Company Law Assignment

On
Rules Regarding Registration
And Incorporation of
A Company
Submitted By:
Anirudh Arora
Roll No. 12
VI
th
Semester
1
S.No. Table of Contents P No.
2
1. A!"no#ledement $
2. %udi!ial Pronoun!ements &
$. %udi!ial Pronoun!ements '
&. ()R*IN+ A C)*PAN, IN IN-IA .
/. Im0osition of ta1es .
'. Pro!edure of reistration 2S. $$3 4
.. Certifi!ate of in!or0oration 2S. $&3 5
4. %udi!ial Re6ie# 11
5. Pre7in!or0oration !ontra!ts 12
18 ST9P :IS9 ()R*A;ITI9S ()R ()R*ATI)N
)( A N9: C)*PAN,
1.
11. Commen!ement of business 2$
12. Bibliora0hy 2.
AC<N):;9-+9*9NT
$
I #ould li"e to than" my Com0any ;a# tea!her -r. =a>i *ohd
?sman for his !onstant su00ort and uidan!e throuhout the
ma"in of this assinment. I #ould also li"e to than" my
!olleaues and friends for their moti6ation and hel0.
&
Judicial Pronouncements
@ Selvarajan v ROC , [1986] 3 Camp LJ 275 Mad
E!l"#$ve %&ard &' ()e Me()&d$#( C)"r!) v *Ol 1985+ 57 Camp Ca#
,3 %&rn-
Ele!(r$!al Ca.le /evel&pmen( 0##n v 0r"n C&mmer!$al 1rem$#e#
C&&p 2&"#$n3 S&!$e(4 L(d, 51998+ 5 SCC 3966 07R 1998 SC 1998
L$n8 2$re 1"r!)a#e 9 Lea#$n3 C& 51+ L(d v S(a(e &' :erala, 52;;1+
1;3 C&mp Ca# 9, 7 :er
J&)n <)&ma# v /r :- Ja3ade##an, 52;;1+ 1;6 C&mp Ca# 619 SC
M&&#a =&&lam 0r$'' v E.ra)$m =&&lam 0r$'' 7LR 51913+ ,; Cal 7 1!-
1eel !a#e 51867+ 2C) 0pp67,6 16L<78;-
Oa8e# v <"r>"and 51867+ LR 2 2L 325-
J".$lee C&((&n M$ll# v Le?$#, 192, 0C 958
<- @- :r$#)na v 0nd)ra 1ra.)a 51+ L(d- 07R 196; 01 123
Sal$m 08.aral$ Aanj$ v @Ol, 52;;3+ 113 C&mp Ca# 1,1 %&rn
*n$ver#al M"("al 0$d 9 1&&r 2&"#e# 0##n v 0- /- <)appa Aa$d",
07R 1933 Mad 16-
1er'&rm$n3 R$3)(# S&!$e(4 L(d v L&nd&n <)ea(re &' @ar$e($e#, [1922]
:% 539B
R v ROC, [1931] 2 :% 197
%&?man v Se!"lar S&!$e(4 L(d, 1917 0C ,;6, ,38C,39
Mal"8 M&)amed v Cap$(al S(&!8 E!)an3e :erala L(d, 51991+ 72
C&mp Ca# 333 :er-
C7< 4 C$(4 M$ll# /$#(r$."(&r# 51+ L(d, 51996+ 2 SCC 375-
7nle! 7nve#(men( 51+ L(d v /4nama($! 24dra"l$!# L(d, [1989] 3 C&mp
LJ 221, 225 CL%-
Aa(al Land 9 C&l&n$#a($&n C& v 1a"l$ne C&ll$er4 S4nd$!a(e- 89 L<
6786 19;, 0C 12;6 [19;;C;3] 0ll ER Rep E( 1;5;-
@al$ 1a((a.)$rama Ra& v Raman"ja =$nn$n3 9 R$!e Da!(&r4 51+ L(d,
51986+ 6; C&mp Ca# 568 01-
2&?ard v 1a(en( 7v&r4 M'3 C&, 51988+ 38 C) / 156
Ja$ Aara$n 1ara#ramp"r$a v 1"#)pa /ev$ Sara', 52;;6+ 133 C&mp
Ca# 79, SC
/
7mper$al <ea M'3 C& v M"n!)er#)a?, 51889+ 13 %&rn ,15-
Ae?.&rne v Sen#&l$d L(d, [1953] 1 0ll ER 7;8, 7;96 [195,] 1 E% ,5
:elner v %a(er Rev$#$(ed, 51967+ 3; M&d LR 328
Small?&&d v %la!8- 51965+ 39 0LJR ,;5
1)&n&3ram L(d v Lane, [1981] 3 0ll ER 182, C0
1ar8e v M&dern F&&dmen, 181 777 21,, 23,, 5SC &' 7ll$n&$#, *-S-0-+-
Ca(r&n$! 5*:+ L(d v /e#&n$(e, 51991+ %CLC 721 C0
:&da8 L(d v Sr$n$va#an, 51936+ 6 C&mp Ca# ,,; Mad
:$#)an3ar) Ele!(r$! S"ppl4 C& L(d v S(a(e &' Raja#()an, 07R 196;
Raj 1,9
'
Registration and Incorporation
What is a Company?
Com0any is a 6oluntary asso!iation of 0ersons formed for the 0ur0ose of
doin business ha6in a distin!t name and limited liability. It is a Auristi!
0erson ha6in a se0arate leal entity distin!t from the members #ho
!onstitute itB !a0able of rihts and duties of its o#n and endo#ed #ith the
0otential of 0er0etual su!!ession. The Com0anies A!tB 15/'B states that
C!om0anyC in!ludes !om0any formed and reistered under the A!t or an
e1istin !om0any i.e. a !om0any formed or reistered under any of the
0re6ious !om0any la#s. Do#e6erB !om0any is not a !iti>en so as to !laim
fundamental rihts ranted to !iti>ens.
Com0any is a CAuristi! 0ersonC and it !an file a suit as an Cindient 0ersonC
An 910ression C0ersonC in!ludes not merely a natural 0erson but also other
Auridi!al 0ersons. A !om0any bein a Auristi! 0erson #ould be re0resented
before a Court of la# or any other 0la!e by a 0erson !om0etent to re0resent
it. It is enouh that the 0erson !om0etent to re0resent a !om0any 0resents
the a00li!ation on behalf of the !om0any. *inorsB lunati!s or 0erson under
any disability are also entitled to file a suit either throuh uardian or the
ne1t friend. In su!h a !ase it is the uardian or ne1t friend #ho is !om0etent
to re0resent the 0etitioner.
Com0any is a se0arate leal entity
Com0any is se0arate leal entity distin!t from its shareholders. The maAor
!onstituents of a !om0any are its membersB #ho are the ultimate o#ners and
its dire!tors. It is an im0ortant feature of the !om0any form of businessB that
there is a a0 bet#een the o#nershi0 and !ontrol o6er the affairs of the
!om0any. In real sense the members are the o#ners of a !om0anyB but it is
bein manaed by the dire!tors #ho are ele!ted re0resentati6es of its
membersB be!ause it is absolutely ne!essary for it to ha6e a human aen!y
!alled as the Com0anyCs board of dire!tors. The Board of -ire!tors
!om0rises the dire!tors.
FORI!" A COPA!# I! I!$IA
.
The Com0anies A!t of 15/' sets do#n rules for the establishment of both
0ubli! and 0ri6ate !om0anies. The most !ommonly used !or0orate form is
the limited !om0anyB unlimited !om0anies bein relati6ely un!ommon. A
!om0any is formed by reisterin the *emorandum and Arti!les of
Asso!iation #ith the State Reistrar of Com0anies of the state in #hi!h the
main offi!e is to be lo!ated.
(orein !om0anies enaed in manufa!turin and tradin a!ti6ities abroad
are 0ermitted by the Reser6e Ban" of India to o0en bran!h offi!es in India
for the 0ur0ose of !arryin on the follo#in a!ti6ities in India:
To re0resent the 0arent !om0any or other forein !om0anies in
6arious matters in IndiaB for e1am0leB a!tin as buyinEsellin aents
in IndiaB et!.
To !ondu!t resear!h #or" in #hi!h the 0arent !om0any is enaed
0ro6ided the results of the resear!h #or" are made a6ailable to Indian
!om0anies
To underta"e e10ort and im0ort tradin a!ti6ities
To 0romote 0ossible te!hni!al and finan!ial !ollaboration bet#een
Indian !om0anies and o6erseas !om0anies.
Imposition of ta%es
CurrentlyB domesti! !om0anies are ta1able at the rate of $/.4./F Gin!lusi6e
of sur!hare of 2./FH on its ta1able in!ome. (orein !om0anies are ta1ed at
a marinally hiher rate of &1F Gin!ludin sur!hare of 2./FH. Do#e6erB in
!ase #here the in!ome ta1 liability of the !om0any under the 0ro6isions of
the domesti! ta1 la#s #or"s out to less than ../F of the boo" 0rofits
Gderi6ed after ma"in the ne!essary adAustmentsHB a *inimum Alternate Ta1
of ..'4./F Gin!ludin a sur!hare of 2./FH on the boo" 0rofitsB #ould be
0ayable. -omesti! !om0anies are reIuired to 0ay a di6idend distribution ta1
of 12.412/F Gin!ludin sur!hare of 2./FH on the di6idends distributed
durin the year.
Com0anies are reIuired to #ithhold ta1 under the domesti! la# from !ertain
0ayments in!ludin salaries 0aid to em0loyeesB interestB 0rofessional feeB
0ayments to !ontra!torsB !ommissionB #innins from ames E lottery E horse
4
ra!es et!. *oreo6erB ta1es ha6e to be #ithheld from all 0ayments made to
non7residents at the lo#er of rates s0e!ified under the domesti! la# or under
the a00li!able ta1 treatyB if any.
Procedure of registration &'( ))*
To obtain the reistration of a !om0any an a00li!ation has to be file #ith the
Reistrar of Com0anies. The a00li!ation must be a!!om0anied by the
follo#in do!uments
1
:
1. *emorandum of Asso!iation.
2. Arti!les of Asso!iationB if ne!essary.
2
$. The areementB if anyB #hi!h the !om0any 0ro0oses to enter into #ith any
indi6idual for his a00ointment as its manain or #hole time dire!tor or
manaer.
The do!uments for reistration must be su00orted by a de!laration statin
that all the reIuirements of the A!t relatin to reistration ha6e been
!om0lied #ith. The de!laration must be sined by an Ad6o!ate of the
Su0reme Court or of a Dih Court or an attorney or a 0leader entitled to
a00ear before a Dih Court or a Se!retaryB or a !hartered a!!ountantB in
#hole7time 0ra!ti!e in India #ho is enaed in the formation of a !om0any
or a 0erson named in the arti!les as a dire!torB manaer or se!retary of the
!om0any. 2So $$G2H3
Se!tion 12B #hi!h states the mode of formin an in!or0orated !om0anyB
enables any se6en 0ersons Gt#o for a 0ri6ate !om0anyH to asso!iate for any
la#ful 0ur0ose and to et themsel6es in!or0orated into a !om0any #ith or
#ithout limited liability. They !an do so by subs!ribin their names to a
memorandum of asso!iation and by !om0lyin #ith other reIuirements.
:hen the reIuisite do!uments are 0resentedB for reistrationB the Reistrar
has to see #hether they ans#er the reIuirements of the A!t. De mayB
ho#e6erB a!!e0t the de!laration as suffi!ient e6iden!e of !om0lian!e. De
1
S. $$. The a00li!ation has to be made to the Reistrar of the State in #hi!h the reistered offi!e of the
!om0any is stated by the memorandum to be situate.
2
Arti!les are !om0ulsory only for unlimited !om0aniesB !om0anies limited by uaranteeB and 0ri6ate
!om0anies 2So 2'3. The do!uments ha6e to be in 0rint and !om0uter 0rintin by laser .. is 6alid for this
0ur0oseB but not 1ero1. Sel6araAan 6 R)CB 2154'3 $ Cam0 ;% 2./ *ad: G154.H '2 Cam0 Cas 228.
5
then reisters the !om0any and other do!uments and 0la!es the name of the
!om0any in the Reister of Com0anies.
$
A !ertifi!ate of in!or0oration is then
issued by the Reistrar #hi!h !ertifies Junder his hand that the !om0any is
in!or0orated andB in the !ase of a limited !om0anyB that the !om0any is
limitedJ.
&

