filling up the e-MOA (Memorandum of Association) and e-AOA (Articles of Association), respectively. The MOA, as we know, is the constitution of the company: it usually describes the object of the company and also describes the directors involved during the incorporation of the company. After the Memorandum of Association, the e-AOA option is provided so as to ease the process of incorporation even further. An e-AOA lays down rules and regulations for company affairs. E-AOA also lays down the powers, duties and rights of managers, officers and the board of directors. 

The Article of Association may be made by the company according to its own requirements, or it may be selected by such a company from the various options available in the Schedule of Companies Act. The AOA must be signed by all the directors and also attested by two witnesses. The Articles of Association of a company are also known as the by-laws of the company. They deal with various issues such as:

• amount of share capital and kinds of share,
• rights of each kind of shareholders, 
• procedure for making allotment of shares, 
• procedure for issuance of share certificate, 
• transfer of shares, 
• procedure for conducting meetings, 
• procedure for appointing or removing directors of the company, etc.

All the documents declared to be necessary under Section 7 of the Companies Act are supposed to be attached, along with the digital signatures of all the directors. The Ministry of Corporate Affairs has tried to simplify the process of getting a DIN number for the directors of the newly incorporated company by including such a request form along with the PAN and TAN cards of the proposed entity that is being incorporated. The single-window clearance regarding the incorporation of a company was an action taken by the central government of India to increase the feasibility and scope of the incorporation even further.

Effect of incorporating a company on false information

If a company is found to have been incorporated on the basis of false information, then the promoters, first directors and any other person would be liable to be charged with the offence of fraud under Section 447. As per Section 7 of the Act, the following documents have to be submitted at the time of incorporation of the company:

• MOA and AOA
• A declaration by the Chartered Accountant, Company Secretary or Cost Accountant stating that all the requirements of the Companies Act, 2013 and the rules made thereunder have been complied with. 
• Name, address and other particulars of the subscribers to the MOA 
• Name, address and other particulars of the Directors of the company. 

Certificate of incorporation of a company

The registration of the Memorandum of Association, the Article of Association and other documents are filed with the registrar. After getting satisfied with the application and documents submitted, the registrar will consider issuing the certificate of incorporation’. A certificate of incorporation is the ultimate proof of the existence of a company.

Once the documents are enumerated under Section 7 and submitted, they are scrutinised by the registrar, who checks whether the documents fulfil all the legal requirements. If he is satisfied with the documents, then he registers the name of the company in the Register of Companies and issues a certificate of incorporation. 

The government of India issued a circular in 2011 to all Regional Directors and all Registrar of Companies. This circular aimed to ease the registration process by making it possible to obtain online and quick incorporation. The Ministry of Corporate Affairs has started issuing digital certificates of incorporation. The digital services enable the promoters to get their companies registered within a period of 24 hours, which provides great ease to the corporate world. 

Effect of the Certificate of Incorporation 

Conclusive evidence 

A certificate of incorporation is conclusive evidence of the legal existence or presence of the company as per Section 7 of Companies Act, 2013. The certificate serves as legal proof that all the legal requirements mandated for the incorporation of the company have been complied with.  

In the case of Moosa v. Ibrahim (1912), a company had been incorporated, but later it was found that there were certain procedural irregularities as the MoA had been signed by a guardian of five minor members. However, the Court held that the certificate of incorporation was valid and conclusive proof of the company’s lawful formation. 

Similarly, in the case of Jubilee Cotton Mills v. Lewis (1924), a company filed for registration before the Registrar of Companies. The documents required for registration were submitted to the registrar on January 6th. On January 8, the registrar issued a certificate of incorporation, but he mentioned the date of incorporation as January 6 on the certificate. The company had allotted certain shares to Lweis on January 6th itself, and the validity of the allotment was challenged before the House of Lords. The Court held that the company came into existence on the date mentioned on the certificate of incorporation and thus, the allotment was legally valid. 

• Even if there are formal deficiencies in the documents submitted for the incorporation of the company, once the certificate of incorporation is issued, the certificate becomes conclusive evidence regarding the legal existence of the company from the date mentioned in the incorporation certificate.
• If the certificate of incorporation was received on 24th, but the certificate reflects the date of the 22nd, then the company shall be taken to have come into existence on the 22nd as reflected by the certificate of incorporation, and this will also authenticate the transactions made by such company on 22nd and 23rd in the eyes of law.

