List and explain four documents involved in the formation of a public limited company.
Explanation
Documents used in the formation of a company:
(a) Prospectus:
(i) It is an invitation to the public in writing to make an offer to buy shares.
(ii) It is used when dealing with new shares.
(iii) It contains company's history and future prospects.
(iv) It provides information about the rights of the shares.
(b) Memorandum of Association:
(1) It is a document that contains the rules that regulate the affairs of the company with the outside world.
(ii) It must be filed with the registrar of companies.
(iii) It contains:
(a) the name of the company with Plc/Ltd as the last word. Cumbersome, requiring a lot of documentation, e.g. memo and article of Association to secure incorporation. It is expensive and takes time to form. It is owned by shareholders through subscription of shares. Owners are separated from management of the business. Capital is raised through subscription of shares. The liability of each member is limited to the amount invested.
(b) where the registered office is located/address.
(c) the objects of the company/the purposes for which the company is set up.
(d) names of promoters/directors and the amount of capital contributed by each.
(e) the amount of authorized capital.
(c) Articles of Association:
(i) It is a document which regulates the structure and internal management of the company.
(ii) It states the rights of different classes of shareholders.
(iii) It states the rules/procedures of conducting meetings.
(iv) It regulates the issue of shares.
(v) It states the election, limitation and rights of Directors.
(vi) It states the borrowing powers of the company.
(vii) It must be filed with the registrar of company.
(d) Certificate of incorporation:
(i) It is a document issued by Registrar of company to the promoters after all documents have been found to be in order.
(ii) It signifies that the company has come into existence from that moment.
(iii) it establishes the company as a legal entity recognised by laws of the state, which can now sue and be sued.
(iv) It is the "birth certificate" of the company.
(e) Declaration:
(i) This is a statement in writing to the registrar of companies by the promoter.
(ii) It states that the requirement of the companies have been complied with.
(iii) It is a declaration that adequate capital has been raised.
(iv) The promoters are held liable for any false declaration.
(f) Trading Certificate:
(i) This is a document issued by the Registrar of companies.
(ii) It gives the public company the right to commence the business for which it was formed.
(iii) It lapses if a company does not start operation within 1 year of its issue.