Certificate of incorporation &'( )+*
The !ertifi!ate of in!or0oration brins the !om0any into e1isten!e as a leal
0erson. ?0on its issue the !om0any is born. (or the A!t 0ro6ides that Cfrom
the date of in!or0oration su!h of the subs!ribers of the memorandum and
other 0ersonsB as may from time to time be the members of the !om0anyB
shall be a body !or0orateB ... !a0able forth#ith of e1er!isin all the fun!tions
of an in!or0orated !om0anyJ.
/
The !om0anyCs life !ommen!es from the date
mentioned in the !ertifi!ate of in!or0oration and the date a00earin on it is
!on!lusi6eB e6en if #ron.
'
Certificate as Conclusi,e -,idence
Not only does the !ertifi!ate !reate the !om0any. It also is Jthe !on!lusi6e
e6iden!e that all the reIuirements of this A!t ha6e been !om0lied #ith in
res0e!t of reistration and matters 0re!edent and in!idental thereto and that
the asso!iation is a !om0any authorised to be reistered and duly reistered
under this A!tJ.
.
In other #ordsB the 6alidity of the !ertifi!ate !annot be
dis0uted on any rounds #hatsoe6er. This is illustrated by the de!ision of the
%udi!ial Committee of the Pri6y Coun!il in M&&#a =&&lam 0r$'' v E.ra)$m
=&&lam 0r$''.
4
$
Refusal to reister on a round #hi!h is not leitimate !an be set riht by a !ourt orderB e.. refusal on the
round of an enIuiry into the moti6es on future 0lans of 0romoters. 91!lusi6e Board of the *ethodist
Chur!h 6 ?)lB G154/H /. Cam0 Cas &$ Born.
&
S. $&G1H. 9le!tri!al Cable -e6elo0ment Assn 6 Arun Commer!ial Premises Coo0 Dousin So!iety ;tdB
G1554H / SCC $5': AIR 1554 SC 1554B the !on6ersion of an unreistered asso!iation into a !om0any #as
not su!!essful be!ause the arti!les of the !om0any #hi!h #as reistered did not !arry a !lause that the
members of the asso!iation #ould be!ome members of the !om0anyB nor there #as any resolution to that
effe!t. The asso!iation and the !om0any remained different entities.
/
S. $&G2H. ;in" Dire Pur!hase K ;easin Co GPH ;td 6 State of <eralaB G2881H 18$ Com0 Cas 5& I <erB the
!om0anyB a 0erson for the 0ur0oses of the <erala *oney ;enders A!tB bound to obtain li!en!e li"e an
indi6idual. %ohn Thomas 6 -r <. %aadessanB G2881H 18' Com0 Cas '15 SCB in the !ase of defamation of
!om0anyB its dire!tor is an Jarie6ed 0ersonJB entitled to maintain 0rose!ution under Se!tions &557/88B
IPC.
'
Ibid.
.
. S. $/ ..
4
I;R G151$H &8 Cal I P!.
18
The memorandum of asso!iation of a !om0any #as sined by t#o adult
0ersons and by a uardian of the other fi6e membersB #ho #ere minors at
the timeB the uardian ma"in a se0arate sinature for ea!h of the minors.
The ReistrarB ho#e6erB reistered the !om0any and issued under his hand a
!ertifi!ate of in!or0oration. The 0laintiff !ontended that this !ertifi!ate of
in!or0oration should be de!lared 6oid.
;ord *ACNA+DT9N said:
Their ;ordshi0s #ill assume that the !onditions of reistration 0res!ribed by
the Indian Com0anies A!t #ere not duly !om0lied #ithL that there #ere no
se6en subs!ribers to the memorandum and that the Reistrar ouht not to
ha6e ranted the !ertifi!ate. But the !ertifi!ate is !on!lusi6e for all 0ur0oses.
In 9nland the Iuestion #hether the ReistrarCs !ertifi!ate is !on!lusi6e #as
de!ided so far ba!" as 14'. by ;ord C07RAS G 7n 1eel !a#e
5
after sinature
and before reistration a 0ro0osed memorandum of asso!iation had been
altered #ithout the authority of the subs!ribers so materially that the
Jalteration entirely neutralised and annihilated the oriinal e1e!ution and
sinature of the do!umentJ. The !om0anyB ho#e6erB #as reistered and the
Reistrar a6e his !ertifi!ate of in!or0oration. It #as obAe!ted that the
memorandum of asso!iation had not been sined by se6en or indeed by any
subs!ribers and that the 0ro6isions of the A!t had not been !om0lied #ith.
To that 0ro0osition L&rd C07RAS assented. But Jthe !ertifi!ate of
in!or0orationJB he saidB Jis not merely a 0rima fa!ie ans#erB but a !on!lusi6e
ans#er to su!h obAe!tion .... :hen on!e the !ertifi!ate of in!or0oration is
i6en nothin is to be inIuired into as to the reularity of the 0rior
0ro!eedinsJ. The obser6ations of L&rd C2ELMSDOR/ $n Oa8e# v
<"r>"and
18
are to the same effe!t. JI thin"JB said his ;ordshi0B Jthe
!ertifi!ate 0re6ents all re!urren!e to 0rior matters essential to reistration ...
and that it is !on!lusi6e ... that all 0re6ious reIuisites ha6e been !om0lied
#ith.
11

