Question

Arrange the following steps in the correct sequence of the life of a company:
(A) Commencement of Business
(B) Incorporation
(C) Promotion
(D) Floatation

• A. (A), (B), (C), (D)
• B. (A), (C), (B), (D)
• C. (B), (A), (D), (C)
• D. (C), (B), (D), (A)

Answer 1

The Correct Option is D

The life cycle of a company consists of various steps. The correct sequence of events in the formation and functioning of a company is as follows: 

• (C) Promotion: The first step in the life of a company is promotion, where the idea for the company is conceived, and the necessary groundwork is laid. This includes identifying the business purpose, preparing the necessary documents, and finding potential investors.
• (B) Incorporation: Once the company is promoted, the next step is incorporation. Incorporation is the legal process of forming the company, which involves registering it with the relevant authorities, like the Registrar of Companies.
• (D) Floatation: After incorporation, the company floats its shares to raise capital from the public or investors. Floatation involves the issuance of shares and debentures, and it is done through public offerings.
• (A) Commencement of Business: After flotation, the company is now ready to begin its operations. The final step is the commencement of business, which marks the actual start of the company's activities.

Thus, the correct order of events is: (C), (B), (D), (A)

Answer 2

The Stages of Company Formation: A Sequential Process

The formation of a company typically follows a specific sequence of stages, ensuring that all necessary steps are taken to legally establish and launch the business. The correct order is: 

1. Promotion: This is the initial stage where the idea for the company is conceived and developed. It involves identifying a business opportunity, conducting feasibility studies, assessing market potential, and gathering resources to start the venture. Promoters take the initiative to organize and assemble the necessary resources.
2. Incorporation: This is the legal process of registering the company with the relevant government authorities, such as the Registrar of Companies. It involves preparing and submitting the necessary documents (e.g., Memorandum of Association, Articles of Association) and obtaining a certificate of incorporation. This step gives the company its legal existence.
3. Floatation (Capital Subscription): This stage involves raising the necessary capital to finance the company's operations. For public companies, this typically involves issuing shares to the public through an initial public offering (IPO). Private companies may raise capital through private placements or loans.
4. Commencement of Business: This is the final stage where the company is ready to start its operations. After obtaining the necessary licenses and permits, the company can begin producing goods or providing services and generating revenue. Public companies must obtain a Certificate of Commencement of Business before they can officially start.

Therefore, the correct sequence is: Promotion → Incorporation → Floatation → Commencement of Business.