Chapter 2 Incorporation

Incorporation of Company and Matters Incidental Thereto
(Section 3 - 22)
read with
The Companies (Incorporation) Rules, 2014
“Someone is sitting in the shade today because someone planted a tree long time ago.”
–Warren Buffett
Section Particulars Section Particulars
3 Formation of company 12 Registered office of Company

3A Members severally liable in certain cases 13 Alteration of Memorandum
4 Memorandum 14 Alteration of Articles
5 Articles 15 Alteration of Memorandum & Articles to be
noted in every copy
6 Act to override Memorandum, Articles, 16 Rectification of Name of Company
etc.
7 Incorporation of company 17 Copies of Memorandum, Articles, etc., to be
given to members
8 Formation of companies with Charitable 18 Conversion of companies already registered
Objects, etc.
9 Effect of Registration 19 Subsidiary company not to hold shares in its
Holding company
10 Effect of Memorandum & Articles 20 Service of Documents
10A Commencement of Business, etc. 21 Authentication of Documents, Proceedings and
Contracts
11 --- Omitted --- 22 Execution of Bills of Exchange, etc.
Division I Section 3 to 3A Promotion & Formation of a Company

Division II Section 4 to 6 Memorandum & Articles
Division III Section 7 to 12 Incorporation
Division IV Section 13 to 17 Alteration of MOA & AOA
Division V Section 18 Conversions
Division VI Section 19 to 22 Miscellaneous
2.2 Incorporation & Matters incidental CA Harsh Gupta
Division I – Promotion & Formation of a Company
PROMOTION AND PROMOTER

Nov 2014 – Who shall be considered as promoter according to the definition given in the Companies Act, 2013? Explain.
What is Promotion?
Promotion of a company involves

 Conceiving the idea;
 Forming a company;
 Taking the necessary steps to incorporate it by registration;
Meaning of Promoter
 Section 2(69)
"Promoter" means a person –
(a) who has been named as such in a prospectus or is identified by the company in the annual return referred
to in section 92; or
(b) who has control over the affairs of the company, directly or indirectly whether as a shareholder, director or
otherwise; or
(c) in accordance with whose advice, directions or instructions the Board of Directors of the company is
accustomed to act.
Provided that nothing in sub-clause (c) shall apply to a person who is acting merely in a professional
capacity.
 It is clear from the foregoing that the word "promoter" is used in common parlance to denote any individual,
corporate, syndicate, association or partnership which has taken all the necessary steps to create and mould a
company and set it going.
 A company may have several promoters. A promoter may be a natural person or a company.
Legal position of Promoter
 While the accurate description of a promoter may be difficult, his legal position is quite clear.
 A promoter is neither an agent of, nor a trustee for, the company because it is not in existence. However, his
position is similar to that of an agent and trustee. Hence as a general rule, contract made by promoter does not
bind the company
 The company could not ratify the contract made by a promoter before its incorporation, subject to some
exceptions mentioned below in the pre-incorporation contracts.
 He occupies a fiduciary position in relation to the company and to those persons whom they induce to become
shareholders in it.
Duties of Promoter
 Full and fair disclosure of interest  Not to make any secret profits
A promoter must make full and fair disclosure Being in a fiduciary position, may not make, either directly
of his interest in every transaction or contract or indirectly, any profit at the expense of the company and
with the company in which he is directly or that if he does make a profit in disregard of this rule, the
indirectly interested company can compel him to surrender the secret profits.
CA Harsh Gupta Incorporation & Matters Incidental 2.3
PRE - INCORPORATION OR PRELIMINARY CONTRACTS OR PROMOTERS’ CONTRACT

May 2004 – What do you understand by Pre-incorporation contracts?
Nov 2007 – What is meant by Pre-incorporation contracts? Can the contracts be enforced by the prospective company after its
incorporation against the third parties with whom the promoters had entered into certain contracts? Explain.
Meaning
A pre-incorporation contract is a contract entered into by the promoters on behalf of a proposed company, i.e. before
incorporation of the company, usually to acquire some property or rights.
Ratification
 A company could NOT ratify a contract made by a promoter before its incorporation. (Kelner v. Baxter)
 However, as per section 15 & 19 or Specific Relief Act, 1963 provides that a company as well as other party can
be bound by a pre-incorporation contract, IF:
 The promoters entered into the contract prior to incorporation;
 It is specifically provided in the contract that it is on behalf of the proposed company;
 Such contract is warranted by the terms of incorporation (i.e. it was necessary for incorporation and carrying
on business of the company)
 The company has adopted the contract after incorporation; and
 The acceptance is communicated to the third party
Position where the company adopts Position where the company does not adopt
the preliminary contract
 The contract can be enforced by or  The contract cannot be enforced by or against the company
against the company
 Even where the contract stipulates that the company shall be bound
 The contract is binding on the by it, the company shall not be bound as there is no privity of contract
company
 The promoters shall be personally liable on the contract
 The promoters shall not be (Kelner vs. Bexter)
personally liable
Nov 2007 – Sunrise Limited submitted the documents for incorporation on 5th October, 2014. It was incorporated and certificate of
incorporation of the company was issued in 20th October 2014. The company on October 14, 2014 entered into a contract which created
its contractual liabilities. The company denies the said liability on the ground that company is not bound by the contract entered into
prior to issuing of certificate of incorporation. Decide under the provisions of Companies Act, 2013, whether the company can be
exempted from the said contractual liability.
Solution –
Date of incorporation - October 20, 2014
Date of entering into contract - October 14, 2014
Nature of contract - Pre-incorporation contract
The company is exempted from the contractual liability since a company is not liable for a pre-incorporation contract.
However, company may adopt the said contract in terms of section 15 & 19 of Specific Relief Act, 1963 and shall be bound in that
case.
SECTION 3- FORMATION OF A COMPANY

Nov 2020 - Mr. Raja along with his family members is running successfully a trading business. He is capable of developing his ideas
and participating in the market place. To achieve this, Mr. Raja formed a single person economic entity in the form of One Person
Company with his brother Mr. King as its nominee. On 4th May 2020, Mr. King withdrew his consent as Nominee of the One Person
Company. Can he do so under the provisions of the Companies Act, 2013?
Examine whether the following individuals are eligible for being nominated as Nominee of the One Person Company as on 5th May
2020 under the above said Act.
i. Mr. Shyam son of Mr. Raja who is 15 years old as on 5th May 2020.
(Hint – NO)
ii. Ms. Devaki an Indian Citizen, sister of Mr. Raja stays in Dubai and India. She stayed in India during the period from 2nd January
2019 to 16th August 2019. Thereafter she left for Dubai and stayed there.
(Hint – YES, her stay in India doesn’t matter as she is an Indian citizen)
iii. Mr. Ashok, an Indian Citizen residing in India who is presently a member of a ‘One Person Company’.
(Hint – YES)
Study Mat - Abha formed a ‘One Person Company (OPC)’ on 15th October, 2017 with her husband Akhil as nominee and Rs. 10 lacs as
Authorised and paid-up share capital. In the month of April, 2018 she got in touch with a foreigner and is expecting to receive a
substantial export order by May, 2018 whose final delivery must be completed by December, 2018. She is contemplating to convert her
OPC into a private limited company before she receives the export order in May 2018. Comment
(Hint- Abha can convert her OPC as there is no minimum time period after which an OPC can be converted)
Study Mat, Nov 2019 & RTP May 2021 - Nadeem incorporated a "One Person Company" making his sister Nisha as the nominee. Nisha
is leaving India permanently due to her marriage abroad. Due to this fact, she is withdrawing her consent of nomination in the said
One Person Company. Taking into considerations the provisions of the Companies Act, 2013 answer the questions given below.
A. If Nisha is leaving India permanently, is it mandatory for her to withdraw her nomination in the said One Person Company?
(Hint – NO, withdrawal of nomination is not required as she continues to be an Indian citizen)
B. If Nisha maintained the status of Resident of India after her marriage, then can she continue her nomination in the said One
Person Company?
(Hint – YES, even if she doesn’t maintain the status of Resident of India, she can continue her nomination as she is an Indian
citizen)
Legal requirements for formation

(1) A company may be formed for any LAWFUL PURPOSE by –
(a) 7 or more persons, where the company to be formed is to be a PUBLIC COMPANY;
(b) 2 or more persons, where the company to be formed is to be a PRIVATE COMPANY; or
(c) 1 person, where the company to be formed is to be OPC that is to say, a private company,
by subscribing their names or his name to a memorandum and complying with the requirements of this Act in
respect of registration.
Additional requirements for formation of OPC → read with Rule 4
Appointment of Nominee + his consent
Provided that
 the memorandum of OPC shall indicate the name of the other person, with his prior written consent in
the prescribed form (Form INC-3),
 who shall, in the event of
 the subscriber's death or
 his incapacity to contract
become the member of the company and
 the written consent of such person shall also be filed with the Registrar at the time of incorporation of
the OPC along with its memorandum and articles.
Withdrawal of consent
Provided further that such other person may withdraw his consent in such manner as may be prescribed.
Change of nominee
Provided also that the member of OPC may at any time change the name of such other person by giving
notice in such manner as may be prescribed.
Provided also that

 it shall be the duty of the member of OPC to intimate the company the change, if any, in the name of the
other person nominated by him
 by indicating in the memorandum or otherwise within such time and in such manner as may be prescribed,
and
 the company shall intimate the Registrar any such change within such time and in such manner as may
be prescribed.
No alteration of memorandum
Provided also that any such change in the name of the person shall NOT be deemed to be an alteration of the
memorandum.
Classification of a company basis liability
(2) A company formed under sub-section (1) may be either -

a. a company limited by shares; or Having share capital
b. a company limited by guarantee; or
c. an unlimited company. NOT having share capital
Exemption – Specified IFSC Public/ Private company