JThus the 0osition is firmly established that if a !om0any is bornB the only
method to et it e1tinuished is not by assailin its in!or0orationB but by
resortin to the 0ro6isions of ena!tmentsB #hi!h 0ro6ide for the #indin u0
of the !om0aniesJ. This summary 6ie# of the 0osition is to be found in the
5
G14'.H 2Ch A00'.&: 1';T.48.
18
G14'.H ;R 2 D; $2/. See also %ubilee Cotton *ills 6 ;e#isB 152& AC 5/4.
11
I;R G151$H &8 Cal I P!
11
Audement of C20A/R0 RE//H CJ $n <- @- :r$#)na v 0nd)ra 1ra.)a 51+
L(d.
12
JIn this !ase the 910ress Ne#s0a0ers GPH ;td #ere the leadin 0ublishers of
ne#s0a0ers and #ee"lies. The +o6ernment ado0ted !ertain
re!ommendations of the :ae Board for im0ro6ement in the terms of
ser6i!e and salaries of the #or"in Aournalists. Thereu0on the 910ress
Ne#s0a0ers sold its underta"in to a ne# !om0any "no#n as Andhra Prabha
Pri6ate ;td. It #as alleed that the ne# !om0any #as formed for the illeal
0ur0ose of e6adin the ne# res0onsibility im0osed by the :ae Board andB
thereforeB the reistration of the !om0any should be de!lared 6oid.J
The CourtB ho#e6erB did not assent to the 0ro0osition that the 0ur0ose for
#hi!h the !om0any #as formed #as in any #ay unla#ful or o00osed to
0ubli! 0oli!y andB thereforeB held that !om0any #as 6alidly in!or0orated.
But e6en if some of the obAe!ts #ere illealB the leal 0ersona of the
!om0any !ould not ha6e been e1tinuished by !an!ellin the !ertifi!ate.
96en in su!h a !ase the !ertifi!ate is !on!lusi6e and the remedy #ould be to
#ind u0 the !om0any. The illeal obAe!tsB ho#e6erB do not be!ome leal by
the issue of the !ertifi!ate.
1$
Se!tion 12 !learly mentions that J0ersons
asso!iated for any la#ful 0ur0ose may ... form an in!or0orated !om0anyJ.
Judicial Re,iew
In some 9nlish !ases the !ourts ha6e e10lored the 0ossibility of re6ie#in
the ReistrarCs !ertifi!ates and ha6e !ome to the !on!lusion that they should
be o0en to Audi!ial re6ie#. A!!ordinlyB a !om0any #hi!h ha00ened to be
reistered for an unla#ful obAe!tB #as ordered to be stru!" off.
1&
12
AIR 15'8 AP 12$. Salim A"barali NanAi 6 V)lB G288$H 11$ Com0 Cas 1&1 BornB a !ertifi!ate of
in!or0oration #as not allo#ed to be !hallened. The !om0any !ould ha6e been e1tinuished only by
#indin u0. A !oo0erati6e so!iety #hi!h fulfilled the reIuirements of Part IM for reistration as !om0any
#as reistered in this !ase.
1$
?ni6ersal *utual Aid K Poor Douses Assn 6 A. -. Tha00a NaiduB AIR 15$$ *ad 1'.
Reistrar !an refuse to reister a memorandum #ith unla#ful obAe!ts andB if 0er !han!eB he ha00ens to do
soB his !ertifi!ate is not !on!lusi6e as to la#fulness of obAe!ts. Performin Rihts So!iety ;td 6 ;ondon
Theatre of VarietiesB 215223 <B /$5L R 6 R)CB 215$13 2 <B 15..
1&
R. R. -ruryB Nullity of Com0anies in 9nlish ;a#B G154/H &4 *od ;R '&& !onsiderin R 6 R)CB
Gunre0ortedH =B-B -e! 1.B 1548. This is so be!ause a !om0any !annot 0ro0erly be reistered for an
unla#ful 0ur0ose. See *oreB e1 0B 215$13 2 <B 15.B281L Bro#nB e1 0B 2151&3 2 <B 11'.1. The reistration
may be !an!elled by a00ro0riate 0ro!eedins. Bo#man 6 Se!ular So!iety ;tdB 151. AC &8'B &$47&$5:
2151'71.3 All 9R Re0 1. The !on!lusi6e 0resum0tion may not be raised #hereB e..B non7!om0lian!e #ith a
material statutory 0ro6ision lea6es the reistration an in!om0lete fa!tB +aiman 6 National Assn of *ental
DealthB G15.1H 1 Ch $1.. The !ertifi!ate #ould not be !on!lusi6e #here a trade union is reistered as a
12
The <erala Dih Court has held that a #rit !annot be issued to !an!el the
reistration of a !om0any under the Com0anies A!t.
1/
Pre.incorporation contracts
Com0any !annot be sued on Pre7in!or0oration Contra!t
Sometimes !ontra!ts are made on behalf of a !om0any e6en before it is duly
in!or0orated. But no !ontra!t !an bind a !om0any before it be!omes !a0able
of !ontra!tin by in!or0oration. JT#o !onsentin 0arties are ne!essary to a
!ontra!tB #hereas the !om0anyB before in!or0orationB is a non7entityJ.
1'

