ECONS 101

LIMITED LIABILITY COMPANY CONTD

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Formation of a Limited Liability Company:

The Steps involved in the formation of a Limited Liability Company (Whether Private or Public) are as follows:

Step 1- The Promoter devises a scheme of Capitalization, bearing in mind the cost of Formation, assets to be brought and working capital.

Step 2- The Promoter is required to secure the services of a solicitor to prepare certain documents to be filed with the Registrar of Companies. The Documents are:

* Memorandum of Association

* Article of Association

* Statement of Nominal Capital.

Step 3- The documents are stamped and lodged with the Registrar of Companies.

MEMORANDUM OF ASSOCIATION is a document forming the constitution of a Company and

defining its objectives and powers with regard to its dealings with the outside world. It is a document containing the rules and regulations which govern the external relationship of a Company with outsiders. Once registered, the Memorandum becomes a Public Document. The Information contained include:

# The Name of the Company which must end with the word "Limited" or "Plc".

# The Registered Office of the Company.

# The Objectives of the Company.

# The Amount of Authorised Capital and the Various shares into which it is divided.

# A Declaration that the Liability of the Members are Limited.

# The Names of Founders of the Company.

# Status of the Company, that is, Private or Public.

# The Restriction, if any, on the power of the Company.

ARTICLES OF ASSOCIATION is a document in which the regulations which govern the internal management of the Company's Affairs, the duties, rights and powers of the Shareholders are stated. It complements the Memorandum of Association. However, where there is conflict between the two documents, the memorandum prevails. The Information contained include:

# The Method of Issuing Capital

# The Method of Holding Meetings

# Definition of Powers and Duties of Directors

# The Right of Shareholders

# How Directors are to be elected

# How Auditors are to be remunerated

# Method of Sharing Dividend

# Transfer and Forfeiture

# Method of Auditing the Account of the Business.

PROSPECTUS  is a document issued by the Public Limited Companies only inviting the public to subscribe for shares of the Company. A copy of such a prospectus, signed by the directors in writing, must be filed with the registrar of companies. The Company Act defines it as: "Any notice, circular, advertisement which invites the public for subscription or purchase of shares of a Company." Its content include:

# Particulars of the Company's Past History

# Information about the Present Position and Future Prospects of the Company

# The Amount of Capital offered for subscription

# Particulars of Directors and Other Officials

# Promoter's Remuneration

# The Date of Opening the Lists

# The Nature of Capital offered for subscription

# Amount payable on Application and Allotment on each share

# The Number of Founders' Shares.

Step 4- After going through the documents, the registrar of companies then issues a Certificate of Incorporation to the Company. This gives the Company the powers to commence business.

Step 5- A Private Limited Company can commence business after receiving the Certificate of Incorporation, but a Public Liability Company can not commence until it receives the Certificate of Trading.

CERTIFICATE OF INCORPORATION is a document which confers legal status on the Company to commence business, it is issued by the Registrar of Companies. The Certificate is given out as an evidence that all the requirements of the Act in respect of Registration have been complied with by the company and is therefore duly registered under the Act. It contains the name of the Company, registration number and signature of the registrar.

The company Act contains  the effects of incorporation as follows:

# Right of the company to own properties which are separated from shareholders

# Right of Perpetual Existence

# Right to sue and be sued

# Right to Transfer Shares

# Right to Borrow

CERTIFICATE OF TRADING is the document which allows the Public Limited Company to commence business activities. It is issued to a Public Liability Company to enable it commence operation after the company has been given the Certificate of Incorporation. If it is at liberty to commence business immediately without the Certificate of Trading.

NOTE: PARTS OF THIS POST WERE CULLED FROM TONAD ESSENTIAL ECONOMICS FOR SENIOR SECONDARY SCHOOLS BY C.E ANDE.  WE AT EDU-MADE-EASY RESPECT THIS CRAFT TOO MUCH TO DENY ITS ORIGIN. THANK YOU

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