In sub-section (2), the following proviso shall be inserted, namely –
“Provided that a Specified IFSC Public/ Private company shall be formed only as a company limited by shares”.
(Notification January 04, 2017)
Rule 3 – OPC
(1) Only a NATURAL PERSON who is an INDIAN CITIZEN whether resident in India or otherwise -
(a) shall be eligible to incorporate a OPC;
(b) shall be a nominee for the sole member of a OPC.
Explanation - For the purposes of this rule, the term "resident in India" means a person who has stayed in India for a
period of not less than 120 days during the immediately preceding financial year
(2) → A natural person shall not be member of more than a OPC at any point of time and
→ the said person shall not be a nominee of more than a OPC.
(3) Where a natural person, being member in OPC in accordance with this rule becomes a member in another such Company
by virtue of his being a nominee in that OPC, such person shall meet the eligibility criteria specified in sub rule (2) within a
period of 180 days.
THREE restrictions on OPC
(4) No minor shall become
 member or
 nominee of the OPC or
 can hold share with beneficial interest.
(5) Such Company cannot be incorporated or converted into a company under section 8 of the Act.
(6) Such Company cannot carry out Non-Banking Financial Investment activities including investment in securities of any body
corporates.
(Rule 5 --- Omitted ---)
Rule 6 – Conversion of OPC into a Public company or a Private company
(1) OPC shall alter its memorandum and articles by passing a resolution in accordance with section 122(3) of the Act to give
effect to the conversion and to make necessary changes incidental thereto.
(2) OPC may be converted into a Private or Public Company, other than a company registered under section 8 of the Act,
 after increasing the minimum number of members and directors to 2 or 7 members and 2 or 3 directors, as the
case may be, and
 maintaining the minimum paid-up capital as per the requirements of the Act for such class of company and
 by making due compliance of section 18 of the Act for conversion.
(3) The company shall file an application in Form INC-6 for its conversion into Private or Public Company, other than under
section 8 of the Act by attaching documents, namely -
 Altered MOA and AOA;
 copy of resolution;
 the list of proposed members and its directors along with consent;
 list of creditors; and
 the latest audited balance sheet and profit and loss account.
(4) On being satisfied that the requirements stated herein have been complied with, the Registrar shall approve the form and
issue the Certificate.
Rule 7 – Voluntary Conversion of Private company into OPC
(1) A Private company OTHER THAN a company registered under SECTION 8 of the Act may convert itself into OPC by
passing a SPECIAL RESOLUTION in the general meeting.
(2) Before passing such resolution, the company shall obtain No objection in writing from members and creditors.
(3) The OPC shall file copy of the special resolution with the Registrar of Companies within 30 days from the date of passing
such resolution in Form No. MGT-14
(4) The company shall file an application in Form No.INC-6 for its conversion into OPC, by attaching the following documents,
namely -
(i) The directors of the company shall give a declaration by way of affidavit duly sworn in confirming that all members
and creditors of the company have given their consent for conversion,
(ii) the list of members and list of creditors;
(iii) the latest Audited Balance Sheet and the Profit and Loss Account; and
(iv) the copy of No Objection letter of secured creditors.
(5) On being satisfied and complied with requirements stated herein the Registrar shall issue the Certificate.
Rule 7A – Penalty
If a OPC or any officer of such company contravenes any of the provisions of these rules,
Who is liable? Fine Further fine
OPC Up to INR 5,000 Up to INR 500/ day after the first day during which such
Any officer of the OPC contravention continues
SECTION 3A- MEMBERS SEVERALLY LIABLE IN CERTAIN CASES

RTP Nov 19 - Red Limited was incorporated on 1st April, 2014 is facing severe effects of depression of the economy. Owing to its bad
financial status most of the members have started withdrawing their holding from the company. The company had 250 members on
10th January, 2019. By 15th January, 2019, 244 members had withdrawn their holding. No new member has invested in the company
after 15th February till date. Now, Mr. A, an existing member has approached you to advise him regarding his liabilities in such a
situation.
MTP Nov 2021 - What is the minimum number of persons required to form a Private company and a Public company. Explain the
consequences when the number of members falls below the minimum prescribed limit.
If at any time the number of members of a company is reduced

 in the case of a PUBLIC COMPANY, below 7,
 in the case of a PRIVATE COMPANY, below 2,
AND the company carries on business for more than 6 months while the number of members is so reduced,
 every person who is a MEMBER of the company during the time that it so carries on business after those 6
months and
 is cognisant of the fact that it is carrying on business with less than 7 members or 2 members, as the case may
be,
 shall be severally liable for the payment of the whole debts of the company contracted during that time, and
may be severally sued therefor.
Division II – Memorandum & Articles
SECTION 4 - MEMORANDUM
May 2014 – Decide, under the Companies Act, 2013 whether Mr. Prabhu can incorporate a new company using the phrase “Electoral
Trust” with the name of the company.
[Hint - Only section 8 company can be incorporated with the word “Electoral Trust” – refer Explanation to Rule 8A]
Section 2(56) – Memorandum

"Memorandum" means the memorandum of association of a company as originally framed or as altered from time to time in
pursuance of any previous company law or of this Act.
 The Memorandum of Association is a key document which sets out the constitution of a company and is therefore the
foundation on which the structure of the company is built. It defines the scope of the company’s activities and its relations
with the outside world.
 The first step in the formation of a company is to prepare a document called the memorandum of association.
 The memorandum of association of a company contains the objects of the company which it shall pursue. It not only shows
the objects of formation of the company but also determines the scope of its operations beyond which its actions cannot
go.
 It is a public document (section 399). Consequently, every person entering into a contract with company is presumed to
have the knowledge of the conditions contained therein.
Clauses of MOA
(1) The memorandum of a company shall state –

(a) the NAME of the company with
(i) the last word "Limited" in the case of a Public limited company, or
(ii) the last words "Private Limited" in the case of a Private limited company.
Provided that nothing in this clause shall apply to a company registered under section 8.
(b) the STATE IN WHICH THE REGISTERED OFFICE of the company is to be situated;
(c) the OBJECTS for which the company is proposed to be incorporated and any matter considered necessary
in furtherance thereof.
(d) The LIABILITY of members of the company, whether limited or unlimited, and also state -
(i) in the case of a company limited by shares, that liability of its members is limited to the amount
unpaid, if any, on the shares held by them; and
(ii) in the case of a company limited by guarantee, the amount up to which each member undertakes to
contribute –
A. to the assets of the company in the event of its being wound-up; and
B. to the costs, charges and expenses of winding-up;
(e) in the case of a company having a share CAPITAL -
(i) → the amount of share capital with which the company is to be registered and
→ the division thereof into shares of a fixed amount and
→ the number of shares which the subscribers to the memorandum agree to subscribe which
shall not be less than one share; and
(ii) the number of shares each SUBSCRIBER to the memorandum intends to take, indicated opposite his
name;
(f) in the case of OPC, the name of the person who in the event of death of the subscriber shall become the
member of the company. (Nominee)
Exemption – Government company
In Section 4(1)(a), the words “in the case of a public limited company, or the last words "Private Limited" in the case of a private limited
company” shall be omitted.
(Notification June 05, 2015)
Exemption – Specified IFSC Public/ Private Company
 In Clause (a) of sub - section (1) after the proviso, the following proviso shall be inserted, namely –
Provided further that a Specified IFSC Public/ Private company shall have the suffix “International Financial Service Company” or “IFSC”
as part of its name.
 In clause (c) of subsection (1) of section 4 the following proviso shall be inserted, namely -
Provided that a Specified IFSC Public/ Private company shall state its objects to do financial services activities, as permitted under the
Special Economic Zones Act, 2005 read with the Special Economic Zones Rules, 2006 and any matter considered necessary in furtherance
thereof, in accordance with license to operate, from International Financial Services Centre located in an approved multi services Special
Economic Zone, granted by the RBI or the SEBI or the Insurance Regulatory and Development Authority of India.
DOCTRINE OF ULTRA VIRES

Meaning
 ‘Ultra’ means ‘beyond’ or ‘in excess of’ and ‘Vires’ means ‘powers’. Thus, ultra vires means an act or transaction beyond or in excess
of the powers of the company
 An act or transaction shall be ultra vires if –
 It is not permitted or authorized by the Act
 It falls outside the scope of the memorandum, and
 Its attainment is not incidental or ancillary to the attainment of main objects
Ashbury Railway Carriage & Iron Company Ltd. V. Richie [House of Lords]
Extracts of objects clause

The object clause of an industrial company contained the following objects beside some other objects:
 To make, sell or lend on hire, railway carriages and wagons.
 To carry on the business of mechanical engineers and general contractors.
 To purchase, lease, work and sell mine, minerals, land and buildings.
Nature of contract made by company with M/s. Richie

The company entered into a contract for financing of a construction of a railway line in the Belgium.
Further facts
- Board repudiated the contract on realizing that the company had gone beyond its object clause
- However, on Richie’s request, majority shareholders even ratified the contract
- Still Board refused to give further funds to Richie
- Richie claimed in the Court that contract was intra vires and moreover the majority shareholders had ratified it
Decision
 The Court held the above contract to be ultra-vires
 The word ‘general contractors’ had to be given a restricted meaning.
 Only such contracts could be covered in the term ‘general contractors’ as are in some way related or connected with
mechanical engineering (following the rule of EJUSDEM GENERIS)
 Therefore, the company could not finance the construction of a railway line by alleging that such a business falls under the
business of general contractors
 Further, Richie cannot sue the company as the contract is void-ab-initio.
 Even shareholders cannot ratify an ultra-vires act
Note: The doctrine of ultra-vires was later upheld by Supreme Court in the case of A. Lakshmanaswami Mudaliar v. L.I.C., 1963.
Consequences of Ultra-vires Act

 Contract is void-ab-initio
 An ultra vires act cannot become valid by estoppel or ratification.
 Directors are personally liable to company as well as third parties.
Ultra-vires the company vs. Ultra-vires the directors

 A distinction must be drawn between transactions which are ultra vires the company and the transactions which are ultra vires the
directors.
 Where the directors exceed their authority (say by exceeding authority under AOA) the same may be ratified by the general
body of the shareholders. Provided the company has the capacity to do that transaction as per its MOA i.e. it should not be ultra-
vires the company
IMPLIED POWERS
 Every company may necessarily possess certain powers which are implied, such as, a power to appoint and act through agents, and
where it is a trading company, a power to borrow and give security for the purposes of its business, and also a power to sell.
 Such powers are incidental and can be inferred from the powers expressed in the memorandum.
POWERS WHICH ARE NOT IMPLIED
Examples of some powers which are NOT implied -

 acquiring any business similar to the company’s own business
 entering into an agreement with other persons or companies for carrying on business in partnership or for sharing profit, joint
venture or other arrangements
 taking shares in other companies having similar objects
 promoting other companies or helping them financially
 a power to sell and dispose of the whole of a company’s undertaking
Section 453 – Punishment for Improper use of ‘Limited’ or ‘Private Limited’
No person shall use the word ‘Limited’ or ‘Private Limited’ as the last word(s) of the name or title under which he carries on
business unless:
 The association is a company as defined u/s 2(20); and
 Such company is a limited company
Fine for contravention = (INR 500 to INR 2,000) per day of contravention
Name NOT to be undesirable
(2) The name stated in the memorandum shall NOT –