A
!om0any has no status 0rior to in!or0oration. It !an ha6e no in!ome before
in!or0oration for ta1 0ur0oses.
1.
Shares !annot be a!Iuired in the name of a
!om0any before its in!or0oration. A transfer form is liable to be reAe!ted
#here the name of a 0ro0osed !om0any is entered in
the !olumn of transferee.
14
ThusB for e1am0leB in En3l$#) 9 C&l&n$al
1r&d"!e C&, Re6
15
A soli!itorB on the instru!tions of !ertain entlemenB 0re0ared the ne!essary
do!uments and obtained the reistration of a !om0any. De 0aid the
reistration fee and in!urred the in!idental e10enses of reistration.
But the !om0any #as held not bound to 0ay for those ser6i!es and e10enses.
JThe !om0any !ould not be sued in la# for those e10ensesB inasmu!h as it
#as not in e1isten!e at the time #hen the e10enses #ere in!urred ... and
ratifi!ation #as im0ossibleJ.
JIt is not desirable to saddle the !or0oration #ith burdens im0osed u0on it in
ad6an!e by o6erly o0timisti! 0romoters.C
28
Company cannot sue on Pre.incorporation Contract
!om0anyB British Assn of +lass Bottle *f ;td 6 NettlefieldB G1511H 2. T;R 2..
1/
*alu" *ohamed 6 Ca0ital Sto!" 91!hane <erala ;tdB G1551H .2 Com0 Cas $$$ <er.
1'
9rie C% in <elner 6 Ba1terB G14''H ;R 2 CP 1.&: 1/ ;T 21$: 214'17.$3 All 9R Re0 91t 2885.
1.
CIT y City *ills -istributors GPH ;tdB G155'H 2 SCC $./.
14
Inle! In6estment GPH ;td 6 -ynamati! Dydrauli!s ;tdB 215453 $ Com0 ;% 221B 22/ C;B.
15
2158'3 2 Ch &$/: 22 T;R ''5. In ClinonCs ClaimB G1584H 2 Ch /1/ CAB a 0romoter #as not allo#ed to
re!o6er reistration fee 0aid by him Ro6er International ;td 6 Cannon (ilm Sales ;tdB G154.H 1 :;R 1/5.B
somebody #ho does not e1ist !annot !ontra!t.
28
%ose0h D. +rossB Pre7in!or0oration Contra!tsB G15.1H 4. ;=R $'.B $'4.
1$
Se!ondlyB the !om0any is also not entitled to sue on a 0re7in!or0oration
!ontra!t. JA !om0any !annot by ado0tion or ratifi!ation obtain the benefit of
a !ontra!t 0ur0ortin to ha6e been made on its behalf before the !om0any
!ame into e1isten!eJ. This #as held in Aa(al Land 9 C&l&n$#a($&n C& v
1a"l$ne C&ll$er4 S4nd$!a(e-
21
N Co entered into an areement #ith one CB #ho a!ted on behalf of a
0ro0osed syndi!ate. ?nder the areement N Co #as to i6e the syndi!ate a
lease of !oal minin rihts. The syndi!ate #as then reistered and stru!" a
seam of !oal and !laimed a lease #hi!h N Co refused. An a!tion by the
syndi!ate for s0e!ifi! 0erforman!e of the areement or in the alternati6e for
damaes #as held not maintainable as the syndi!ate #as not in e1isten!e
#hen the !ontra!t #as sined.
Ratification of Pre.incorporation Contract
ThusB so far as the !om0any is !on!ernedB it is neither bound byB nor !an
ha6e the benefit ofB a 0re7in!or0oration !ontra!t. But this is subAe!t to the
0ro6isions of the S0e!ifi! Relief A!tB 15'$. Se!tion 1/ of the A!t 0ro6ides
that #here the 0romoters of a !om0any ha6e made a !ontra!t before its
in!or0oration for the 0ur0oses of the !om0anyB and if the !ontra!t is
#arranted by the terms of in!or0orationB the !om0any may ado0t and
enfor!e it. J:arranted by the terms of in!or0orationJ means #ithin the s!o0e
of the !om0anyCs obAe!ts as stated in the memorandum. The !ontra!t should
be for the 0ur0oses of the !om0any. A 0ersonB #ho intended to 0romote a
!om0anyB a!Iuired a leasehold interest for it. De held it for sometime for a
0artnershi0 firmB !on6erted the firm into a !om0any #hi!h ado0ted the lease.
The lessor #as held bound to the !om0any under the lease.
22
A!!ordin to a de!ision of the Su0reme CourtB the !om0any has to a!!e0t
the transa!tion but it is not ne!essary that the transa!tion should be
mentioned in the !om0anyCs arti!les. The 6ery fa!t that the !om0any #as
see"in a de!laration of its o#nershi0 of the 0ro0erty #hi!h the dire!tors
21
45 ;T '.4: 158& AC 128: 2158878$3 All 9R Re0 91t 18/8.
22
Vali Pattabhirama Rao 6 RamanuAa +innin K Ri!e (a!tory GPH ;tdB G154'H '8 Com0 Cas /'4 AP. A ne#
!ontra!t !an also be made by the !om0any after in!or0oration in terms of the earlier !ontra!tB Do#ard 6
Patent I6ory *f CoB G1544H $4 Ch - 1/'. An im0lied !ontra!t may arise if the !om0any after
in!or0oration a!ts on the !ontra!t but not #hen it is under mista"en belief of bein bound by the earlier
!ontra!tB Northumberland A6enue Dotel CoB ReB G154'H $$ Ch - 1' CA.
1&
had 0ur!hased for it before in!or0oration #as suffi!ient to sinify
a!!e0tan!e of the transa!tion.
2$
A !ontra!t to allot shares after the !om0any
is in!or0orated is not for the 0ur0oses of the !om0any so that the !om0any
!annot enfor!e it aainst the other 0arty.
2&
Se!tion 15 of the same A!t 0ro6ides that the other 0arty !an also enfor!e the
!ontra!t if the !om0any has ado0ted it after in!or0oration and the !ontra!t is
#ithin the terms of in!or0oration.
Personal Right and Lia/ility of Contracting Agent
No#B in referen!e to !ontra!ts #hi!h do not fall #ithin the 0ur6ie# of the
abo6e 0ro6isionsB the Iuestion arises #hether they !an be enfor!ed by or
aainst the aent #ho a!ted on behalf of the 0roAe!ted !or0orationN The
ans#er #ill de0end u0on the !onstru!tion of the !ontra!t. If the !ontra!t is
made on behalf of a !om0any not yet in e1isten!eB the aent miht in!ur
0ersonal liability. (orB #here a !ontra!t is made on behalf of a 0rin!i0al
"no#n to both the 0arties to be non7e1istent the !ontra!t is deemed to ha6e
been entered into 0ersonally by the a!tual ma"er. SimilarlyB J#here a 0erson
0ur0orts to !ontra!t as aent he may ne6ertheless dis!lose himself as bein
in truth a 0rin!i0alB and brin an a!tion in his o#n nameJ.
2/
Thus the aents
#ere held 0ersonally liable in :elner v %a(er:
2'
The fa!ts #ere that the 0laintiff intended to sell #ine to a !om0any #hi!h
#as to be formedB but under the !ontra!t he areed to sell to the 0ro0osed
dire!tors of the !om0any. The 0ro0osed dire!tors intended to buy the #ine
on behalf of the !om0anyB butB as it #as not in e1isten!e #hen the !ontra!t
#as madeB they 0ersonally too" deli6ery. It #as held that as they had
!ontra!ted on behalf of a 0rin!i0al #ho did not e1istB they ha6in re!ei6ed
the #ineB must 0ay for it.
2.
As aainst itB in an Australian !aseB a 6endor of land #as not allo#ed to sue
for s0e!ifi! 0erforman!e the dire!tors of a 0ro0osed !om0any #ho
2$
%ai Narain Parasram0uria 6 Push0a -e6i SarafB G288'H 1$$ Com0 Cas .5& SC.
2&
Im0erial Tea *f Co 6 *un!hersha#B G1445H 1$ Born &1/.
2/
;ord +oddard C% in Ne#borne 6 Sensolid ;tdB 215/$3 1 All 9R .84B .85: 215/&3 1 =B &/.
2'
G14''H ;R 2 CP 1.&: 1/ ;T 21$: 214'17.$3 All 9R Re0 91t 2885.
2.
;ord +oddard C% at 0 .85 in Ne#borne 6 Sensolid ;tdB 215/$3 1 All 9R .84B .85. The !om0any had
one into liIuidation before 0ayin the 0laintiffCs bill. By 6irtue of S. 5G2H of the 9uro0ean Communities
A!tB GS. $' of the 9nlish Com0anies A!tB 1545H an aent of an unformed !om0any be!omes 0ersonally
liable. See Phonoram ;td 6 ;aneB 215413 $ All 9R 142B CA.
1/
!ontra!ted to buy somethin under the name of the !om0any #hi!h
subseIuently refused to ado0t the 0ur!hase.
24
:here the !ontra!t is 0ur0orted to be made by the !om0any itselfB it !annot
be enfor!ed by or aainst the aent throuh #hom the !om0any !ontra!tedB
be!ause Jthe relationshi0 bet#een a !om0any and its dire!tors is not the
ordinary one of 0rin!i0al and aent. :here a !om0any !ontra!tsB it is the
!om0any #ho !ontra!ts and its !ontra!t is merely authenti!ated by the
sinature of one or more of the dire!torsJ. And so in Ne#borne 6 Sensolid
G+BH ;td:
25
The 0laintiff #as a 0romoter and 0ros0e!ti6e dire!tor of a limited !om0anyB
named ;eo0old Ne#borne G;ondonH ;tdB #hi!h at the material time had not
been reistered. A !ontra!t for the su00ly of oods by the !om0any to the
defendants #as sined thus: C;eo0old Ne#borne G;ondonH ;tdCL and the
0laintiffCs name C;. N.C #as #ritten underneath. In an a!tion for brea!h of the
!ontra!t brouht by the 0laintiff aainst the defendants it #as held that the
!ontra!t #as madeB not #ith the 0laintiff #hether as aent or as 0rin!i0alB
but #ith a limited !om0any #hi!h at the date of the ma"in #as non7
e1istentB andB thereforeB it #as a nullityB and the 0laintiff !ould not ado0t it or
sue on it as his !ontra!t.
To the same effe!t is the de!ision of the Bombay Dih Court in Ram"umar
Potdar 6 Shola0ur S0innin K :ea6in Co ;td.
$8
There #as a !lause in the memorandum of a 0ro0osed !om0any under #hi!h
a !ertain firm #as to be a00ointed as manain aent of the !om0any. After
in!or0oration the !om0any a00ointed themB but subseIuentlyB the dire!tors
resol6ed to dismiss them. In an a!tion to restrain the !om0any from
!ommittin brea!h of the !ontra!tB it #as held that a !lause of this "ind in
the memorandum or arti!les does not !onstitute a !ontra!t bet#een the
!om0any and an outsider. 96en if it does !onstitute an im0lied !ontra!tB yetB
Jthis #as a 0reliminary !ontra!t su!h as the 0romoters ma"e before
in!or0oration of the !om0any. It is not 0ossible to brin a !om0any into
e1isten!e under the A!t bound by a !ontra!t 0re6iously madeJ.
$1
24
Small#ood 6 Bla!". G15'/H $5 A;%R &8/ De. (a!ts borro#ed from R. Ba1tB Personal ;iability of Aent
of ?nformed Com0anyL <elner 6 Ba1ter Re6isitedB G15'.H $8 *od ;R $24B See also :. 9. -a6ies.
Personal ;iability of -ire!tors of Non7C91istent Com0aniesB G15'&H ' ?ni6. of :. Australia ;R &88.
25
215/$3 1 All 9R .C04: 215/&3 1 =B &/.
$8
AIR 15$& Born &2.: G15$&H $' Born ;R 58..
$1
2d. at 0 &25B see also B B Rly Co 6 -istri!t BoardB 2& Paranas. AIR 15&' Ca12$.
1'
Thus it seems that the desire of the !ourts is to 0rote!t the ne# !om0any
from the burden of 0romotersC 0romisesB for they Jare 0ro6erbially 0rofuse in
their 0romisesB and if the !or0oration #ere to be bound by them it #ould e
subAe!t to many un"no#nB unAust and hea6y obliationsJ.
$2
:ith this
0rote!tion oes some sa!rifi!e alsoB for a !om0any !ould not sue a 0erson
Bho before its in!or0oration had !ontra!ted to buy its shares. In some !ases
0ersons renderin ser6i!es before in!or0oration had to o unremunerated.
$$
Dere the Courts #ill as far as 0ossible saddle the 0romoter #ith 0ersonality.
ThusB for e1am0leB in <&"!)e v Me(r&p&l$(an Rl4 Fare)&"#$n3 C&
$&
under a
!ontra!t #ith a 0romoter ser6i!es #ere rendered by a third 0arty to a
!om0any before its in!or0oration. The third 0arty not bein able to sueB it as
held that the 0romoter must sue the !om0any as a !onstru!ti6e trustee or the
benefit of the third 0arty.
'tatutory Reform
Some of these !om0li!ations ha6e been Csol6ed by the 9uro0ean
Communities A!tB 15.2. Se!tion 5G2H
$/
0ro6ides that #hen a !ontra!t
0ur0orts to be made by a !om0anyB or by a 0erson as aent for a !om0anyB at
a time #hen the !om0any has not been formedB thenB subAe!t to any
areement to the !ontraryB the !ontra!t shall ha6e effe!t as a !ontra!t entered
into by the 0erson 0ur0ortin to a!t for the !om0any or as aent for it and he
shall be 0ersonally liable on the !ontra!t a!!ordinly. These 0ro6isions ha6e
been in!or0orated into S. $'7C of the 2?<3 Com0anies A!tB 1545.
A 0erson attem0tin to in!or0orate a 0o0 rou0B obtained finan!ial
assistan!e fromBa re!ordin !om0any. De #as held 0ersonally liable to
refund the amount on his 0roAe!t failin to materialise.
$'
$2
Par"e 6 *odern :oodmenB 141 III 21&B 2$&B GSC of IllinoisB ?.S.A.H.
$$
SeeB Dereford K South :ales :aon K 9n CoB ReB G14.'H 2 Ch - '21L Rotherham Alum K
Chemi!al CoB ReB G144$H 2/ Ch - 18$L National *otor *ail7Coa!h CoB ReB G1584H 2 Ch 224: 215847183
All 9R 91t Re0 1$.$.
$&
G14.1H ;R ' Ch A00 '.1.
$/
This 0ro6ision #as in!or0orated in S. $'G&H of the 154/ A!t 29nlish3 and re7ena!ted as S. $'G1H in the
1545 A!t. In order to a6oid su!h 0ersonal liability the modern 0ra!ti!e is to "ee0 a draft7!ontra!t ready to
be e1e!uted by the !om0any after in!or0oration.
$'
Phonoram ;td 6 ;aneB G1541H $ All 9R 142B noted: %ohn *!*ullenB Preliminary Contra!ts by
PromotersB 215423 Camb ;% &.. See also Catroni! G?<H ;td 6 -esoniteB G1551H BC;C .21 CAB here also
the !ontra!tin aent #as held liable but that his liability by itself #ould not i6e him the riht to sue the
1.
'0-P WI'- FORALI0I-' FOR FORA0IO! OF A !-W
COPA!#
Persons desirous of formin a !om0any must adhere to the ste0 by ste0
0ro!edure as dis!ussed belo#:O

