Question 7 of 10intermediate💡 UnderstandLong Answer5 marks

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

Correct Answer

Promotion is the first stage in the formation of a company. It involves conceiving a business idea and taking an initiative to form a company so that practical shape can be given to exploiting the available business opportunity. Persons who conceive the business idea, decide to form a company, take necessary steps for the same, and assume associated risks, are called promoters.

The first step in promotion is taking approval of the company's name from the Registrar of Companies. This ensures that the proposed name is available for registration.

The second step involves fixing the signatories to the Memorandum of Association. These signatories become the initial members of the proposed company.

The third step is that certain professionals are appropriated to assist the promoters in various activities related to the formation of the company.

The fourth step involves preparation of documents necessary for registration. These documents include Memorandum of Association, Articles of Association, consent of proposed directors, agreement with proposed managing or whole-time director (if any), and a statutory declaration. After completing these steps, the promoters can proceed with incorporation.

Exercise: Long Answer Questions | Q: 2 | (Page 20)
For More Understanding

Explanation

This is a 5-mark long answer question from NCERT Business Studies Class 11, Chapter on Formation of a Company. The answer covers the four key steps in promotion as mentioned in the textbook: (i) Approval of company's name from Registrar of Companies, (ii) Fixing signatories to the Memorandum of Association, (iii) Appointing professionals to assist promoters, and (iv) Preparing necessary documents for registration. The context also provides background on what promotion means and who promoters are, which helps frame the answer properly.

Solution Steps

  1. Step 1: Define Promotion and Promoters as introduction

  2. Step 2: Explain Step i - Approval of company's name from Registrar of Companies

  3. Step 3: Explain Step ii - Fixing signatories to Memorandum of Association

  4. Step 4: Explain Step iii - Appointing professionals to assist promoters

  5. Step 5: Explain Step iv - Preparing necessary documents for registration with list of documents

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