Unit 2: Formation and Incorporation of Company
2.1 Notion of Promotion, Formation and Incorporation of Company
Promotion — the idea’s gestation: identifying the venture, assembling the founding team, preparing the documents, and bringing the company to birth. Formation — the statutory mechanics (documents, filing, registration). Incorporation — the state’s act: registration under the Companies Act 2063 — the birth certificate and the person’s creation. The three are a sequence: promoter → documents → registrar → company.
2.2 Promoters: Meaning, Position, Duties, Rights, Responsibilities
Meaning: those who take the initiative in forming the company — name it, prepare the MOA/AOA, arrange capital and the first contracts. Position: neither trustee nor agent in the full sense — a fiduciary toward the company in formation (the classical formula: standing in a fiduciary relation to the future company). Duties: to disclose all interests (profits made in promotion, property bought and resold to the company); no secret profit; to act with good faith toward the venture and the first members. Rights: to be reimbursed the pre-incorporation expenses (as the company may adopt); the remuneration agreed in a disclosed arrangement. Responsibilities/liabilities: personal liability for pre-incorporation contracts (2.3); liability to account for secret profits; the prospectus’s misstatement liabilities where they issue it.
The authority’s discipline (the prescribed case): Tara Prasad Lamichhane vs. Tara Prasad Poudel, NKP 2080 B.S., Vol. 1, D.No. 11022, Pages 168 (Doctrine of Ultra Vires) — the director-authority decision: a director’s unauthorised act cannot automatically bind the company, particularly where it is not in the company’s interest (in the case, a director’s settlement-and-release of a bank guarantee, without shown legal authority to finally settle the company’s accounts, held not to bind the company — the courts below and the Supreme Court all refusing to bind the company to the unauthorised dealing). The case fuses two doctrines: the authority
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