II JAI SRIGURUDEV II

Sri Adichunchanagiri Shikshana Trust

SJB INSTITUTE OF TECHNOLOGY
BGS Health & Education City
Dr. Vishnuvardhana Road, Kengeri, Bengaluru - 560 060.

Department of MBA

ENTREPRENEURSHIP DEVELOPMENT &

LEGAL ASPECTS
20MBA26
MODULE 5

Prepared by
Dr. Harshitha S
Assistant Professor
MBA Department
SJBIT
Module 6
Process of Company Incorporation; process of registration; Importance of
Marketing; Funding, Four stages of Start Up.
Intellectual property protection and Ethics: Patents – Copyright -
Trademark- Geographical indications – Ethical and social responsibility
and challenges.
Company Incorporation

Process of Company Incorporation

The incorporation of a corporation refers to the legal method that's accustomed to typing a company entity or a
corporation. Associate in the nursing incorporated company could be a separate legal entity on its own,
recognized by the law. These firms will be known with terms like ‘Inc’ or ‘Limited’ in their names. It becomes a
company legal entity to fully break away from its homeowners.
• Apply to the concerned RoC (Registrar of Corporations) to ascertain the availability of name in eForm1 A by
logging in to the portal. A fee of Rs. 500/- has to be paid alongside and the digital signature of the applicant
proposing the company has to be attached in the form. If proposed name is not available, the user has apply for a
fresh name on the same application.
• After the name approval the applicant can apply for registration of the new company by filing the required
forms (that is Form 1, 18 and 32) within 60 days of name approval.
2. Preparation of Memo of Association and Articles of Association-
The memo of association of a corporation will be cited as its constitution or rulebook. The memo states the sphere during
which the corporate can do business, objectives of the corporate, yet because of the style of business the corporate plans to
undertake. It’s divided into 5 clauses
i. Name Clause
ii. Registered workplace Clause
iii. Objects Clause
iv. Liability Clause
v. Capital Clause
Articles of Association are essentially a document that states rules that the inner management of the corporate can follow.
The article creates a contract between the corporate and its members. The article mentions the rights, duties, and liabilities
of the members. It’s equally binding on all the members of the corporate.
3. Printing, Linguistic Communication, and Stamping, Vetting of Memo and Articles
The Registrar of corporations usually helps promoters to draw up and draft the memo and articles of association.
Above all, with promoters hasn’t any previous expertise in drafting the memo and articles. Once these are
examined by the Registrar of corporations, then the memo of association and articles of association will be
written. The memo and article consequently divided into paragraphs and organized chronologically. The articles
ought to be one by one signed by every subscriber or their representative within the presence of a witness;
otherwise, it'll not be valid.
4. Power of Attorney
To fulfil the legal and complicated documentation formalities of incorporation of a corporation, the promoter
could then use an Associate in a professional can have the authority to act on behalf of the corporate and its
promoters. The professional can have the authority to form changes within the memo and articles and different
documents that are filed with the registrar.
5. Statutory Declaration
This declaration, moreover states that ‘All the necessities of the businesses Act and therefore the rules under that
are compiled with respect of and matters precedent and incidental to that. A statutory declaration by any one of the
subsequent persons stating that each one the necessities of the Act relating to Registration are punctually complied
with:
1. Associate in Advocate of the Supreme Court or state Supreme Court.
2. Associate in professional or attorney is entitled to seem before a state supreme court.
3. A controller is engaged in the information of the corporate and additionally active in India.
4. Any person is called within the Articles of Association because of the Company’s Director, Manager, or
Secretary.
6. Payment of Registration Fees
A prescribed fee is to be paid to the Registrar of corporations throughout incorporation. It depends on the nominal
capital of the businesses that even have share capital. A private company or a public company not having share
capital will begin business at once on its incorporation. Capital Subscription Stage and Commencement of
Business Stage relevant solely within the case of a public company having a share capital. The capital subscription
stage deals with the task of getting the required capital for the corporate.