(a) be identical with or resemble too nearly to the name of an existing company registered under this Act or
any previous company law; or
(b) be such that its use by the company –
(i) will constitute an offence under any law for the time being in force; or
(ii) is undesirable in the opinion of the CG (power delegated to RoC). [Rule 8(1) & 8(2)]
Prior approval of CG for prescribed words
(3) Without prejudice to the provisions of sub-section (2), a company shall not be registered with a name which
contains –
(a) any word or expression which is likely to give the impression that the company is in any way connected
with, or having the patronage of, the CG, any State Government, or any local authority, corporation or body
constituted by the CG or any State Government under any law for the time being in force; or
(b) such word or expression, as may be prescribed.
unless the previous approval of the CG [Rule 8(6)] has been obtained for the use of any such word or expression.
(Rule 8, 8A & 8B – refer Annexure 1 at the end of this Chapter)
Reservation of Name
(4) A person may make an application, in such form and manner and accompanied by such fee, as may be
prescribed, to the Registrar for the reservation of a name set out in the application as –
(a) the name of the proposed company; or
(b) the name to which the company proposes to change its name.
Rule 9 – Reservation of Name or Change of Name

 An application for RESERVATION OF NAME shall be made through the web service available at www.mca.gov.in
by using web service SPICe+ (Simplified Proforma for Incorporating Company Electronically Plus: INC-32), and
 for CHANGE OF NAME by using web service RUN (Reserve Unique Name) along with the prescribed fee,
 which may either be approved or rejected, as the case may be, by the Registrar, Central Registration Centre
 after allowing re-submission of such web form within 15 days for rectification of the defects, if any.
(5)
(i) Upon receipt of an application under sub-section (4), the Registrar may, on the basis of information and
documents furnished along with the application, reserve the name for a period of 20 days from the date of
approval or such other period as may be prescribed
Provided that in case of an application for reservation of name or for change of its name by an existing
company, the Registrar may reserve the name for a period of 60 days from the date of approval.
Rule 9A – Extension of Reservation of Name in certain cases
Upon payment of fees provided below through the web service available at www.mca.gov.in, the Registrar shall extend
the period of a name reserved under Rule 9 by using web service SPICE+: INC-32 upto –
(a) 40 days from the date of approval under Rule 9, on payment of fees of INR 1,000 made before the expiry of 20
days from the date of approval under Rule 9;
(b) 60 days from the date of approval under Rule 9 on payment of fees of INR 2,000 made before the expiry of 40
days referred to in clause (a) above;
(c) 60 days from the date of approval under Rule 9 on payment of fees of INR 3,000 made before the expiry of 20
days from the date of approval under Rule 9
Provided that the Registrar shall have the power to cancel the reserved name in accordance with section 4(5) of the
Act
(ii) Where after reservation of name under clause (i), it is found that name was applied by furnishing wrong or
incorrect information, then –
(a) IF the company has NOT been INCORPORATED,

 the reserved name shall be cancelled and
 the person making application shall be liable to a penalty up to INR 1 lakh;
(b) IF the company has been INCORPORATED, the Registrar may, after giving the company an opportunity
of being heard -
 either direct the company to change its name within a period of 3 months, after passing an ordinary
resolution;
 take action for striking off the name of the company from the register of companies; or
 make a petition for winding up of the company.
Form of MOA
(6) The memorandum of a company shall be in respective forms specified in Schedule I in
Table A MOA of a company limited by shares

Table B MOA of a company limited by guarantee and not having share capital
Table C MOA of a company limited by guarantee and having a share capital
Table D MOA of an unlimited company and not having share capital
Table E MOA of an unlimited company and having a share capital
Nov 2006 – The principal business of XYZ Company Ltd. was formed for the acquisition of vacant plots of land and to erect houses.
In the course of transacting the business, the Chairman of the Company acquired the knowledge of arranging finance for the
development of land. The XYZ Company introduced a financier to another company ABC Ltd. and received an agreed fee of INR 2
lakhs for arranging the finance.
The MOA of the company authorises the company to carry on any other trade or business which can in the opinion of the Board, be
advantageously carried on by the company with the company’s general business.
Referring to the provisions of Companies Act, examine the validity of the contract carried out by XYZ Company Ltd. with ABC Ltd.
Solution –
- The contract of arranging finance is ultra vires, since it falls outside the object clause of memorandum.
- An object contained in MOA is invalid if it authorises the company to carry on ANY other trade or business.
- Thus, company first needs to alter its MOA to insert a specific object of carrying the business of arranging the finance.
May 2010 – The object clause of the MOA of RST Ltd. authorises it to publish and sell text-books for students. The company, however
entered into an agreement with Q to supply 100 laptops of worth INR 5 lakh for resale purposes. Subsequently, the company refused to
make payment on the ground that the transaction was ultra vires the company. Examine the validity of the company’s refusal for
payment to Q under the provisions of the Companies Act.
Solution –
- The contract to purchase the laptops is an ultra vires contract
- Q cannot enforce the contract against RST Ltd.
SECTION 5 - ARTICLES
May 2015 – “The Doctrine of Indoor Management always protects the persons (outsiders) dealing with a company”. Explain the above
statement. Also, state the exceptions to the above rule.
Study Mat, Nov 2018 & MTP Nov 2021 - The persons (not being members) dealing with the company are always protected by the
doctrine of Indoor management. Explain. Also, explain when doctrine of Constructive Notice will apply.
MTP May 2020 - The directors of Smart Computers limited borrowed a sum of money from Mr. Tridev. The company's articles provided
that the directors may borrow on bonds such sums as may, from time to time, be authorized by resolution passed at a general meeting
of the company. The shareholders claimed that there had been no such resolution authorizing the loan, and therefore, it was taken
without their authority and the company is not bound to repay the loan to Tridev. In the light of the contention of shareholders, decide
whether the company is bound to pay the loan.
Study Mat & RTP May 2020 - Yadav Dairy Products Private limited has registered its articles along with memorandum at the time of
registration of company in December, 2014. Now directors of the company are of the view that provisions of articles regarding forfeiture
of shares should not be changed except by a resolution of 90% majority. While as per section 14 of the Companies Act, 2013 articles
may be changed by passing a special resolution only. Hence, one of the directors is of the view that they cannot make a provision
against the Companies Act, 2013. You are required to advise the company on this matter.
Nov 2020 - The Articles of Association of a Company may contain provisions for entrenchment under section 5 of the Companies Act,
2013. What is meant by entrenchment provision in the context? Also state the relevant provisions of the said Act dealing with
entrenchment provisions
Jan 2021 - The role of doctrine of 'Indoor management' is opposed to that of the role of 'Constructive notice'. Comment on this
statement with reference to the Companies Act, 2013.
MTP May 2021 - Mr. Shyamlal is a B. Tech in computer science. He has promoted an IT start up and got it registered as a Private
Limited Company. Initially, only he and his family members are holding all the shares in the company. While drafting the Articles of
Association of the company, it has been included that Mr. Shyamlal will remain as a director of the company for lifetime.
Mr. Mehra, a close friend of Mr. Shyamlal has warned him (Mr. Shyamlal) that in future if 75% or more shares in the company are
held by non- family members then by passing a Special Resolution, the relevant articles can be amended and Mr. Shyamlal may be
removed from the post of director.
Mr. Shyamlal has approached you to advise him for protecting his position as a director for lifetime. Give your answer as per the
provisions of the Companies Act, 2013.
Study Mat - Mr. Anil Desai, has applied for reservation of company name with a prefix “Sanwariya”. He claimed that the Prefix
“Sanwariya” is registered trademark in his name. Later on, it is found that the said prefix is not registered with Mr. Anil Desai,
however, he has formed company by giving incorrect documents/information while applying the name of the company. What action
can be taken against the company?
Section 2(5) – Articles

"Articles" means the articles of association of a company as originally framed or as altered from time to time or applied in
pursuance of any previous company law or of this Act;
 Articles cannot supersede Memorandum. AOA are subordinate to MOA.
Regulations in the Articles
(1) The articles of a company shall contain the regulations for management of the company.
(2) The articles shall also contain such matters, as may be prescribed.
Provided that nothing prescribed in this sub-section shall be deemed to prevent a company from including
such additional matters in its articles as may be considered necessary for its management.
Entrenchment provision
(3)
 The articles may contain PROVISIONS FOR ENTRENCHMENT to the effect that
 specified provisions of the articles may be altered only IF conditions or procedures as that are more
restrictive than those applicable in the case of a special resolution, are met or complied with.
Example – Mr. Tarun promoted an educational start up and got it registered as a private limited company. Initially he and his
family are holding all shares in the company. In the articles of the company it is written that Mr. Tarun will remain director of
the company for lifetime. But he has a fear that tomorrow if 75% or more shares in the company are held by non-family
members then by passing a special resolution articles may be changed and he may be removed from the post of director.
Therefore, it was also written in the articles that he can be removed from the post of director only if 95% votes are cast in favour
of the resolution. This is provision for entrenchment.
Example – Articles of XYZ Pvt Ltd. contains an entrenchment provisions to obtain consent of 90% voting rights for borrowing
funds. PQR Pvt Ltd. subscribes 20% shares of XYZ Pvt. Ltd and the remaining 80% shares are held by promoters and family.
Tomorrow if XYZ Pvt. Ltd. approaches any bank for a loan, bank officials would read the articles and would ask to get the consent
of PQR Pvt Ltd. If there was no entrenchment provision, XYZ Pvt Ltd may borrow money by passing a special resolution which
wouldn’t have required the consent of PQR Pvt Ltd. Thus, by entrenchment provision the rights of minority are protected.
(4)
 The provisions for entrenchment referred to in sub-section (3) shall only be made either on formation of
a company, or
 by an amendment in the articles agreed to
 by ALL the members of the company in the case of a Private company and
 by a special resolution in the case of a Public company.
(5) Where the articles contain provisions for entrenchment, whether made on formation or by amendment, the
company shall give notice to the Registrar of such provisions in such form and manner as may be prescribed.
Rule 10 - Where Articles Contains Entrenchment Provisions
Where the articles contain the provisions for entrenchment, the company shall give notice to the Registrar of such
provisions in SPlCe+: INC-32 at the time of incorporation of the company
or
in case of existing companies, the same shall be filed in Form No.MGT.14 within 30 days from the date of entrenchment
of the articles.
Model articles → read with Rule 11
(6) The articles of a company shall be in respective forms specified in Schedule I in

Table F AOA of a company limited by shares
Table G AOA of a company limited by guarantee and having a share capital
Table H AOA of a company limited by guarantee and no having share capital
Table I AOA of an unlimited company and having a share capital
Table J AOA of an unlimited company and not having share capital
(7) A company may adopt all or any of the regulations contained in the model articles applicable to such company.
(8) In case of any company, which is registered after the commencement of this Act, in so far as the registered
articles of such company do not
 exclude or
 modify the regulations contained in the model articles applicable to such company,
those regulations shall, so far as applicable, be the regulations of that company in the same manner and to
the extent as if they were contained in the duly registered articles of the company.
Applicability to existing companies
(9) Nothing in this section shall apply to the articles of a company registered under any previous company law
unless amended under this Act.
]
DOCTRINE OF CONSTRUCTIVE NOTICE

