This chapter explains the detailed process of creating a company, outlining the legal requirements and important steps involved.
Formation of a Company – Formula & Equation Sheet
Essential formulas and equations from Business Studies, tailored for Class 11 in Business Studies.
This one-pager compiles key formulas and equations from the Formation of a Company chapter of Business Studies. Ideal for exam prep, quick reference, and solving time-bound numerical problems accurately.
Key concepts & formulas
Essential formulas, key terms, and important concepts for quick reference and revision.
Formulas
Minimum Subscription = 90% of Issue Size
Minimum Subscription represents the percentage of total shares that must be subscribed before allotment, ensuring companies start with adequate funding.
Liability = Number of Shares × (Face Value - Amount Paid)
Liability indicates obligations of shareholders for unpaid amounts. Crucial in determining shareholders' risk exposure.
CIN = Corporate Identity Number
CIN is a unique identifier issued to every company, vital for legal identification and regulatory purposes.
Total Authorized Capital = Number of Shares × Face Value
Calculated to determine the maximum capital a company can raise through its shares as stated in the Memorandum of Association.
Return of Allotment = (Names of Allottees + Number of Shares allotted)
This document specifies the details of shares allotted post-application, essential for regulatory compliance.
Time for obtaining Certificate of Commencement of Business = 180 days from Incorporation
Companies must obtain this certificate within 180 days to start operations legally.
Director Identification Number (DIN)
A unique number assigned to directors, required before they can be appointed to the company. It ensures traceability and accountability.
Prospectus = Invitation to Public for Subscribing Shares
Essential for public companies to disclose information and invite investment, ensuring transparent communication.
Basic Requirement for Incorporation = (Memorandum + Articles + Statutory Declaration)
These are vital documents needed by the Registrar for approving company formation.
Approval Process = Name Approval + Document Submission
Describes the procedure to officially register the company with regulatory authorities.
Equations
Total Fund Required = Fixed Costs + Variable Costs + Contingency Funds
Determined for estimating overall capital requirements for business operations during initial stages.
Authorized Capital = Issued Capital + Unissued Capital
Reflects the total potential capital that can be issued to shareholders, guiding future capital raising.
Shares Allotted = Application Received – Rejected Applications
Counts shares that will be distributed based on successful applications post-allocation process.
Preliminary Contracts = Contracts Signed by Promoters Pre-Incorporation
Defines agreements made by promoters when establishing the company, before it becomes a legal entity.
Corporate Existence = Date of Certificate of Incorporation
Marks the official legal birth of the company, enabling it to conduct business and enter contracts.
Prospective Capital = (Price per Share × Number of Shares)
Estimates potential revenue from the sale of shares to investors, significant for financial planning.
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