I. Sele!tion of ty0e of the !om0any.
II. Sele!tion of name for the 0ro0osed !om0any.
III. A00ly for -ire!tors Identifi!ation Number and -iital SinaturesB if
does not ha6e
IV. -raftin of *emorandum and Arti!les of Asso!iation.
V. Stam0inB diitally sinin and e7filin of 6arious do!uments #ith the
Reistrar.
VI. Payment of (ees.
VII. )btainin Certifi!ate of In!or0oration.
VIII. Pre0aration and filin of Pros0e!tusEStatement in lieu of Pros0e!tus
and e7(orm 15E28 Gin !ase of 0ubli! !om0aniesH for obtainin the !ertifi!ate
of !ommen!ement of business.
IM. )btainin Certifi!ate of Commen!ement of business Gin !ase of 0ubli!
limited !om0aniesH.

'election of the 0ype of Company
The 0romoters of a !om0any may be indi6iduals or bodies !or0orate
enaed in efforts to in!or0orate a !om0any. They ha6e the 0o#er of
definin the obAe!t of the !om0any and de!idin 6arious !onne!ted matters
reardin in!or0oration. Pro0osed s!ale of o0erationsB !a0ital in6ol6edB et!.
de0end u0on the 0ur0oses for #hi!h the !om0any is to be in!or0orated. The
0romoters are at liberty to sele!t ty0e of the !om0any 6i>. 0ri6ate !om0anyB
0ubli! !om0anyB non0rofit ma"in !om0anyB et!.

Re1uirement for ha,ing $I!
As 0er 0ro6iso to se!tion 2/$ of the Com0anies A!tB 15/'B inserted by the
Com0anies GAmendmentH A!tB 288'B #.e.f. 17117288'B no !om0any shall
other 0arty.
14
a00oint or re7a00oint any indi6idual as dire!tor of the !om0any unless he
has been allotted a -ire!tor Identifi!ation Number under se!tion 2''B.

