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

Sequence of Stages in Company Formation 

The formation of a company typically involves a series of distinct stages, each with its own purpose and requirements. Understanding this sequence is crucial for entrepreneurs and anyone involved in setting up a new business.

Stages of Company Formation

The correct sequence of stages in the formation of a company is as follows:

1. (C) Promotion: This is the initial stage, involving the conception of the business idea and the assessment of its feasibility. It includes identifying a market opportunity, conducting market research, and preparing a preliminary business plan.
2. (B) Incorporation: This stage involves the legal registration of the company with the relevant authorities. It includes preparing and filing the necessary documents (e.g., Memorandum of Association, Articles of Association) and obtaining a certificate of incorporation.
3. (D) Floatation: This stage involves raising capital for the company by issuing shares to the public (in the case of a public company). It includes preparing a prospectus, marketing the share offering, and allotting shares to investors. *Note: This step is only applicable to Public companies.*
4. (A) Commencement of Business: This is the final stage, where the company begins its actual business operations. It involves obtaining any necessary licenses and permits, setting up the business infrastructure, and starting to generate revenue.

Correct Sequence

Therefore, the correct sequence is (C) → (B) → (D) → (A), making Option 4 the correct answer.

Note

This step floatation is not needed for a private company

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.