Ms. TEENA KAPOOR a 3rd year law student from Gitarattan International Business School college
INTRODUCTION
Registration is the process by which a company submits required documents to the Securities and Exchange Commission (SEC) detailing the details of a proposed public offering. Registration usually consists of two parts: a guide and personal documents. A prospectus is a document issued to all investors purchasing securities, while a nondisclosure document is information provided to the SEC for verification.
Understanding Registration
The process of an initial public offering (IPO) is a long and complex one, requiring many months of work and tremendous amounts of documentation. When registering for an IPO, a company issuing shares must reveal essential facts and detailed information about its business during the registration process. This type of information includes a description of its business and assets, a description of the security being offered, further details of the offering, a description and names of the company`s management, and the company’s financial statements, which have been certified by an accountant, working independently of the company. The SEC specifies that a company should have at least three years of audited financial statements before it can go public.2 If a company does not have three years of audited financial statements, the SEC allows for exceptions whereby the company is allowed to provide them after the fact, when they actually have the required information available. An auditor would perform a look back, and the company would have to ensure it has systems in place for capturing this information. Registration is also intended to contain negative information, such as legal issues or other issues in the business that could have a significant impact on investors. The purpose of registration is to disclose all details of the company. The prospectus contains brief information about offering stock in the company to investors, including the amount the funds raised will be used for and the company’s contact information. A prospectus is the first document issued by an issuer of a security. This is often referred to as a red herring. The final prospectus will contain the final information including the exact number of shares/shares issued and the exact offer price and will be printed after the transaction takes effect. When registration information is provided to the SEC, the SEC reviews the information, provides comments, and requests changes if necessary. The SEC will generally respond within 30 days of the initial filing. Some securities are exempt from the SEC registration process. This includes limited and private provision as well as city, state and federal security provision.
MEANING
Effect of Registration of a Company
According to Section 9 of the Companies Act, 2013, these are the effects of registration of a company:
From the date of incorporation, the subscribers to the Memorandum and all subsequent members of the company are a body corporate.
A registered company can exercise all functions of a company incorporated under the Act. Also, the company has perpetual succession with power to acquire, hold, and dispose of property of all forms. Also, it can contract, sue and be sued by the said name.
Further, the company becomes a legal person separate from the incorporators from the date of incorporation. Also, a binding contract comes into existence between the company and its members as mentioned in the Memorandum and Articles of Association. Until the company dissolves or the Registrar removes it from the register, it has perpetual existence.
Benefits of Registering OF Company
A company can be defined as an invisible, intangible, man-made entity created by law with separate legal personality, perpetual succession and a common seal. It is not affected by the death, insanity or bankruptcy of individual members. Let’s take a look at the biggest benefits of registering a company instead of an owner or partner company.
reality
A company is a real legal entity. It is an artificial entity created by law and its existence is separate from its directors and shareholders. A corporation established under the Companies Act. The term “legal person” means a subject recognized as a person by law. He can sue and sue in his name. A registered company has its own rights, its own obligations and conducts its own legal process. Upon registration, the company acquires an identity. Because the company owns property and can incur liabilities, its legal powers are broader because individual members of the company are not liable for debts to the company’s creditors.
eternal succession
Endless succession means continuing or going on forever and the company is forever. It means that a corporation or company continues to exist until legally dissolved. Permanent succession is an important factor. As mentioned earlier, it is a separate legal entity that is not affected by the death or withdrawal of a member. Anything has changed. Nothing, including members, members, employees, shareholders, etc., can influence its existence and, once registered, it survives under the Corporations Act.
limited liability
Limited liability is legal liability for a limited amount of debt. Participants’ liability for corporate debt is limited. limited to the par value of the shares acquired. Exceptions are where participants have agreed to unlimited obligations, conditions may vary. These companies are called general liability companies.
DISADVANTAGES
1 Lack of confidentiality:
According to the provisions of the law, companies are required to submit various reports to company registration authorities and financial institutions. Business secrets are reduced. Competitors also know the details of all the financial data, so there is less when the company presents its annual report to shareholders.
2. Restrictions:
Compared to ownership and partnerships, companies have to meet more legal requirements. This will take a lot of time and effort.
3. Business damage`
Sometimes managers and directors misuse company resources for personal gain. This brings losses to the company and the company closes.
4. Lack of personal interest:
Unlike ownership and partnerships, the day-to-day running of the company is handled by hired managers. Because they are employees, not owners, they have little or no personal interest and commitment to the company. This can lead to inefficiencies and consequently losses.
Corporations also have a disadvantage compared to property and partnerships when it comes to taxation. Corporations and shareholders face double taxation issues because they are considered as two different entities.
If the company’s owners work for the company, they receive salaries and bonuses just like any other employee. He reports and pays taxes on this income on his personal tax return, just like any other employee. Companies also pay taxes on any profits left in the business after all salaries, bonuses, overheads, and other expenses have been paid. Another issue that can be seen as a disadvantage of corporations is that shareholders are not really owners, given the fact that they are not decision makers and management is the one who owns the company as they have the right to make all decisions.
CONCLUSION
Registration is the process by which a company submits required documents to the Securities and Exchange Commission (SEC) detailing the details of a proposed public offering. Registration usually consists of two parts: a guide and personal documents. The SEC specifies that a company should have at least three years of audited financial statements before it can go public
REFERENCES
COMPANIES ACT 2013
Aishwarya Says:
Law students often face problems, which they cannot share with their friends and families. We have started a column on our website Student’s Corner. In this column we are talking to several law students about the challenges that they face. Students who are interested in participating in the same, can fill this Google Form.
IF YOU ARE INTERESTED IN PARTICIPATING IN THE SAME, DO LET ME KNOW.
The copyright of this Article belongs exclusively to Ms. Aishwarya Sandeep. Reproduction of the same, without permission will amount to Copyright Infringement. Appropriate Legal Action under the Indian Laws will be taken.
If you would also like to contribute to my website, then do share your articles or poems to aishwarya@aishwaryasandeep.com
Join our Whatsapp Group for latest Job Opening