Ne# se!tion 2''A has been inserted by the Com0anies GAmendmentH A!tB
288' #hi!h 0ro6ides that e6ery indi6idualB intendin to be a00ointed as
dire!tor of a !om0any shall ma"e an a00li!ation for allotment of -ire!tor
Identifi!ation Number G-INH to the Central +o6ernment in the 0res!ribed
-IN (orm. ThereforeB before submission of e7(orm 1A all the dire!tors of
the 0ro0osed !om0any must ensure that they are ha6in -IN and if they are
not ha6in -INB it should be first obtainedB ho#e6er on the basis of the
0ro6isional -IN allotted online #ill ser6e the 0ur0ose.
S0e!ifi! !are should be ta"en that a 0erson !annot ha6e more than one -INB
thereforeB a -IN on!e obtained shall ser6e the reIuirement for all the
!om0anies in #hi!h he is dire!tor or intended to be a dire!tor.

Re1uirement for ha,ing digital signatures
After 1'th Se0t.B 288'B e6ery do!uments 0res!ribed under the Com0anies
A!tB 15/' is reIuired to be filed #ith the diital sinature of the manain
dire!tor or dire!tor or manaer or se!retary of the Com0anyB thereforeB it is
!om0ulsorily reIuired to obtain diital sinatures of at least one dire!tor to
sin the e7(orm 1A and other do!uments.

'election of name
Si1 names are reIuired to be sele!ted in order of 0referen!e after ta"in
notes of numerous !larifi!ationsB !ir!ulars and rules made by the *inistry of
Com0any Affairs G-CAHB et!. In !ase "ey #ord is reIuiredB sinifi!an!e of
ea!h "ey #ord should be i6en in the e7(orm 1A.

APPL#I!" FOR A'C-R0AI!I!" 02- A3AILA4ILI0# OF 02-
'-L-C0-$ !A-
The 0romoters are reIuired to ma"e an a00li!ation to the !on!erned
Reistrar of Com0anies be submitted ele!troni!ally to the *inistry of
Com0any Affairs on the 0ortal of *CA. An a00li!ation shall be in e7(orm
1A as 0res!ribed by Notifi!ation No. +SR /'G9H dated 18th (eb.B 288' duly
15
diitally sined by any one 0romoter or manain dire!tor or dire!tor or
manaer or se!retary of the !om0any alon#ith the reIuired fee of Rs. /88
only for as!ertainin #hether the sele!ted name is a6ailable for ado0tion by
the 0romoters of the 0ro0osed !om0any.

APPRO3AL OF 02- !A-
After re!ei0t of !om0leted a00li!ation in e7(orm 1AB the Reistrar shall
intimate #hether the 0ro0osed name is a6ailable for ado0tion or not. The
!onfirmation of the name made a6ailable by the Reistrar shall be 6alid for a
0eriod of si1 months from the date of letter issued in these reards. In !aseB
if the 0romoters fails to submit all the reIuired do!uments for in!or0oration
#ithin that 0eriodB then they are reIuired to submit another a00li!ation for
re6alidation of name #ith fresh filin fee of Rs. /88 only.

In Or$en(al Me(al pre##$n3 F&r8# pr$va(e l$m$(ed @#- %)a#8er :a#)$na()
<)a8&&r
$.
B a!!ordin to Su0reme Court the offi!e of a dire!tor is to some
e1tent an offi!e of trust and there should be somebody a6ailable on #hom
res0onsibility !ould be fi1ed. (i1in su!h res0onsibility miht be diffi!ult if
the dire!tor is a !or0oration or an asso!iation or firm.
Preparation of the emorandum of Association 5OA6 and Articles of
Association 5AOA6
-raftin of the *)A and A)A is enerally a ste0 subseIuent to the
a6ailability of name made by the Reistrar. It should be noted that the main
obAe!ts should mat!h #ith the obAe!ts sho#n in e7(orm 1A. These t#o
do!uments are basi!ally the !harter and internal rules and reulations of the
!om0any. ThereforeB it must be drafted #ith utmost !are and #ith the ad6ise
of the e10erts and the other obAe!t !lause should be drafted in a 6ery broader
sense.

-stimate of Registration Fees for a !ew Company
The fees 0ayable to the Reistrar at the time of reistration of a ne#
!om0any 6aries a!!ordin to the authorised !a0ital of a !om0any 0ro0osed
to be reistered as 0er S!hedule M to the A!t. (ees !an be !al!ulated at the
*CA 0ortal usin fees !al!ulator.
$.
215'13 $1 Com0. Cas. 1&$ GSCH
28

Filing of documents with the Registrar
Ne1t ste0 for the 0romoters is to file the follo#in do!uments #ith the
Reistrar for in!or0oration of the !om0any. The follo#in do!uments shall
be submitted to the Reistrar alon#ith the adeIuate filin fees as a00li!able
for reistration of the !om0any ele!troni!ally on line basis #ithin a 0eriod of
si1 months from the date of intimation of a6ailability of name:O

GiH *emorandum of Asso!iationB duly sined by the subs!ribers and
#itnessedB sho#in the number of shares aainst their names ele!troni!ally
atta!hed in P-( file. It should also be 0ro0erly stam0ed as 0er the stam0
duty a00li!able in the StateB #here the reistered offi!e of the !om0any is to
be situated. Photora0hs of the subs!ribers shall also be atta!hed.
Simultaneously oriinal stam0ed !o0y of the *emorandum of Asso!iation
shall be submitted G0hysi!al submissoinH #ith the Reistrar of Com0anies
!on!erned.

GiiH Arti!les of Asso!iation should also be duly sined by the subs!ribers and
#itnessedB sho#in the number of shares aainst their names ele!troni!ally.
It should also be 0ro0erly stam0ed a!!ordin to the authorised share !a0ital.
Photora0hs of the subs!ribers shall also be atta!hed. Simultaneously
oriinal stam0ed !o0y of the Arti!le of Asso!iation shall be submitted #ith
the Reistrar of Com0anies !on!erned.

GiiiH Co0y of the areementB if anyB #hi!h the !om0any 0ro0oses to enter into
#ith any indi6idual for a00ointment as its manain or #hole7time dire!tor
or manaer shall be atta!hed in the P-( file.

Gi6H -e!laration in e7(orm 1 by an ad6o!ate or !om0any se!retary or
!hartered a!!ountant enaed in #hole time 0ra!ti!e in India or by a 0erson
named in the Arti!les as a dire!torB manaer or se!retary of the !om0anyB
that all the reIuirements of the Com0anies A!tB 15/' and the rules made
thereunder ha6e been !om0lied #ith in res0e!t of reistration. 2Refe Se!tion
$$G2H3

G6H Po#er of Attorney for should be furnished by all the subs!ribers in
fa6our of any one subs!riber or any other 0erson authorisin him to file
these do!uments and to #ith the Reistrar and to obtain !ertifi!ate of
21
in!or0oration. The 0o#er of attorney should be i6en on Non7%udi!ial stam0
0a0er of a00ro0riate 6alue and shall be submitted to the Reistrar.

G6iH )ther areement if anyB #hi!h has been stated in the *emorandum or
Arti!les of Asso!iation shall also be filed in the P-( file #ith the Reistrar
be!ause in su!h !ases the areement #ill form 0art of this basi! do!ument.

G6iiH 97(orm 14 is to be filed #ith the Reistrar ele!troni!ally #ith the
diital sinatures in reard to lo!ation of the reistered offi!e. 97(orm 14
shall also be !ertified by the !om0any se!retary or !hartered a!!ountant or
!ost a!!ountant in #hole7time 0ra!ti!e. 2Se!tion 1&'G2H3

G6iiiH 97(orm $2 is reIuired to be filed #ith the Reistrar ele!troni!ally for
filin 0arti!ulars of dire!tors. The 0ersonal details should mat!h #ith the
information 0ro6ided in the -IN. (ollo#in additional details are also
reIuired to i6en in e7(orm $2:
97(orm $2 is reIuired to be diitally sined by the dire!tor or manain
dire!tor or manaer or se!retary of the !om0any. 97(orm $2 shall be filed
alon #ith the adeIuate filin fee as 0res!ribed under S!hedule MIII of the
Com0anies A!tB 15/'.