Raising of capital for a company

A company is formally floated for the raising of capital after it has been registered and the certificate of incorporation has been issued. The company thereafter raises the capital required for the commencement of the business. 

There are three ways of raising capital:

• Private placement
• Through the issue of bonus shares
• Inviting public to investment in the company through shares 

In the case of a private company, the issuance of shares to the public is prohibited, and thus, the capital has to be raised from friends, relatives or any other sort of private arrangement. 

In the case of a public company, capital can be raised by the issuance of shares and debentures to the public at large. 

Certificate of commencement of business

• As soon as a private company gets the certification of incorporation, it can start its business. Once the certificate of incorporation is received by the company, a public company issues a prospectus inviting the public to subscribe to its share capital. It fixes the minimum subscription in the prospectus. Then, it is required to sell the minimum number of shares mentioned in the prospectus.
• After completing the sale of the required number of shares, the certificate is sent to the registrar along with a letter from the bank stating that all the money has been received.
• The registrar then scrutinises the documents. If all the legal formalities are done, then the registrar issues a certificate known as ‘certificate of commencement of business’. This is conclusive evidence for the commencement of business for the public company.

The certificate of incorporation plays a crucial role in proving that the company has been duly incorporated, and the same cannot be taken back unless the winding up is initiated. The certificate of incorporation speaks for itself and the receipt date of the same does not affect the date of incorporation, i.e., if the incorporation certificate clearly specifies the date of incorporation as February 14, although the certificate is received on February 20, all the transactions taken place after February 14, shall be taken to be done in compliance with law.

Conclusion

From the above article, we understand that the company’s incorporation period is the sum of the pre-incorporation period and the incorporation period. Pre-incorporation period may be understood as the phase in which the idea of the company is manifested into a reality. The promoter whose name is reflected in the prospectus of the company plays a very important role in collecting initial funding for the company. The promoter also conducts a SWOT analysis of the company to understand its potential in the marketplace and make it a feasible option for investors to invest in. The duties and liabilities of the promoter have been discussed in detail, showing how the relationship between the promoter and the company is fiduciary in nature. 

The principle of the promoter’s liability in relation to the pre-incorporation contract has been dealt with in detail, leading to the conclusion that the promoter shall be held personally liable for all the pre-incorporation contracts unless there is a novation of the contract or in the case of India, when the provisions of the Specific Relief Act apply, wherein the company ratifies the contract and sends communication to the other party of the contract regarding their liability. The role of the government in easing the process of incorporation is very crucial, as it determines the potential intentions of investors towards companies in the market. 

The ease of incorporation has been increased by making it an online affair. The Ministry of Corporate Affairs provides options to incorporate the company with a unique name by providing the online option of submitting the Memorandum of Association along with the Articles of Association online with the declaration digitally signed stating that all the procedures of incorporation of a company under law have been followed by the respective company. The state’s duty as an enabler of business for the growth of the economy finds its presence in this legislation. 

Frequently Asked Questions (FAQs) 

What is the doctrine of ulta vires?

The Memorandum of Association of a company contains an object clause that specifies the object and purpose of the company. A company is bound to operate within the scope of its object clause. Any act done by the company that is beyond the ambit of the MOA would be ultra vires or null and void. 

What is a prospectus? 

Prospectus has been defined under Section 2(70) of the Companies Act, and it refers to a document that is issued by a body corporate inviting the public to subscribe to its securities. It includes a shelf prospectus and a red herring prospectus. 

What are the different types of prospectus?

A deemed prospectus, which is mentioned in Section 25 of the Companies Act, is a prospectus issued by a company to allot any securities of the company. Section 31 of the Companies Act defines a shelf prospectus. When a company issues securities under a shelf prospectus, it is no longer obliged to issue a fresh prospectus for a further and subsequent issue of shares. It can make a further issue of securities on the basis of a shelf prospectus without issuing a new prospectus. 

Section 32 of the Act defines a red herring prospectus as a prospectus that does contain the exact particulars of the number and price of securities proposed to be issued. 

Lately, there is Abridged Prospectus which constraints all the information in brief to give a summary to the investor on which he can rely for his decisions. 

References 

• https://www.ijlmh.com/paper/procedure-for-incorporation-of-company/ 
• https://www.icsi.edu/media/portals/0/INCORPORATION%20OF%20COMPANIES.pdf 
• https://www.journalppw.com/index.php/jpsp/article/view/1453 
• https://www.jstor.org/stable/24694943 

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