7. Certificate of Incorporation
If the Registrar is convinced that all needs are consummated by the corporate that's being incorporated, then he can
register the corporate and issue a certificate of incorporation. As a result, the incorporation certificate provided by
the Registrar is definite proof that all needs of the Act are met. This Certificate of Incorporation entitles the
corporate to a legal person. In different words, the corporate is born upon the problem of a Certificate of
Incorporation.
Incorporation Doctrine
This document could be a philosophy that sets forth sure provisions elaborate within the Bill of Rights, that created
applicable to the states through the group action Clause of the amendment. This essentially details that the state is
controlled to sure needs that also are established within the Bill of Rights. This includes the following:
First Modification – Freedom of Speech, Press, Religion, and Petition. This modification is incorporated.
Second Modification – Right to stay and bear arms. This modification is incorporated.
Third Modification – Conditions for quarters of troopers. Not incorporated.
Fourth Modification – Freedom from unreasonable search and seizure. This modification is incorporated.
Fifth Modification – Provisions regarding prosecution which are partly incorporated.
Sixth Modification – Right to a speedy trial which is partly incorporated.
Seventh Modification – Excessive bail, cruel and strange penalty are not incorporated.
Eighth Modification – Excessive bail shall not be needed which are Partly-Incorporated.
•Login to the portal and fill the following forms and attach the mandatory documents listed in the-Form:
•Declaration of compliance -Form-1
•Notice of situation of registered office of the company -Form-18.
•Particulars of the Director's, Manager or Secretary -Form-32.
•Submit the following e-Forms after attaching the digital signature, pay the requisite filing and registration fees and send
the physical copy of Memorandum and Article of Association to the RoC
• After processing of the Form is complete and Corporate Identity is generated obtain Certificate of Incorporation from
RoC.
Additional steps to be taken for formation of a Public Limited Company:
To obtain Commencement of Business Certificate after incorporation of the company the public company has to make
following compliance
• File a declaration in e-Form 20 and attach the statement in lieu of the prospectus(schedule III) OR
• File a declaration in e-Form 19 and attach the prospectus (Schedule II) to it.
• Obtain the Certificate of Commencement of Business.
Process Of Registration

Whoever is willing to register a startup or a new company in India then you need to record it in Indian official
records i.e. Ministry of Corporate Affairs (MCA).
•One does not need to visit the corporate office for registration as it can be done while sitting at home.
•The registration includes Digital Signature Certificate(DSC), Director Identity Number(DIN) and filing for an
e-form.

Step 1:Acquire Digital Signature Certificate (DSC)

Step 2:Acquire Director Identification Number (DIN)
Step 3:Create an account on MCA portal-New user registration @ [Link]
Step 4:Incorporate or Apply for the company to be registered
List of documents required for registration

•Original copy of formal letter issued by ROC regarding availability of Company name
•DIN of all those directors of a proposed company
•DSC -Digital Signature Certificate
•Form-1 for incorporation of a company
•Form-18 for situation or address of the proposed company
•Form-32 for particulars of proposed directors, managers and secretary
Importance of Marketing
‘The aim of marketing is to make selling superfluous. The aim of marketing is to know and understand the
customer so well that the product or service fits him and sells itself. Ideally, marketing should result in a customer
who is ready to buy. All that should be needed then is to make the product or service available.’

(1) Marketing Helps in Transfer, Exchange and Movement of Goods:

Marketing is very helpful in transfer, exchange and movement of goods. Goods and services are made available to
customers through various intermediaries’ viz., wholesalers and retailers etc. Marketing is helpful to both
producers and consumers.
To the former, it tells about the specific needs and preferences of consumers and to the latter about the products
that manufacturers can offer. According to Prof. Haney Hansen “Marketing involves the design of the products
acceptable to the consumers and the conduct of those activities which facilitate the transfer of ownership between
seller and buyer.”
(2) Marketing Is Helpful In Raising And Maintaining The Standard Of Living Of The Community:
Marketing is above all the giving of a standard of living to the community. Paul Mazur states, “Marketing is the delivery
of standard of living”. Professor Malcolm McNair has further added that “Marketing is the creation and delivery of
standard of living to the society”.
By making available the uninterrupted supply of goods and services to consumers at a reasonable price, marketing has
played an important role in raising and maintaining living standards of the community. Community comprises of three
classes of people i.e., rich, middle and poor. Everything which is used by these different classes of people is supplied by
marketing.
In the modern times, with the emergence of latest marketing techniques even the poorer sections of society have attained
a reasonable level of living standard. This is basically due to large scale production and lesser prices of commodities and
services. Marketing has infact revolutionised and modernised the living standard of people in modern times.
(3) Marketing Creates Employment:

Marketing is complex mechanism involving many people in one form or the other. The major marketing functions
are buying, selling, financing, transport, warehousing, risk bearing and standardisation, etc. In each such function
different activities are performed by a large number of individuals and bodies.
Thus, marketing gives employment to many people. It is estimated that about 40% of total population is directly or
indirectly dependent upon marketing. In the modern era of large scale production and industrialisation, role of
marketing has widened.
This enlarged role of marketing has created many employment opportunities for people. Converse, Huegy and
Mitchell have rightly pointed out that “In order to have continuous production, there must be continuous marketing,
only then employment can be sustained and high level of business activity can be continued”.
(4) Marketing as a Source of Income and Revenue:
The performance of marketing function is all important, because it is the only way through which the concern could
generate revenue or income and bring in profits. Buskirk has pointed out that, “Any activity connected with obtaining
income is a marketing action. It is all too easy for the accountant, engineer, etc., to operate under the broad
assumption that the Company will realise many dollars in total sales volume.
However, someone must actually go into the market place and obtain dollars from society in order to sustain the
activities of the company, because without these funds the organisation will perish.”
Marketing does provide many opportunities to earn profits in the process of buying and selling the goods, by creating
time, place and possession utilities. This income and profit are reinvested in the concern, thereby earning more profits
in future. Marketing should be given the greatest importance, since the very survival of the firm depends on the
effectiveness of the marketing function.
(5) Marketing Acts as a Basis for Making Decisions:
A businessman is confronted with many problems in the form of what, how, when, how much and for whom
to produce? In the past problems was less on account of local markets. There was a direct link between
producer and consumer.
In modern times marketing has become a very complex and tedious task. Marketing has emerged as new
specialised activity along with production.
As a result, producers are depending largely on the mechanism of marketing, to decide what to produce and
sell. With the help of marketing techniques a producer can regulate his production accordingly.
The concept of marketing is a dynamic concept. It has changed altogether with the passage of time. Such
changes have far reaching effects on production and distribution. With the rapid change in tastes and
preference of people, marketing has to come up with the same.
Marketing as an instrument of measurement, gives scope for understanding this new demand pattern and
thereby produce and make available the goods accordingly.
(6) Marketing Acts as a Source of New Ideas:
The concept of marketing is a dynamic concept. It has changed altogether with the passage of time. Such
changes have far reaching effects on production and distribution. With the rapid change in tastes and
preference of people, marketing has to come up with the same.
Marketing as an instrument of measurement, gives scope for understanding this new demand pattern and
thereby produce and make available the goods accordingly.
(7) Marketing Is Helpful In Development Of An Economy:
Adam Smith has remarked that “nothing happens in our country until somebody sells something”.
Marketing is the kingpin that sets the economy revolving. The marketing organisation, more
scientifically organised, makes the economy strong and stable, the lesser the stress on the marketing
function, the weaker will be the economy.
Funding

•Funding refers to the money required to start and run a business.

•It is a financial investment in the company for product development, manufacturing, expansion, sales and
marketing, office spaces, and Inventory.

Sources of funding include credit, venture capital, donations, grants, savings, subsidies, and taxes.
Fundings such as donations, subsidies, and grants that have no direct requirement for return of investment are
described as "soft funding" or "crowd-funding".
Stages of Start ups
•There are multiple sources of funding available for startups.
•However, the source of funding should typically match the stage of operations of the startup.
•Raising funds from external sources is a time-consuming process and can easily take over 6 months to convert
Seed stage
It’s the initial stage of a project, it’s the business idea and the development of a product or service. It is the first step, where normally the
team is very small and where the first draft is assembled. In this beginning there is not yet a 100% defined business plan.
Working at this stage with the help of mentors and professionals could help you get your startup on the right track.
At this stage funding is not an obstacle, because there are no big needs to complete it. It usually starts with input from the founders,
family or friends. There are also business angels, who are willing to make their small contribution.