'74I''IO! OF -.FOR 8

97(orm 1 has to be submitted #ith follo#in en!losures:
G1H *emorandum of Asso!iation G*oAH and Arti!le of Asso!iation GAoAH of
the !om0any 2Not reIuired for a !om0any li!ensed under se!tion 2/3L
G2H Anne1ure !ontainin details of subs!ribers G)0tionalHL
G$H Po#er of AttorneyEAuthority letter i6en by the
subs!ribersE0romotersEdire!tors to the 0rofessional i.e.ad6o!ate or attorney
or 0leader or CS or CA Gin #hole7time 0ra!ti!eH for formation of a !om0any.
G&H Co0y of *emorandum of Asso!iation G*oAH and Arti!le of Asso!iation
GAoAH after stam0in and 0hysi!ally sined by all the subs!ribers should be
deli6ered at the RoC offi!e #here !om0any is to be reistered.
Note: In !aseB if any subs!ribe 0ut his nameB and other des!ri0tions and sin
in a lanuae other thanB in #hi!h the *emorandum and Arti!les of
Asso!iatesB then it is reIuired by the #itness to i6e statement that he had
22
e10lained the !ontents of all the do!uments in su!h lanuae and the
subs!riber has sined the same after 0ro0er understandin of the same.
(urther that an Affida6it on the stam0 0a0er of adeIuate 6alue that he had
been e10lained the !ontents of the *emorandum and Arti!les of Asso!iation
and all other rele6ant do!uments for in!or0oration of the !om0any and
heEshe had 0ut hisEher sinature after 0ro0er understandin of the same and
this affida6it should also be furnished #ith the Reistrar alon #ith all the
do!uments as des!ribed abo6e.

Certificate of Incorporation 5'ections )) and )+6
)n the satisfa!tion of the Reistrar that the reIuirements s0e!ified in
se!tions $$G1H and $$G2H ha6e been !om0lied #ith by the !om0anyB he shall
retain the do!uments and reister the *)AB A)A and other do!uments.
Se!tion $&G1H !ast an obliation on the Reistrar to issue a Certifi!ate of
In!or0orationB normally #ithin . days of the re!ei0t of do!uments. It is
ad6isable to authorise some 0erson to !olle!t the !ertifi!ate 0ersonally from
the R)C )ffi!e.

Commencement of 4usiness
A Pri6ate limited !om0any and a !om0any not ha6in share !a0ital may
!ommen!e its business a!ti6ities from the date of its in!or0oration.
Do#e6erB a Publi! ;imited Com0any ha6in share !a0ital is also reIuired to
obtain a se0arate !ertifi!ate of !ommen!ement of business a!!ordin to
se!tion 1&5G2AH of the Com0anies A!tB 15/'.
Commencement of /usiness &'( 8+9*
A 0ri6ate !om0any !an !ommen!e business riht from the date of its
in!or0oration.
$4