Applicability
 This doctrine operates in the favour of a company, i.e. it creates a presumption in favour of the company and against the persons
dealing with the company
Effect of the doctrine
 Constructive notice means to the world at large
 Once registered, the memorandum and articles become public documents (section 399). Therefore, every person dealing with the
company is presumed to have read and understood the memorandum and articles before signing a contract with the company
 In other words, every person dealing with the company is deemed to have a “constructive notice” of the contents of its
memorandum and articles.
 The doctrine prevents any person dealing with the company from alleging that he did not know the provision contained in MOA
and AOA.
 If a person enters into a contract with the company in contravention of the provisions of memorandum and articles, he cannot
enforce such a contract.
 Griffith vs. Paget
The articles provided that a company can borrow money on a bond signed by 2 directors. But, actually the company borrowed the
money on the bond signed by only 1 director. Court held that the company is not liable to repay the loan at maturity, because the
bond is void.
DOCTRINE OF INDOOR MANAGEMENT OR TURQUAND’S RULE

Applicability
 While the doctrine of ‘constructive notice” seeks to protect the company against the outsiders, the principal of ‘indoor
management’ operates to protect the outsiders against the company.
 It operates in the favour of the outsiders, i.e., the doctrine creates presumption in favour of the outsiders.
 As per this doctrine, outsiders dealing with the company are not required to enquire into the internal management of the company.
 Outsiders have the right to presume that as far as internal procedures of the company are concerned, everything has been done
regularly.
 Once the outsiders have read and understood the MOA and AOA, they shall not be affected by the irregularities inside the doors
of the company by Board or members.
Effect of the doctrine

 If a contract is entered into on behalf of the company by any director or officer of the company, it is enforceable against the
company, if the provisions contained in MOA or AOA have been complied with, even though while entering into such a contract,
some internal irregularity had arisen of which the outsiders was unaware.
 Royal British Bank vs. Turquand
 The AOA of a company stated that the directors could borrow money on behalf of the company, if they are so authorized
by a resolution passed by shareholders in the GM.
 The directors, however, borrowed the money from Turquand without obtaining the required authorization
 Turquand had lent the money to the company assuming that the shareholders had authorized the directors to borrow money
as per the requirement of the articles.
 It was held that borrowing money, without authorization amounted to a mere internal irregularity and since Turquand had
no knowledge of such internal irregularity, he would not be prejudiced by such internal irregularity.
EXCEPTIONS to the doctrine of Indoor management
Knowledge The rule does not protect any person who has actual or even an implied notice of the lack of authority of the person
of acting on behalf of the company. Thus, a person knowing fully well that the directors do not have the authority to
irregularity make the transaction but still enters into it, cannot seek protection under the rule of indoor management
 Howard v. Patent Ivory Co.
- The articles of a company empowered the directors to borrow up to £ 1,000 only.
- They could, however, exceed the limit of £ 1,000 with the consent of the company in general meeting.
- Without such consent having been obtained, they borrowed £ 3,500 from one of the directors who took
debentures and the company refused to pay the amount.
- Held that, the debentures were good to the extent of £ 1,000 only because the director had notice or was
deemed to have the notice of the internal irregularity.
Forgery The rule of indoor management does not extend to transactions involving forgery or to transactions which are
otherwise void or illegal ab initio. In the case of forgery, it is not that there is absence of free consent but there is
no consent at all
 Rouben v. Great Fingal Consolidated

- A share certificate was issued under the common seal of the company.
- The secretary of the company had signed on the share certificate.
- However, the signatures of 2 directors were also required and were forged by the secretary
- Consequently, it is not that the title of the person is defective but there is no title at all. Therefore, howsoever
clever the forgery might have been, the personates acquire no rights at all.
- The certificate was held to be nullity and the holder of the certificate was not allowed to take advantage of
the doctrine of indoor management
Negligence The ‘doctrine of indoor management’, in no way, rewards those who behave negligently.
– suspicious
transactions  Underwood v. Bank of Liverpool
- A person who was a sole director and principal shareholder of a company deposited into his own account
cheques drawn in favour of the company.
- Held, that, the bank should have made inquiries as to the power of the director.
- The bank was put upon an enquiry and was accordingly not entitled to rely upon the ostensible authority of
director.
Ultra vires The benefit of this doctrine is not available in the case of any ultra-vires or illegal transactions.
or Illegal
transactions This Doctrine is also not applicable where a pre-condition is required to be fulfilled before company itself can
exercise a particular power. In other words, the act done is not merely ultra vires the directors/officers but ultra
vires the company itself.
May 2007 & Nov 2007 – The Secretary of a Company issued a share certificate to ‘A’ under the Company’s seal with his own signature
and the signature of a Director forged by him. ‘A’ borrowed money from ‘B’ on the strength of this certificate. ‘B’ wanted to realise
the security and requested the company to register him as a holder of the shares. Explain whether ‘B’ will succeed in getting the share
registered in his name.
Solution –
- Forgery is nullity. There is complete absence of the title
- A is not entitle to the shares and cannot take benefit of the doctrine of indoor management
- And accordingly, B is also not entitled to the shares.
- Refer case of Ruben vs. Great Fingal Consolidated
May 2008 – Under the AOA of Sunshine Ltd., directors had power to borrow up to INR 10,000 without the consent of the general meeting.
The Directors themselves lent INR 35,000 to the company without such consent and took debentures of the Company. Decide under
the provisions of the Companies Act, 2013, whether the company is liable? If so, what is the extent of liability of the company in this
case?
Solution –
- The Company is liable only up to INR 10,000
- Directors cannot avail the benefit of doctrine of Indoor Management as they are presumed to have the knowledge of the
irregularity
- Refer case of Howard vs. Patent Ivory Manufacturing Company.
Nov 2016 – The AOA of XYZ Ltd. provides the Board has authority to issue bonds provided such issue is authorised by the shareholders
by a necessary resolution in the general meeting of the company. The Company was in dire need of funds and therefore, it issued
bonds to Mr. X without passing any such resolution in general meeting. Can Mr. X recover the money from the company. Decide
referring the relevant provisions of the Companies Act, 2013.
Solution –
- The Company is liable to Mr. X
- Mr. X can take benefit of the doctrine of Indoor Management
- Refer the case of Royal British Bank vs. Turquand
Study Mat – Yadav dairy products Private limited has registered its articles along with memorandum at the time of registration of
company in December, 2014. Now directors of the company are of the view that provisions of articles regarding forfeiture of shares
should not be changed except by a resolution of 90% majority. While as per section 14 of the Companies Act, 2013 articles may be
changed by passing a special resolution only. One of the directors said that they cannot make a provision against the Companies Act.
You are required to advise the company on this matter.
Solution – As per section 5 of the Companies Act, 2013 the article may contain provisions for entrenchment to the effect that specified
provisions of the articles may be altered only if more restrictive conditions than a special resolution, are met.
The provisions for entrenchment shall only be made either on formation of a company, or by an amendment in the articles agreed to
by all the members of the company in the case of a private company and by a special resolution in the case of a public company.
Where the articles contain provisions for entrenchment, whether made on formation or by amendment, the company shall give notice
to the Registrar of such provisions in prescribed manner.
In the present case, Yadav dairy products Private Limited is a private company and wants to protect provisions of articles regarding
forfeiture of shares. It means it wants to make entrenchment of articles, which is allowed. But the company will have to pass a
resolution taking permission of all the members and it should also give notice to ROC regarding entrenchment of articles.
SECTION 6 - ACT TO OVERRIDE MEMORANDUM, ARTICLES, ETC.

Save as otherwise expressly provided in this Act -
(a) the provisions of this Act shall have effect notwithstanding anything to the contrary contained in the
 memorandum or
 articles of a company, or
 in any agreement executed by it, or
 in any resolution passed by the company in general meeting or by its Board of Directors, whether the
same be registered, executed or passed, as the case may be, before or after the commencement of this
Act; and
(b) any provision contained in the memorandum, articles, agreement or resolution shall, to the extent to which it
is repugnant to the provisions of this Act, become or be void, as the case may be.
Division III – Incorporation
SECTION 7- INCORPORATION OF A COMPANY

(Rule 12 to 18)
May 2011 – Which documents are required to be filed with the Registrar of companies at the time of registration?
May 2016 – State the documents and information for registration of OPC required to be filed with Registrar.
Study Mat – The MOA of a company as signed by 2 adult members and by a guardian of the other 5 minor members, the guardian
signing separately for each minor member. The Registrar registered the company and issued under his hand a Certificate of
Incorporation. The plaintiff contended that
a. conditions of registration were not duly complied with, and
b. that there were no seven subscribers to the Memorandum.
Will the Court uphold his contention?
(Hint – Moosa vs. Ebrahim)
Nov 2019 - Mahima Ltd. was incorporated by furnishing false information. As per the Companies Act, 2013, state the powers of Tribunal
(NCLT) in this regard.
Application + Documents to be filed with RoC

(1) There shall be filed with the Registrar (Rule 12) within whose jurisdiction the registered office of a company is
proposed to be situated, the following documents and information for registration, namely -
(i) the memorandum and articles of the company duly signed by all the subscribers to the memorandum in
such manner as may be prescribed; (Rule 13)
(ii) a declaration in the prescribed form by (Rule 14)
 an advocate, a chartered accountant, cost accountant or company secretary in practice, who is
engaged in the formation of the company, and
 by a person named in the articles as a director, manager or secretary of the company,
 that all the requirements of this Act and the rules made thereunder in respect of registration and
matters precedent or incidental thereto have been complied with;
(iii) a declaration from (Rule 15)
 each of the subscribers to the memorandum and
 from persons named as the first directors, if any, in the articles
 that he is not convicted of any offence in connection with the promotion, formation or management
of any company, or
 that he has not been found guilty of any fraud or misfeasance or of any breach of duty to any
company under this Act or any previous company law during the preceding 5 years and
 that all the documents filed with the Registrar for registration of the company contain information
that is correct and complete and true to the best of his knowledge and belief;
(iv) the address for correspondence till its registered office is established;
(v) the particulars of name, including surname or family name, residential address, nationality and such
other particulars of every subscriber to the memorandum along with proof of identity, as may be
prescribed, and in the case of a subscriber being a body corporate, such particulars as may be
prescribed; (Rule 16)
(vi) the particulars of the persons mentioned in the articles as the first directors of the company, their names,
including surnames or family names, the DIN, residential address, nationality and such other particulars
including proof of identity as may be prescribed; and (Rule 17)
(vii) the particulars of the interests of the persons mentioned in the articles as the first directors of the
company in other firms or bodies corporate along with their consent to act as directors of the company
in such form and manner as may be prescribed.
(Rule 12 to 17 – Not in syllabus)
Registration by Registrar
(2) The Registrar on the basis of documents and information filed under sub-section (1) shall
 register all the documents and information referred to in that sub-section in the register and
 issue a certificate of incorporation in the prescribed form to the effect that the proposed company is
incorporated under this Act.
Rule 18 - Certificate of Incorporation
The Certificate of Incorporation shall be issued by the Registrar in Form No.INC-11 and the Certificate of Incorporation
shall mention PAN of the company where if it is issued by the Income-tax Department
Allotment of CIN
(3) On and from the date mentioned in the certificate of incorporation issued under sub-section (2), the Registrar
shall allot to the company a Corporate Identity Number,
 which shall be a distinct identity for the company and
 which shall also be included in the certificate.
Preservation of documents by company
(4) The company shall maintain and preserve at its registered office copies of all documents and information as
originally filed under sub-section (1) till its dissolution under this Act.
Consequences of furnishing false information