Early Stage
This is where the startup begins to grow, there’s already a product on the market that customers are starting to buy. Even though the
growth is very incipient, there are starting to be advances. At this stage it is likely that new people will join the staff to respond to these
new challenges.
Developing a product based on feedback is vital for the startup. Detecting which are the most important characteristics or functionalities
is one of the most important tasks in this phase, as well as establishing the first relationships or commercial agreements for the future.
On the other hand, when the first benefits arrive, the business model arrives. At this point you will need a financial boost, which usually
comes from funds and investors specialized in this phase of the company’s life cycle.
Growth Stage
It’s time to grow up. In this stage the startup is already built, established, more or less consolidated and with some stable benefits. This is
where the product or service begins to make improvements and become more competitive.
Here is where the startup must focus on its growth and increase both profits and the number of customers. But don’t forget the part of
continuously improving the product to be able to adapt to the growth of the startup. This is usually the stage where more staff are hired.
On the other hand, external financing is important, but the company’s own cash flow solves many of the day-to-day needs, so the cost
structure has to be controlled.

Expansion Stage
Once the company is consolidated, it is time to take the leap: open up to new markets and segments. It is a very delicate moment, at this
stage there has to be a very clear and measured strategy. The risk of error is higher.
This phase requires even greater financial support. It can be through investment, with the company’s own funds. In addition, reaching
agreements with large companies already established in the different countries or in the different sectors to be reached may be an easier
way of carrying out this process.
Exit
After the long and arduous path of a startup, there may come the approach (or not) of the sale
(exit).
We can not only talk about a company that sees in it an opportunity (it can be a merger or keeping
both brands and firms in an independent way in the market). There are also the IPO (Public Offer
of Sale), that is, the entry to be listed on the stock exchange.
Intellectual Property Protection and Ethical Rights

Intellectual property rights are the rights given to persons over the creation of their minds. They usually give the
creator an exclusive right over the use of his/her creation for a certain period of time.

•Intellectual property rights are a socio-economic tool that create a temporary monopoly for inventor firms and enable
such firms to charge prices for their innovations that are many times higher than the marginal cost of production of the
innovations.
•This allows the inventor firms to salvage their research-costs and secure a profit on their innovations.
•Examples include inventions; literary and artistic works; designs; symbols, names and images.
•The ethical issues surrounding intellectual property rights are most pertinent when it is socially valuable goods that are
given intellectual property protection.
Patents
•A patent is a property right issued by a government authority allowing the holder exclusive rights to the
invention for a certain period of time.
•A patent safeguards an original invention for a certain period of time.
•By granting the right to produce a product without fear of competition for the duration of the patent, an incentive
is provided for companies or individuals to continue developing innovative new products or services.
Section 20 and Rules 35 and 36 of the Patents Act 1970 govern the procedure for the substitution of applicants in case of
patent applications. If after filing an application for patent, the applicant assigns the rights of his invention by written
assignment or agreement to some other person, then that person (the claimant) may make an application, in Form 6 along
with a fee of Rs. 4,000/- (in case of an online filing by a legal entity such as corporate), for substituting his name.
The application should include an original patent assignment or patent assignment agreement. An application should be
made in duplicate and be accompanied by the statement setting out fully the facts upon which the applicant relies and the
directions which he seeks.
Such an application may be made any time before the grant of the patent. If the Controller is satisfied that
by any assignment in writing the other person (to whom the invention has been assigned) be entitled to:
a patent; or
a specific interest in the patent; or
an undivided share of the patent; or
to a specific interest in the undivided share of the patent, then the Controller may direct that the application
shall proceed in the name of the other person (the claimant).
In case there are two or more joint patent applicants currently on file, then the consent of each of the joint
applicants is required. In case of addition of a new applicant, the agreement, assignment or operation of law
should be to effect that, if a patent were to be granted ultimately, then the newly added applicant would be
entitled to the rights of the existing applicant.
Types of Patents
Trademark

A trademark is a unique symbol or word(s) used to represent a business or its products. It refers to a recognizable
insignia, phrase, word, or symbol that denotes a specific product and legally differentiates it from all other products
of its kind. A trademark exclusively identifies a product as belonging to a specific company and recognizes the
company's ownership of the brand. Trademarks are generally considered a form of intellectual property and may or
may not be registered.

•A trademark protects words and design elements that identify the source of a product.
•Brand names and corporate logos are primary examples.
•A service mark is similar, except that it safeguards the provider of a service instead of a tangible good.
•The term “trademark” is often used in reference to both designations.
Think of the apple shape with the bite taken out that Apple uses as its logo, the swoosh logo that Nike features on
all of its products, or the golden arches McDonald's registered decades ago.
•You’ll probably run into trouble if you try to bottle a beverage and call it Coca-Cola or even use the famous wave
from its logo since both have been protected for decades.