ButB in the !ase of a 0ubli! !om0anyB a further !ertifi!ate for
$4
S. 1&5G.H. This #ill be so e6en if the 0ri6ate !om0any is the subsidiary of a 0ubli! !om0any.The se!tion
#ould not a00ly to deemed 0ubli! !om0any also unless the o0erati6e !ateory of deemin 0ro6isions
#ould reIuire the filin of a statement in lieu of 0ros0e!tus. The -e0tt. of Co Affairs G-CAH 2(ile No &&E/8
G;7IVE'23 is of o0inion that the !ommen!ement !ertifi!ate GS. 1&5H and statutory meetin reIuirement GS.
1'/H #ould not a00ly to a 0ri6ate !om0any !on6ertin itself into a 0ubli! !om0any. Certain internal
formalities #hi!h #ould be needed are a00ointin a !hairmanB ado0tin a !ommon sealB o0enin a ban"
2$
the !ommen!ement of business has to be obtained. This be!omes ne!essary
#here a !om0any has issued a 0ros0e!tus in6itin the 0ubli! to subs!ribe for
its shares. It #ill be entitled to the !ertifi!ate subAe!t to the follo#in
!onditions: 2So 1&5G1H3
GaH shares 0ayable in !ash must ha6e been allotted u0 to the amount of the
minimum subs!ri0tionL
GbH dire!tors must ha6e 0aid in !ash the a00li!ation and allotment money in
res0e!t of the shares !ontra!ted to be ta"en by them for !ashL
G!H no money is liable to be!ome refundable to the a00li!ants by reason of
failure to a00ly for or to obtain 0ermission for shares or debentures to be
dealt in on any re!onised sto!" e1!hane.
A de!laration sined by any dire!tor of the !om0any or its se!retary that the
abo6e reIuirements ha6e been !om0lied #ith should be filed #ith the
Reistrar. A !om0any #hi!h has not a00ointed a se!retaryB !an et the
sinature of a se!retary #ho is in #hole time 0ra!ti!e. A !om0any #hi!h has
not issued a 0ros0e!tus has only to file a statement in lieu of 0ros0e!tus and
to !ertify that e6ery dire!tor has 0aid his a00li!ation and allotment money
for shares !ontra!ted to be ta"en by him for !ash. 2So 1&5G2H3 :hen this is
doneB the Reistrar !ertifies that the !om0any is entitled to !ommen!e
business. The !ertifi!ate is !on!lusi6e e6iden!e that the !om0any is so
entitled.
$5
No 0ubli! !om0any !an !ommen!e any business or e1er!ise any borro#in
0o#er unless this !ertifi!ate is obtained.
&8
Any !ontra!t made before the date
at #hi!h the !om0any is entitled to !ommen!e business shall be 0ro6isional
only and shall not be bindin on the !om0any until the !ertifi!ate is
obtained.
&1
a!!ountB and allottin shares either to raise !a0ital or other#ise to the subs!ribers. These formalities #ould
reIuire a meetin of dire!tors.
$5
S. 1&5G$H. A #rit !annot be issued to !an!el the !ertifi!ate of !ommen!ementB *ulu" *ohamed 6 Ca0ital
Sto!" 91!hane <erala ;td. G1551H .2 Com0 Cas $$$ <er.
&8
S. 1&5G&H. <oda" ;td 6 Srini6asanB G15$'H ' Com0 Cas &&8 *ad. The !om0any be!omes entitled to all
"inds of business o0erations ne!essary for the attainment of its obAe!ts. <ishanarh 9le!tri! Su00ly Co ;td
6 State of RaAasthanB AIR 15'8 RaA 1&5. Resear!hB e10lorationsB sear!h for mar"etsB mobilisation of
resour!es and other 0reliminary thins !an be underta"en e6en #ithout the !ertifi!ate.
&1
S. 1&5G'H im0oses a 0enalty for any !ontra6ention of these 0ro6isions.
2&
The Amendment A!t of 15'/ introdu!ed !ertain ne# !onditions for the
!ommen!ement of business by a !om0any. 7It has added t#o ne#
subse!tions to Se!tion 1&5. As a result of the amendment of Se!tion 1$B the
obAe!ts !lause of a !om0any in!or0orated after the amendment #ill ha6e to
be di6ided into t#o sub7!lausesB namely:
1. *ain obAe!ts.7This #ill state the main obAe!ts of the !om0any and the
obAe!ts in!idental or an!illary to the attainment of the main obAe!ts.
2. )ther obAe!ts.7This #ill in!lude a statement of other obAe!ts not
mentioned in the abo6e !lause.
&2
If a !om0any #ishes to start a business in!luded in the Jother obAe!tsJ it
shall ha6e to obtain the authority of a s0e!ial resolution of its shareholders.
SimilarlyB #hen an e1istin !om0any #ants to !ommen!e any ne# business
#hi!h thouh in!luded in its obAe!ts is not ermane to the business #hi!h it
has been !arryin on at the !ommen!ement of the Amendment A!tB it shall
ha6e to obtain the authority of a s0e!ial resolution.
&$
:hereB ho#e6erB a
s0e!ial resolution has not been 0assedB but the 6otes !ast in fa6our of the
resolution e1!eed the 6otes !ast aainst itB the Central +o6ernment mayB on
an a00li!ation by the Board of dire!torsB allo# the !om0any to !ommen!e
su!h business.
&&
In both the abo6e !ases thereC must be filed #ith the Reistrar a de!laration
by the se!retary or a dire!tor that the reIuirement as to the resolution has
been !om0lied #ith.
&/
Con!lusi6eness of Certifi!ate of In!or0oration and Com0anies BillB 2885
Se!tion $/ of the Com0anies A!tB 15/' deals #ith the !on!lusi6eness of the
!ertifi!ate of in!or0oration. It 0ro6ides that PA !ertifi!ate of in!or0oration
i6en by the Reistrar in res0e!t of any asso!iation shall be !on!lusi6e
e6iden!e that all the reIuirements of this A!t ha6e been !om0lied #ith in
res0e!t of reistration and matters 0re!edent and in!idental theretoB and that
the asso!iation is a !om0any authorised to be reistered and duly reistered
under this A!t.Q
&2
S. 1$G1HGdH. The e1istin !om0aniesC memorandum !an remain as they are S. 1$GlHGeH.
&$
910lanation and sub7se!tion G27AH. :here the business is not related #ith the e1istin business it is not
ermane. Thus@ a ne# and unrelated business #ould attra!t these reIuirements.
&&
S. 1&5G27BH.
&/
S. 1&5G27AHGiiH. A 0enalty is im0osed for !ontra6ention of this 0ro6ision.
2/
The 0ro6ision intends to i6e !ertainty to the a!ts of a Sate fun!tionary i.e.
the Reistrar of Com0anies.
The Dih Court of Australia e10lained this in the !ase of S(ep)en#&n 9 S&n
L(d v- =$llander# 0r.)"(n&( 9 C&-
&'
as follo#s: P2The3 effe!t of formal
in!or0oration is not rearded by the leislature as em0o#erin the Reistrar
to inore !om0lian!e #ith the A!tL but the leislature #ishes to ensure that
after the ne# leal entity has been brouht into e1isten!e by the formal a!t
of a State fun!tionaryB it #ill not be ne!essary for 0ersons dealin #ith the
!om0any to as!ertain at their 0eril #hether the 6arious statutory
reIuirements ha6e been !om0lied #ithR It is not so mu!h a 0o#er i6en to
the Reistrar by the leislatureB as a 0rote!tion i6en to the 0ubli! #ho may
be dealin #ith the !om0any be!ause of the assum0tion that the Reistrar
#ill be !areful in the matterRQ
The !ertifi!ate of in!or0oration ma"es it !on!lusi6e that the reIuirements of
the Com0anies A!t #ith res0e!t to reistration ha6e been !om0lied #ith and
0re6ents the reo0enin of matters 0rior and !ontem0oraneous thereto. It
i6es effe!t to the belief that on!e a 0erson is born ali6e its e1isten!e !annot
be denied on the round of bein born out of #edlo!" or similar misdeeds.
This 0ro6ision is one of the e1!e0tions in la# to the 0rin!i0le that an a!t
based u0on fraudB et!. is 6oid ab initio. 96en if all the sinatures of the
subs!ribers are fored or all sinatories are minors that #ould not ta"e a#ay
the leal 0ersonality of the !om0any so !onferred. A !om0any on!e
in!or0orated and reistered !an be remo6ed from the reister only by
#indin u0 as 0er the 0ro6isions.
In the !ase of M&&#a =&&lam 0r$' v- E.ra)$m =&&lam 0r$''
&.
B only t#o adult
0ersons sined the memorandum and one of them sined as a uardian of
the other fi6e members #ho #ere all minors at the time. ;ord *a!nahten in
the Pri6y Coun!il said: PTheir ;ordshi0s #ill assume that the !onditions of
reistration 0res!ribed by the Indian Com0anies A!t #ere not duly !om0lied
#ithL that there #ere no se6en subs!ribers to the memorandum and that the
Reistrar ouht not to ha6e ranted the !ertifi!ate. But the !ertifi!ate is
!on!lusi6e for all 0ur0oses.Q
In 9nland the Iuestion #hether the ReistrarSs !ertifi!ate is !on!lusi6e #as
de!ided so far ba!" as 14'. by ;ords CairnsB sittin in the Court of A00eal.
&'
G15$1H &/ C;R &.'
&.
I;R G151$H &8 Cal 1 PC
2'
In 1eel v- L&nd&n and A&r() Fe#(ern Ra$l?a4I# !a#e
&4
B after sinature and
before reistrationB a 0ro0osed memorandum of asso!iation had been altered
#ithout the authority of the subs!ribers so materially thatB in the #ords of
;ord CairnsB Tthe alteration entirely neutrali>ed and annihilated the oriinal
e1e!ution and sinature of the do!ument. The !om0anyB ho#e6erB #as
reisteredB and the Reistrar a6e his !ertifi!ate of in!or0oration. It #as
obAe!ted that the memorandum of asso!iation had not been sined by se6en
or indeed by any subs!ribersB and that the 0ro6isions of the A!t had not been
!om0lied #ith. To that 0ro0osition ;ord Cairns assented. But the !ertifi!ate
of in!or0orationB he saidB is not merely a 0rima fa!ie ans#erB but a
!on!lusi6e ans#er to su!h obAe!tion . . . :hen on!e the !ertifi!ate of
in!or0oration is i6en nothin is to be inIuired into as to the reularity of
the 0rior 0ro!eedins. That #as a 0lain and dire!t de!ision on the 0oint.
The obser6ations of ;ord Chelmsford in Oa8e# v- <"r>"and
&5
are to the same
effe!t. I thin"B said his ;ordshi0B that the !ertifi!ate 0re6ents all re!urren!e
to 0rior matters essential to reistrationB amonst #hi!h is the subs!ri0tion
of a memorandum of asso!iation by se6en 0ersonsB and that it is !on!lusi6e
in this !ase that all 0re6ious reIuisites had been !om0lied #ith.S
Do#e6erB a similar 0ro6ision is !ons0i!uously missin from the Com0anies
BillB 2885. )ne !annot "no# #hether this omission is intentional or due to
o6ersiht. But the effe!t of this omission on the future administration of
!om0aniesB and in6estments therein is foreseeable.
1. ?nder the ne# Com0anies A!tB one !annot a!t on the basis of the
assum0tion that the Reistrar #ould ha6e a!ted !arefully and in a!!ordan!e
#ith la# #hile in!or0oratin the !om0any.
2. The shareholdersB in6estorsB !reditors and other sta"eholders #ould
deal #ith a !om0any at their o#n 0eril.
$. (raudB illeality #ould be fa6ourite defen!e for 0eo0le intendin to
et rid of burdensome !ontra!ts and dealins #ith the !om0any.
&. In6estors #ill be left to fend for themsel6es in su!h a situation.
/. There #ill be a s0ate of !or0orate litiation relyin hea6ily on this
missin lin".
Do#e6erB for so mu!h on the !on!lusi6eness of the !ertifi!ate of
in!or0orationB it may be noted that it does not #arrant that all the obAe!ts of
the !om0any as set out in its memorandum are lealB nor #ill it 6alidate
#hat may other#ise be illeal obAe!ts. It does not 0re6ent an arie6ed
0erson or the o6ernment from 0rose!utin a !laim aainst 0erson
&4
2158.3 1 Ch /
&5
214'.3 2 D; $2/
2.
res0onsible for ettin the !om0any in!or0orated #ith irreularities relatin
to 0ro!edural matters 0ertainin to reistration. Con!lusi6e e6iden!e does
not mean e1!lusi6e e6iden!e. )ne !an al#ays 0ro6e a fa!t by other leally
0ermissible means at his dis0osal.
4I4LIO"RAP2#
Com0any ;a# by A6tar Sinh
A Com0arati6e Study of Com0anies A!t 281$ and Com0anies A!t 15/' by Institute of
Com0anies Se!retaries of India GICSIH
A %ourney of Com0anies A!tB 15/' to The Ne# Com0any ;a# 7 An ?nderstandin by V.S.
Vadi6el
A Te1tboo" of Com0any ;a# GCor0orate ;a#H by P.P.S.+ona
24