(5) If any person furnishes any false or incorrect particulars of any information or suppresses any material
information, of which he is aware in any of the documents filed with the Registrar in relation to the registration
of a company, he shall be liable for action under section 447.
Consequences if a company is incorporated by furnishing false information
(6) Where it is proved that the company has been got incorporated by furnishing any false or incorrect information
or representation -
 the promoters,
 the persons named as the first directors of the company and
 the persons making declaration under clause (b) of sub-section (1)
shall each be liable for action under section 447.
Powers of Tribunal in case of furnishing false information
(7) Without prejudice to the provisions of sub-section (6), where a company has been got incorporated by
furnishing any false or incorrect, the Tribunal may, on an application made to it, on being satisfied that the
situation so warrants -
(a) pass such orders, as it may think fit, for regulation of the management of the company including changes,
if any, in its memorandum and articles, in public interest or in the interest of the company and its
members and creditors; or
(b) direct that liability of the members shall be unlimited; or
(c) direct removal of the name of the company from the register of companies; or
(d) pass an order for the winding up of the company; or
(e) pass such other orders as it may deem fit.
Provided that before making any order under this sub-section -

(i) the company shall be given a reasonable opportunity of being heard in the matter; and
(ii) the Tribunal shall take into consideration the transactions entered into by the company, including the
obligations, if any, contracted or payment of any liability.
Points to Ponder – Conclusive Evidence of Certificate of Incorporation
 A Certificate of Incorporation given by the Registrar in respect of any association shall be conclusive evidence that all the
requirements of the Act have been complied with in respect of registration and matters precedent and incidental thereto, and
that the association is a company authorised to be registered and duly registered under the Act.
 However, it is not conclusive for the purpose of any unlawful object stated in the MOA
 The Certificate of Incorporation is conclusive evidence that everything is in order as regards registration and that the company
has come into existence from the earliest moment of the day of incorporation stated therein with rights and liabilities of a natural
person, competent to enter into contracts
Jubilee Cotton Mills Ltd. v. Lewis]
 The MOA of a company was signed by two adults and by a guardian of the other 5 subscribers, who were minors. The Registrar,
however, registered the company and issued under his hand a Certificate of Incorporation. It was contended that this Certificate
of Incorporation should be declared void. It was held that it will be assumed that the conditions of registration prescribed by the
Indian Companies Act were not duly complied with; that there were no seven subscribers to the Memorandum and that the Registrar
ought not to have granted the certificate. But the certificate is conclusive for all purpose. Thus, the certificate prevents anyone
from alleging that the company does not exist.
Moosa v. Ebrahim ILR
 It is for the purpose of incorporation only that the certificate was made conclusive by the legislature and the certificate cannot
legalise the illegal object contained in the MOA. Where the object of a company is unlawful, it has been held that the certificate
of registration is not conclusive for this purpose.
Performing Right Society Ltd. v. London Theatre of Varieties
SECTION 8 - FORMATION OF COMPANY WITH CHARITABLE OBJECTS, ETC.

May 2004 & Nov 2007– Explain the provisions of Companies Act, 2013 relating to registration of a non-profit organisation as a
company. What procedure is required to be adopted for the said purpose?
[Hint – Write Section 8(1)]
License by CG to register Section 8 company

(1) Where it is proved to the satisfaction of the CG that a person or an association of persons proposed to be
registered under this Act as a limited company –
(a) has in its objects the promotion of commerce, art, science, sports, education, research, social welfare,
religion, charity, protection of environment or any such other object;
(b) intends to apply its profits, if any, or other income in promoting its objects; and
(c) intends to prohibit the payment of any dividend to its members,
 the CG (power delegated to RoC) may, by license issued in such manner as may be prescribed, and on such
conditions as it deems fit,
 allow that person or association of persons to be registered as a limited company under this section
without the addition to its name of the word "Limited", or as the case may be, the words "Private Limited",
and
 thereupon the Registrar shall, on application, in the prescribed form, register such person or association
of persons as a company under this section.
(Rule 19 – Not in syllabus)
Privileges & obligations of limited companies
(2) The company registered under this section shall enjoy all the privileges and be subject to all the obligations of
limited companies.
Firm may be member
(3) A firm may be a member of the company registered under this section.
Alteration of MOA and AOA or Conversion to any other company
(4)
(i) A company registered under this section shall not alter the provisions of its memorandum or articles EXCEPT
with the previous approval of the CG (power delegated to RoC).
(ii) A company registered under this section may convert itself into company of any other kind only after
complying with such conditions as may be prescribed. (power delegated to RD in case of conversion)
(Rule 21 & 22 – Not in syllabus)
[Note – As per Rule 21, a company needs to pass a Special Resolution at a general meeting for approving such
conversion along with the approval of Regional Director]
License for EXISTING companies

(5)
 Where it is proved to the satisfaction of the CG (power delegated to RoC) that a limited company registered
under this Act or under any previous company law
 has been formed with any of the objects specified in clause (a) of sub-section (1) and
 with the restrictions and prohibitions as mentioned respectively in clauses (b) and (c) of that sub-section,
 it may, by license, allow the company to be registered under this section subject to such conditions as the
CG deems fit and
 to change its name by omitting the word "Limited", or "Private Limited" from its name and
 thereupon the Registrar shall, on application, in the prescribed form, register such company under this
section.
Revocation of license
(6)
 The CG (power delegated to RD) may, by order,
 revoke the license granted to a company registered under this section
 if the company
 contravenes any of the requirements of this section or
 contravenes any of the conditions subject to which a license is issued or
 the affairs of the company are conducted fraudulently or
 affairs conducted in a manner violative of the objects of the company or
 affairs prejudicial to public interest, and
 without prejudice to any other action against the company under this Act,
 direct the company to convert its status and
 change its name to add the word "Limited" or the words "Private Limited", as the case may be, to its name
and
 thereupon the Registrar shall, without prejudice to any action that may be taken under sub-section (7), on
application, in the prescribed form, register the company accordingly.
Provided that no such order shall be made unless the company is given a reasonable opportunity of being
heard.
Provided further that a copy of every such order shall be given to the Registrar.
(7) Where a license is revoked under sub-section (6), the CG may, by order, if it is satisfied that it is essential in
the public interest, direct that
 the company be WOUND UP under this Act or
 AMALGAMATED with another company registered under this section:
Provided that no such order shall be made unless the company is given a reasonable opportunity of being
heard.
(8)
 Where a license is revoked under sub-section (6) and where the CG is satisfied that it is essential in the
public interest that the company registered under this section should be AMALGAMATED with another
company registered under this section and having similar objects, then,
 notwithstanding anything to the contrary contained in this Act,
 the CG may, by order, provide for such amalgamation to form a single company.
(9)
 If on the WINDING UP OR DISSOLUTION OF A COMPANY registered under this section,
 there remains, after the satisfaction of its debts and liabilities, any asset,
 they may be transferred to another company registered under this section, or
 may be sold and proceeds thereof credited to Insolvency and Bankruptcy Fund formed under section 224
of the Insolvency and Bankruptcy Code, 2016
(10) A company registered under this section shall amalgamate only with another company
 registered under this section and
 having similar objects.
Contravention
(11) If a company makes any default in complying with any of the requirements laid down in this section,
Fine
Who is liable?
Minimum Maximum
the company INR 10 lakh INR 1 crore
every officer in default INR 25,000 INR 25 lakh
Provided that when it is proved that the affairs of the company were conducted fraudulently, every officer in
default shall be liable for action under section 447.
Study Material & MTP May 19– Alfa school started imparting education on 1.4.2010, with the sole objective of providing education to
children of weaker society either free of cost or at a very nominal fee depending upon the financial condition of their parents. However,
on 30th March 2018, it came to the knowledge of the Central Government that the said school was operating by violating the objects
of its objective clause due to which it was granted the status of a section 8 company under the Companies Act, 2013. Describe what
powers can be exercised by the Central Government against the Alfa School, in such a case?
Solution - Section 8 of the Companies Act, 2013 deals with the formation of companies which are formed to promote the charitable
objects of commerce, art, science, education, sports etc. Such company intends to apply its profit in promoting its objects. Section 8
companies are registered by the Registrar only when a license is issued by the Central Government to them. Since, Alfa School was a
Section 8 company and it had started violating the objects of its objective clause, hence in such a situation the following powers can
be exercised by the Central Government -
(a) The Central Government may by order REVOKE THE LICENCE of the company where the company contravenes any of the
requirements or the conditions of this sections subject to which a licence is issued or where the affairs of the company are
conducted fraudulently, or violative of the objects of the company or prejudicial to public interest, and on revocation the Registrar
shall put ‘Limited’ or ‘Private Limited’ against the company’s name in the register. But before such revocation, the Central
Government must give it a written notice of its intention to revoke the licence and opportunity to be heard in the matter.
(b) Where a licence is revoked, the Central Government may, by order, if it is satisfied that it is essential in the public interest, direct
that the company be WOUND UP under this Act or amalgamated with another company registered under this section. However, no
such order shall be made unless the company is given a reasonable opportunity of being heard.
(c) Where a licence is revoked and where the Central Government is satisfied that it is essential in the public interest that the
company registered under this section should be AMALGAMATED with another company registered under this section and having
similar objects, then, notwithstanding anything to the contrary contained in this Act, the Central Government may, by order,
provide for such amalgamation to form a single company with such constitution, properties, powers, rights, interest, authorities
and privileges and with such liabilities, duties and obligations as may be specified in the order.
Study Mat, May 2019 & MTP Nov 2020 - A group of individuals intend to form a club namely 'Budding Pilots Flying club' as limited
liability company to impart class room teaching and aircraft flight training to trainee pilots. It was decided to form a limited liability
company for charitable purpose under Section 8 of the companies Act, 2013 for a period of ten years and thereafter the club will be
dissolved and the surplus of assets over the liabilities, if any, will be distributed amongst the members as a usual procedure allowed
under the Companies Act.
Examine the feasibility of the proposal and advise the promoters considering the provisions of the Companies Act, 2013.
Solution - According to section 8(1) of the Companies Act, 2013, where it is proved to the satisfaction of the Central Government that
a person or an association of persons proposed to be registered under this Act as a limited company –
(a) has in its objects the promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection
of environment or any such other object;
(b) intends to apply its profits, if any, or other income in promoting its objects; and
(c) intends to prohibit the payment of any dividend to its members;
the Central Government may, by issue of licence, allow that person or association of persons to be registered as a limited liability
company.
In the instant case, the decision of the group of individuals to form a limited liability company for charitable purpose under section 8
for a period of ten years and thereafter to dissolve the club and to distribute the surplus of assets over the liabilities, if any, amongst
the members will not hold good, since there is a restriction as pointed out in point (b) above regarding application of its profits or
other income only in promoting its objects. Further, there is restriction in the application of the surplus assets of such a company in
the event of winding up or dissolution of the company as provided in sub-section (9) of Section 8 of the Companies Act, 2013.
Therefore, the proposal is not feasible.
May 2021 - State Cricket Club was formed as a Limited Liability Company under Section 8 of the Companies Act, 2013 with the object
of promoting cricket by arranging introductory cricket courses at district level and friendly matches. The club has been earning surplus.
Of late, the affairs of the company are conducted fraudulently and dividend was paid to its members. Mr. Cool, a member decided
make a complaint with Regulatory Authority to curb the fraudulent activities by cancelling the licence given to the company.
1. Is there any provision under the Companies Act, 2013 to revoke the licence? If so, state the provisions.
2. Whether the Company may be wound up?
3. Whether the State Cricket Club can be merged with M/s. Cool Net Private Limited, a company engaged in the business of
networking?
Hint –
1. Mention section 8(6)
2. Mention section 8(7)
3. No, it can be merged only with any other section 8 company with similar objects.
SECTION 9 - EFFECTS OF REGISTRATION
From the date of incorporation mentioned in the certificate of incorporation,