Trademarks can be bought and sold. For instance, Nike (NKE) purchased the instantly recognizable Swoosh logo
in 1971 from a graphic arts student for a one-time price of $35. Trademarks also can be licensed to other
companies for an agreed-upon time or under certain conditions, which can result in crossover brands. Take the
relationship LEGO has with certain movie franchises, for example. The private company licenses many famous
sub-brands such as Star Wars and DC Comics to produce LEGO versions of popular products.
Copyright

Copyright is a type of intellectual property that gives its owner the exclusive right to make copies of a creative
work, usually for a limited time. Copyright is intended to protect the original expression of an idea in the form of
a creative work, but not the idea itself.
Typically, the public law duration of a copyright expires 50 to 100 years after the creator dies, depending on the
jurisdiction.
When the copyright of a work expires, it enters the public domain.
•Copyrights protect “original works of authorship,” such as writings, art, architecture, and music.
•For as long as the copyright is in effect, the copyright owner has the sole right to display, share, perform, or
license the material.
•One notable exception is the “fair use” doctrine, which allows some degree of distribution of copyrighted
material for scholarly, educational, or news-reporting purposes.
•Technically, you don’t have to file for a copyright to have the piece of work protected.
•It’s considered yours once your ideas are translated into a tangible form, such as a book, music, or published
research.
Geographical Indication

•A geographical indication (GI) is a sign used on products that have a specific geographical origin and possess
qualities or a reputation that are due to that origin.
•In order to function as a GI, a sign must identify a product as originating in a given place.
•In addition, the qualities, characteristics or reputation of the product should be essentially due to the place of
origin.
•Since the qualities depend on the geographical place of production, there is a clear link between the product
and its original place of production.
What right does a geographical indication provide?

•A geographical indication right enables those who have the right to use the indication to prevent its use by a third
party whose product does not conform to the applicable standards.
•For example, in the jurisdictions in which the Darjeeling geographical indication is protected, producers of
Darjeeling tea can exclude use of the term “Darjeeling” for tea not grown in their tea gardens or not produced
according to the standards set out in the code of practice for the geographical indication.
•However, a protected geographical indication does not enable the holder to prevent someone from making a
product using the same techniques as those set out in the standards for that indication.
•Protection for a geographical indication is usually obtained by acquiring a right over the sign that constitutes the
indication.
Geographical indications can be used for the following products

Agricultural products
Food stuffs
Industrial products
Handicrafts
Alcohol drinks

There are three main ways to protect a geographical indication:

•so-called sui generis systems (i.e. special regimes of protection);
•using collective or certification marks; and
•methods focusing on business practices, including administrative product approval schemes.

The good quality of the products opens the international door for the producers.
A geographical indication is a public property of a particular area or state. It shall not be assigned or transferred,
pledged, mortgaged to others.
If the authorised user of GI tag dies, his right transfers on his successor in title.
Ethical and social responsibility and challenges

•Ethics is the study of moral obligation involving the distinction between right and wrong. As a
consequence, the study of ethics paved the way for the adaption of the general rules of conduct in society.
•The rules about how entrepreneurs ought to behave are referred to as business ethics.
•The ethical behavior required of entrepreneurs is determined by the following:
•The public;
•Interest groups like the Society of Prevention of Cruelty to Animals; Business organizations; and the
individual’s personal morals and values.
Social responsibility
Social Responsibility means eliminating corrupt, irresponsible or unethical behaviour which might harm to the
community, its people and the environment.

Social Responsibility of an Entrepreneur Towards Different Sections of The Society

•Responsibility Towards Employees
•Responsibility Towards Customers
•Responsibility Towards Shareholders
•Responsibility Towards Suppliers and Creditors
•Responsibility Towards Public in general
•Social responsibility is a very effective exercise of public relations.
•Image building of a business house in a society.
•Two-way activities, CSR make the upliftment of society, which in turn will co-operate with business firm in achieving
their business goals.
•To make the best use of natural resources so as to raise the level of national income and standard living of people.
•To create more and more employment opportunities for semiskilled people To protect the ecology of nation.
•To contribute to the economic development of backward region of the country.