 such subscribers to the memorandum and all other persons, as may, from time to time, become members of
the company,
 shall be a body corporate
 by the name contained in the memorandum,
 capable of exercising all the functions of an incorporated company under this Act and
 having perpetual succession
 with power to acquire, hold and dispose of property, both movable and immovable, tangible and intangible,
 power to contract and
 power to sue and be sued, by the said name.
Note - As per Companies (Amendment) Act, 2015; the mandatory requirement of Common seal has been omitted.
SECTION 10 - EFFECT OF MEMORANDUM AND ARTICLES
(1)
 Subject to the provisions of this Act, the memorandum and articles shall, when registered,
 bind the company and the members thereof to the same extent as if they respectively had been signed
by the company and by each member, and
 contained covenants on its and his part to observe all the provisions of the memorandum and of the
articles.
(2) All monies payable by any member to the company under the memorandum or articles shall be a debt due
from him to the company.
Points to Ponder
 Company is bound to members
Every member has some individual rights under the Act and the articles. If the company deprives any of its members
from such rights, such a member can sue the company for enforcement of such rights.
 Members are bound to company

MOA and AOA are deemed to be signed by the members and they are bound to the company to comply with the
provisions of the MOA and AOA.
 Members are NOT bound inter se (i.e. each other)

There is no privity of contract between members. However, a member may enforce his rights against another
through the company, but not directly.
 Company is NOT bound to outsiders

The MOA and AOA do not bound the company to the outsiders because of the general principle of law that a stranger
to a contract does not acquire any rights under the contract.
May 2004, May 2007 & May 2013 & Study mat– The AOA of a limited company provided that “X” shall be the law officer of the
company and he shall not be removed except on the ground of proved misconduct. The company removed him even though he was not
guilty of misconduct. Decide, whether company’s action is valid?
Solution –
- The company’s action is valid, since the MOA and AOA do not bind the company to the outsiders.
- Thus, unless X proves a contract independent of the MOA and AOA, he cannot enforce any right against the company as he has
no right to rely on the articles.
 Eley vs. Positive Govt. Security Life Assurance Co.
SECTION 10A – COMMENCEMENT OF BUSINESS, ETC.

MTP May 2021 - Mr. Dinesh incorporated a new Private Limited Company under the provisions of the Companies Act, 2013 and desires
to commence the business immediately. Please advise Mr. Dinesh about the procedure for commencement of business as laid under
the provisions of the Section 10A of the Companies Act, 2013.
Declaration
(1) A company
 incorporated after the commencement of the Companies (Amendment) Act, 2019 (November 2, 2018) and
having a share capital
 shall not commence any business or
 exercise any borrowing powers
 UNLESS -
(a) a DECLARATION is filed by a director

 within a period of 180 days of the date of incorporation of the company
 in such form and verified in such manner as may be prescribed,
 with the Registrar that
 every subscriber to the memorandum has paid the value of the shares agreed to be taken by
him on the date of making of such declaration; and
(b) The company has filed with the Registrar a VERIFICATION of its registered office as provided in
section 12(2)
Penalty
(2) If any default is made in complying with the requirements of this section,
Who is liable Amount of penalty

Company INR 50,000
Office is default INR 1,000 for each day during which such default continues but not exceeding an
amount of INR 1 lakh.
Strike-off
(3) Where
 no declaration has been filed with the Registrar under clause (a) of sub-section (1) within a period of 180
days of the date of incorporation of the company and
 the Registrar has reasonable cause to believe that the company is not carrying on any business or
operations,
 he may, without prejudice to the provisions of sub-section (2),
 initiate action for the removal of the name of the company from the register of companies under Chapter
XVIII
Rule 23A – Declaration at the time of commencement of business

The declaration under section 10A by a director shall be in Form No.INC-20A and shall be filed as provided in the Companies
(Registration Offices and Fees) Rules, 2014 and the contents of the said form shall be verified by a Company Secretary or a
Chartered Accountant or a Cost Accountant, in practice.
Provided that in the case of a company pursuing objects requiring registration or approval from any sectoral regulators such
as RBI, SEBI, etc., the registration or approval, as the case may be from such regulator shall also be obtained and attached
with the declaration.
--------------- Section 11 (Certificate of Commencement of business) – Omitted ------------------
SECTION 12 - REGISTERED OFFICE OF THE COMPANY

Nov 2015 – What is the importance of registered office of a company?
Solution –
 Necessary documents may be served upon or deposited
 Notices, letters etc. may be issued;
 Inspection may be done;
 Communication may be made;
 Determining jurisdiction of the company;
 Determination of revenue of the State
 Stamp duty in case of compromise and arrangement etc.
Registered office
(1) A company shall, within 30 days of its incorporation and at all times thereafter, have a registered office capable
of receiving and acknowledging all communications and notices as may be addressed to it.
(2) The company shall furnish to the Registrar verification of its registered office within a period of 30 days of its
incorporation in such manner as may be prescribed.
Rule 25 – Verification of Registered Office

(1) The verification of the registered office shall be filed in Form No.INC.22 along with the fee, and
(2) There shall be attached to said Form, any of the following documents, namely -
 the registered document of the title of the premises of the registered office in the name of the company;
 the notarized copy of lease or rent agreement in the name of the company along with a copy of rent paid receipt not
older than 1 month;
 the authorization from the owner or authorized occupant of the premises along with proof of ownership or occupancy
authorization, to use the premises by the company as its registered office;
 the proof of evidence of any utility service like telephone, gas, electricity, etc. depicting the address of the premises
in the name of the owner or document, as the case may be, which is not older than 2 months.
Labelling of Name & Registered office
(3) Every company shall –

(a) paint or affix its name, and the address of its registered office, and keep the same painted or affixed,
 on the outside of every office or place in which its business is carried on,
 in a conspicuous position,
 in legible letters, and
 if the characters employed therefor are not those of the language or of one of the languages in
general use in that locality, also in the characters of that language or of one of those languages;
(b) have its name engraved in legible characters on its seal; if any
(c) get its name, address of its registered office and the CIN along with telephone number, fax number, if
any, e-mail and website addresses, if any, printed in all its business letters, billheads, letter papers and
in all its notices and other official publications; and
(d) have its name printed on hundis, promissory notes, bills of exchange and such other documents as may
be prescribed.
Provided that where a company has changed its name(s) during the last 2 years, it shall paint or affix or print,
as the case may be, along with its name, the former name(s) so changed during the last 2 years as required
under clauses (a) and (c).
Provided further that the words "OPC" shall be mentioned in brackets below the name of such company,
wherever its name is printed, affixed or engraved.
Change of Registered office within same State
(4) Notice of every change of the situation of the registered office, verified in the manner prescribed, after the date
of incorporation of the company, shall be given to the Registrar within 30 days of the change, who shall record
the same.
(5) EXCEPT on the authority of a SPECIAL RESOLUTION passed by a company, the registered office of the
company shall not be changed OUTSIDE the local limits of any CITY, TOWN OR VILLAGE (“CTV”)
Provided that no company shall change the place of its registered office from the jurisdiction of one Registrar
to the jurisdiction of another Registrar WITHIN THE SAME STATE unless such change is confirmed by the
REGIONAL DIRECTOR on an application made in this behalf by the company in the prescribed manner.
(6)
 The confirmation referred to in sub-section (5) shall be communicated within a period of 30 days from
the date of receipt of application by the RD to the company and
 the company shall file the confirmation with the Registrar within a period of 60 days of the date of
confirmation
 who shall register the same and certify the registration within a period of 30 days from the date of filing
of such confirmation.
(7) The certificate referred to in sub-section (6) shall be conclusive evidence that all the requirements of this Act
with respect to change of registered office in pursuance of sub-section (5) have been complied with and the
change shall take effect from the date of the certificate.
Contravention
(8) If any default is made in complying with the requirements of this section,
Who is liable? Minimum penalty Maximum penalty
the company
INR 1,000/ day during which default continues INR 1 lakh
every officer in default
Strike-off
(9) If
 the Registrar has reasonable cause to believe that
 the company is not carrying on any business or operations,
 he may cause a physical verification of the registered office of the company in such manner as may be
prescribed and
 if any default is found to be made in complying with the requirements of sub-section (1),
 he may without prejudice to the provisions of sub-section (8),
 initiate action for the removal of the name of the company from the register of companies under Chapter
XVIII
Exemption – Specified IFSC Public/ Private Company
 After sub-section (1), the following proviso shall be inserted, namely -

“Provided that a Specified IFSC Public/ Private company shall have its registered office at the International Financial
Services Centre located in the approved multi services Special Economic Zone set-up under the Special Economic Zones
Act, 2005 read with the Special Economic Zones Rules, 2006, where it is licensed to operate, at all times.”
 In sub-section (2), the words ‘30 days’ shall be read as ‘60 days’
 In sub-section (4), the words ‘15 days’ shall be read as ‘60 days’
 In place of sub-section (5), the following sub-section shall be substituted, namely -
(5) Except on the authority of a resolution passed by the Board of Directors, the registered office of the Specified IFSC
Public/ Private company shall not be changed from one place to another within the IFSC
Provided that the Specified IFSC public company shall not change the place of its registered office to any other place
outside the said International Financial Services Centre.
Study Mat, MTP May 19 & MTP Nov 19 - XY Ltd. has its registered office at Mumbai in the State of Maharashtra. For better administrative
conveniences the company wants to shift its registered office from Mumbai to Nashik (within the State of Maharashtra). What
formalities the company has to comply with under the provisions of the Companies Act, 2013 for shifting its registered office as stated
above? Explain.
Solution - The Companies Act, 2013 under section 13 provides for the process of altering the Memorandum of a company. Since the
location or Registered Office clause in the Memorandum only names the state in which its registered office is situated, a change in
address from Mumbai to Nashik, does not result in the alteration of the Memorandum and hence the provisions of section 13 do not
apply in this case.
However, under section 12 (5) of the Act which deals with the registered office of company, the change in registered office from one
town or city to another in the same state, must be approved by a special resolution of the company. Further, registered office is shifted
from one ROC to another, therefore company will have to seek approval of Regional director.
May 2021 - Examine the validity of the following different decisions/proposals regarding change of office by A Ltd. under the provisions
of the Companies Act, 2013 -
(i) The Registered office is shifted from Thane (Local Limit of Thane District) to Dadar (Local limit of Mumbai District), both places
falling within the jurisdiction of the Registrar of Mumbai, by passing a special resolution but without obtaining the approval of the
Regional Director.
(ii) The Registered office is situated in Mumbai, Maharashtra (within the jurisdiction of the Registrar, Mumbai, Maharashtra State)
whereas the Corporate Office is situated in Pune, Maharashtra State (within the jurisdiction of the Registrar, Pune). A Ltd. proposes
to shift its corporate office from· Pune to Mumbai under the authority of a Board· resolution.
(iii) The registered office situated in certain place of a city is proposed to be shifted to another place within the local limits of the
same city under the authority of Board Resolution.
Solution –
(i) In the first case, where the Registered office is shifted from Thane to Dadar (one District to another District) falling under
jurisdiction of same ROC i.e. Registrar of Mumbai.
As per Section 12 (5) of the Act which deals with the change in registered office outside the local limit from one town or city to
another in the same state, may take place by virtue of a special resolution passed by the company. No approval of regional director
is required. Accordingly, said proposal is valid.
(ii) Section 12 talks about shifting of Registered office only, In the second case the corporate office is being shifted from Pune to
Mumbai under the authority of Board resolution. Shifting of corporate office under the board resolution is valid.
[Note - It may be assumed that corporate office and registered office are same. Then in this case, registered office situated in
Mumbai is changed from Mumbai to Pune falling the jurisdiction of different of ROCs in the same State.
In line section 12 (5) of the Act, where a company changes the place of its registered office from the jurisdiction of one Registrar
to the jurisdiction of another Registrar within the same State, there such change is to be confirmed by the Regional Director on
an application made by the company. Accordingly, the said proposal may be treated as invalid, due to lack of confirmation by
Regional director of such change.
(iii) In the third case, change of registered office within the local limits of the same city. Said proposal is valid in terms it has been
passed under the authority of Board resolution.
Division IV – Alteration of MOA & AOA
SECTION 13 - ALTERATION OF MEMORANDUM

Nov 2015 – State the procedure for shifting registered office if the company from one state to another under the provisions of
Companies Act, 2013.
May 2016 – Rishi Pharmacy Ltd. decided to take up the business of food processing because of the downward trend in pharmacy
business. There is no provision in the object clause of the MOA to enable the company to carry on such business. State whether its
object clause can be amended? Mention briefly the procedure to be adopted for change in the objects clause.
May 2017 – The object clause of the MOA of Vardhman Industries Ltd, empowers it to carry on real-estate business and any other
business that is allied to it. Due to downward trend in real-estate business, the management of the company has decided to take up
the business of food processing activity. The company wants to alter its MOA, so as to include the food processing business in its
objects clause.
State whether the company can make such change as per the provisions of the Companies Act, 2013?
Study Mat - The Directors of a company registered and incorporated in the name “Mars Textile India Ltd.” desire to change the name
of the company entitled “National Textiles and Industries Ltd.” Advise as to what procedure is required to be followed under the
Companies Act, 2013?
Study Mat & RTP Nov 2019 - Vintage Security Equipments limited is a manufacturer of CCTV cameras. It has raised ` 100 crores through
public issue of its equity shares for starting one more unit of CCTV camera manufacturing. It has utilized 10 crores rupees and then it
realized that its existing business has no potential for expansion because government has reduced customs duty on import of CCTV
camera hence imported cameras from china are cheaper than its own manufacturing. Now it wants to utilize remaining amount in
mobile app development business by adding a new object in its memorandum of association.
Does the Companies Act, 2013 allow such change of object. If not, then what advise will you give to company. If yes, then give steps
to be followed.
Alteration by SR
(1) Save as provided in section 61 (alteration of share capital - OR), a company may, by a SPECIAL RESOLUTION
and after complying with the procedure specified in this section, alter the provisions of its MOA.
Alteration of Name clause

(2) Any change in the name of a company shall be subject to the provisions of sub-sections (2) and (3) of section
4 and shall not have effect except with the approval of the CG (delegated to RoC) in writing.
Provided that no such approval shall be necessary where the only change in the name of the company is the
deletion therefrom, or addition thereto, of the word "Private", consequent on the conversion of any one class
of companies to another class in accordance with the provisions of this Act.
(3) When any change in the name of a company is made under sub-section (2), the Registrar shall enter the new
name in the register of companies in place of the old name and issue a fresh certificate of incorporation with
the new name and the change in the name shall be complete and effective only on the issue of such a
certificate.
Rule 29 - Alteration of Memorandum by Change of Name

(1) The change of name shall NOT be allowed to a company which has
 not filed annual returns or
 financial statements due for filing with the Registrar or
 which has failed to pay or repay matured deposits or debentures or interest thereon.
Provided that the change of name shall be allowed upon filing necessary documents or payment or repayment of
matured deposits or debentures or interest thereon as the case may be.
(2) An application shall be filed in Form No.INC.24 for change in the name of the company and a new certificate of
incorporation in Form No.INC.25 shall be issued to the company consequent upon change of name.
Alteration of Situation Clause
(4) The alteration of the memorandum relating to the place of the registered office from one State to another shall
not have any effect unless it is approved by the CG (power delegated to RD) on an application in such form and
manner as may be prescribed.
(5)
 The CG (power delegated to RD) shall dispose of the application under sub-section (4) within a period of 60
days and
 before passing its order may satisfy itself that the alteration has the consent of the creditors, debenture
holders and other persons concerned with the company or
 that the sufficient provision has been made by the company either for the due discharge of all its debts
and obligations or that adequate security has been provided for such discharge.
Filing with RoC

(6) Save as provided in section 64 (Notice to RoC for alteration of Share capital), a company shall, in relation to any alteration
of its memorandum, file with the Registrar-
(a) the special resolution passed by the company under sub-section (1);
(b) the approval of the CG under sub-section (2), if the alteration involves any change in the name of the
company.
Filing order of CG (RD) with RoC of both states → read with Rule 31
(7)
 Where an alteration of the memorandum results in the transfer of the registered office of a company
from one State to another,
 a certified copy of the order of the CG approving the alteration shall be filed by the company with the
Registrar of each of the States in Form No. INC-28 within 30 days from the date of receipt of certified
copy of the order,
 who shall register the same, and the Registrar of the State where the registered office is being shifted
to, shall issue a fresh certificate of incorporation indicating the alteration
Alteration of Objects Clause + Exit offer in case Public issue

(8)
 A company, which has raised money from public through prospectus and still has any unutilised amount
out of the money so raised,
 shall not change its objects for which it raised the money through prospectus unless a special resolution
is passed by the company (through postal ballot) and –
(i) the details in respect of such resolution shall also be published in the newspapers (one in English
and one in vernacular language) which is in circulation at the place where the registered office of
the company is situated and shall also be placed on the website of the company, if any, indicating
therein the justification for such change;
(Rule 32 – not in syllabus)
(ii) the dissenting shareholders shall be given an opportunity to exit by the promoters and shareholders
having control in accordance with regulations to be specified by the SEBI.
[also refer Section 27(2)]
(9) The Registrar shall register any alteration of the memorandum with respect to the objects of the company and
certify the registration within a period of 30 days from the date of filing of the special resolution in accordance
with clause (a) of sub-section (6) of this section.
Alteration to be registered
(10) No alteration made under this section shall have any effect until it has been registered in accordance with the
provisions of this section.
Study Mat - The object clause of the Memorandum of Vivek Industries Ltd., empowers it to carry on real-estate business and any other
business that is allied to it. Due to a downward trend in real-estate business the management of the company has decided to take
up the business of Food processing activity. The company wants to alter its Memorandum, so as to include the Food Processing Business
in its objects clause. Examine whether the company can make such change as per the provisions of the Companies Act, 2013?
Solution - The Companies Act, 2013 has made alteration of the memorandum simpler and more flexible. Under section 13(1) of the
Act, a company may, by a special resolution after complying with the procedure specified in this section, alter the provisions of its
Memorandum.
In the case of alteration to the objects clause, Section 13(6) requires the filing of the Special Resolution by the company with the
Registrar. Section 13 (9) states that the Registrar shall register any alteration to the Memorandum with respect to the objects of the
company and certify the registration within a period of thirty days from the date of filing of the special resolution by the company.
Section 13 10) further stipulates that no alteration in the Memorandum shall take effect unless it has been registered with the Registrar
as above.
Hence, the Companies Act, 2013 permits any alteration to the objects clause with ease. Vivek Industries Ltd. can make the required
changes in the object clause of its Memorandum of Association.
SECTION 14 - ALTERATION OF ARTICLES

(read with Rule 33)
Nov 2011 – If the Central Government permits, a public company can be converted into a Private company. True or False.
(Hint - True)
May 2014 – What restrictions are applicable under the Companies Act, 2013 when AOA of a company is altered?
(1) Subject to the provisions of this Act and the conditions contained in its memorandum, if any, a company may,
by a SPECIAL RESOLUTION, alter its articles including alterations having the effect of conversion of
(a) a Private company into a Public company; or
(b) a Public company into a Private company.
Provided that where a company being a Private company alters its articles in such a manner that they no
longer include the restrictions and limitations which are required to be included in the articles of a Private
company under this Act, the company shall, as from the date of such alteration, cease to be a Private company.
Provided further that any alteration having the effect of conversion of a Public company into a private
company shall not be valid unless it is approved by an order of NCLT CG (power delegated to RD) on an
application made in such form and manner as may be prescribed
Provided also that any application pending before the Tribunal, as on the date of commencement of the
Companies (Amendment) Act, 2019 (November 2, 2018), shall be disposed of by the NCLT in accordance with
the provisions applicable to it before such commencement
(2) Every alteration of the articles under this section and a copy of the order of the CG (power delegated to RD)
approving the alteration as per sub-section (1) shall be filed with the Registrar, together with a printed copy of
the altered articles, within a period of 15 days in Form No. INC - 27, who shall register the same.
(3) Any alteration of the articles registered under sub-section (2) shall, subject to the provisions of this Act, be valid
as if it were originally in the articles.
Points to Ponder
Limitations on alteration of articles
 The alteration must not exceed the powers given by the memorandum. In the event of conflict between the memorandum and
the articles, it is the memorandum that will prevail.
 The alteration must not be inconsistent with any provisions of the Companies Act or any other statute.
 The Articles must not include anything which is illegal or opposed to public policy.
 The alteration must be bona fide for the benefit of the company as a whole.
 The alteration must not constitute a fraud on the minority by a majority.
RTP Nov 2018 - The Board of Directors of Sindhu Limited wants to make some changes and to alter some Clauses of the Articles of
Association which are to be urgently carried out, which include the increase in Authorized Capital of the company, issue of shares,
increase in borrowing limits and increase in the number of directors. Discuss about the provisions of the Companies Act, 2013 to be
followed for alteration of Articles of Association.
Solution - Section 14 of the Companies Act, 2013, vests companies with power to alter or add to its articles. The law with respect to
alteration of articles is as follows -
(1) Alteration by special resolution: Subject to the provisions of this Act and the conditions contained in its memorandum, if any, a
company may, by a special resolution alter its articles.
(2) Filing of alteration with the registrar: Every alteration of the articles and a copy of the order of the Tribunal approving the
alteration, shall be filed with the Registrar, together with a printed copy of the altered articles, within a period of fifteen days
in such manner as may be prescribed, who shall register the same.
(3) Any alteration made shall be valid: Any alteration of the articles registered as above shall, subject to the provisions of this Act,
be valid as if it were originally contained in the articles.
(4) Alteration noted in every copy: Every alteration made in articles of a company shall be noted in every copy of the articles, as
the case may be. If a company makes any default in complying with the stated provisions, the company and every officer who
is in default shall be liable to a penalty of one thousand rupees for every copy of the articles issued without such alteration.
[Section 15]
SECTION 15 - ALTERATION OF MEMORANDUM OR ARTICLES TO BE NOTED IN EVERY COPY
(1) Every alteration made in the memorandum or articles of a company shall be noted in every copy of the
memorandum or articles, as the case may be.
(2) If a company makes any default in complying with the provisions of sub-section (1),
Who is liable? Penalty

the company INR 1,000 for every copy of the MOA or
every officer in default AOA issued without such alteration.
SECTION 16 - RECTIFICATION OF NAME OF COMPANY
(1) If, through inadvertence or otherwise, a company on its first registration or on its registration by a new name,
is registered by a name which -
(a)
 in the opinion of the CG, is identical with or too nearly resembles the name by which a company in
existence had been previously registered, whether under this Act or any previous company law,
 it may direct the company to change its name and
 the company shall change its name or new name, as the case may be, within a period of 3 months
from the issue of such direction, after adopting an ORDINARY RESOLUTION for the purpose;
(b)
 on an application by a registered proprietor of a trade mark that the name is identical with or too nearly
resembles to a registered trade mark of such proprietor under the Trade Marks Act, 1999,
 made to the CG within 3 years of incorporation or registration or change of name of the company,
whether under this Act or any previous company law,
 in the opinion of the CG, is identical with or too nearly resembles to an existing trade mark,
 it may direct the company to change its name and
 the company shall change its name or new name, as the case may be, within a period of 3 months
from the issue of such direction, after adopting an ORDINARY RESOLUTION for the purpose.
Notice of change to RoC
(2) Where a company changes its name or obtains a new name under sub-section (1), it shall within a period of
15 days from the date of such change, give notice of the change to the Registrar along with the order of the CG,
who shall carry out necessary changes in the certificate of incorporation and the memorandum.
Contravention
(3) If a company is in default in complying with any direction given under sub-section (1),
 CG shall allot a new name to the company in such manner as may be prescribed and
 the Registrar shall enter the new name in the register of companies in place of the old name and issue
a fresh certificate of incorporation with the new name, which the company shall use thereafter
Provided that nothing in this sub-section shall prevent a company from subsequently changing its name in
accordance with the provisions of section 13.
Rule 33A - Allotment of a new name to the existing company under section 16(3) of the Act
In case
 a company fails to change its name within a period of 3 months from the date of issue of direction issued under
section 16(3),
 the letters “ORDNC” (which is an abbreviation of the words “Order of Regional Director Not Complied”), the year
of passing of the direction, the serial number and the existing Corporate Identity Number (CIN) of the company
shall become the new name of the company without any further act or deed by the company, and
 the Registrar shall accordingly make entry of the new name in the register of companies and issue a fresh
certificate of incorporation
Provided that nothing mentioned above shall apply in case application for change of name filed by the company is
pending for disposal at the expiry of 3 months from the date of issue of direction by RD, unless such application is
subsequently rejected.
Note: Powers under this section have been delegated to RD

Note: Suo-moto rectification of name is done by company by complying with Section 13
Study Mat - Manglu and friends got registered a company in the name of Taxmann advisory private limited. Taxmann is a registered
trade mark. After 5 years When the owner of trade mark came to know about the same, it filed an application with relevant authority.
Can the company be compelled to change its name by the owner of trademark? Can the owner of registered trade mark request the
company and then company changes its name at its discretion?
Solution - According to section 16 of the Companies Act, 2013 if a company is registered by a name which -
 in the opinion of the Central Government, is identical with the name by which a company had been previously registered, it may
direct the company to change its name. Then the company shall by passing an ordinary resolution change its name within 3
months.
 is identical with a registered trade mark and owner of that trade mark apply to the Central Government within three years of
incorporation of registration of the company, it may direct the company to change its name. Then the company shall change
its name by passing an ordinary resolution within 6 months.
Company shall give notice to ROC along with the order of Central Government within 15 days of change. In case of default company
and defaulting officer are punishable.
In the given case, owner of registered trade mark is filing objection after 5 years of registration of company with a wrong name. While
it should have filed the same within 3 years. Therefore, the company cannot be compelled to change its name.
As per section 13, company can anytime change its name by passing a special resolution and taking approval of Central Government.
Therefore, if owner of registered trade mark request the company for change of its name and the company accepts the same then it
can change its name voluntarily by following the provisions of section 13.
SECTION 17 - COPIES OF MEMORANDUM, ARTICLES, ETC, TO BE GIVEN TO MEMBERS

D TRANSFER
(read with Rule 34)
(1) A company shall, on being so requested by a member, send to him within 7 days of the request and subject to
the payment of such fees as may be prescribed, a copy of each of the following documents, namely-
(a) the memorandum;
(b) the articles; and
(c) every agreement and every resolution referred to in section 117(1), if and in so far as they have not been
embodied in the MOA or AOA.
(2) If a company makes any default in complying with the provisions of this section,
Who is liable? Penalty

the company - INR 1,000/ day during which default continues
- INR 1 lakh
every officer in default whichever is less
Division V – Conversions
SECTION 18 - CONVERSION OF COMPANY ALREADY REGISTERED

GER
By alteration of MOA & AOA
(1)
 A company of any class registered under this Act may convert itself as a company of other class under this
Act
 by alteration of memorandum and articles (refer section 13 & 14) of the company in accordance with the
provisions of this Chapter.
File an application with RoC

(2)
 Where the conversion is required to be done under this section,
 the Registrar shall on an application made by the company,
 after satisfying himself that the provisions of this Chapter applicable for registration of companies have been
complied with,
 close the former registration of the company and
 after registering the documents referred to in sub-section (1), issue a certificate of incorporation in the same
manner as its first registration.
No effect on liabilities prior to conversion

(3) The registration of a company under this section shall not affect any debts, liabilities, obligations or contracts
incurred or entered into, by or on behalf of the company before conversion and such debts, liabilities,
obligations and contracts may be enforced in the manner as if such registration had not been done.
(Rules 37 – Conversion of Unlimited company into Company Limited by Shares or Guarantee & Rule 39 – Conversion of Company
Limited by Guarantee into Company Limited by Shares
Not in syllabus)
Points to Ponder
 Conversion of OPC : Section 3 + Rule 6

 Voluntary conversion of Private Company into OPC : Section 3 + Rule 7
 Conversion of Section 8 company into any other kind : Section 8 + Rule 21 & 22
 Conversion of Limited company into Section 8 company : Section 8 + Rule 20
 Conversion of Unlimited company into Company Limited by Shares or Guarantee : Rule 37
 Conversion of Company Limited by Guarantee into Company Limited by Shares : Rule 39
 Any other conversion : Section 18 + 13 + 14
Division VI – Miscellaneous
SECTION 19 - SUBSIDIARY COMPANY NOT TO HOLD SHARES IN ITS HOLDING COMPANY

May 2014 – Anson Limited held equity shares in Booban Limited. Later on Anson Limited became a subsidiary company of Booban
Limited. Decide under the Companies Act, 201 whether it is necessary for Anson Limited to surrender the equity shares of Booban
Limited?
(Hint: Anson Limited can continue to hold the shares but cannot exercise any voting right)
May 2016 – A subsidiary company cannot hold shares of its holding company. True or false.
(Hint: True, however there are some exceptions)
Study Mat - Explain in the light of the provisions of the Companies Act, 2013, the circumstances under which a subsidiary company
can become a member of its holding company.
May 19 - As at 31st March, 2018, the paid-up share capital of S Ltd. is `1,00,00,000 divided into 10,00,000 equity shares of ` 10 each. Of
this, H Ltd. is holding 6,00,000 equity shares and 4,00,000 equity shares are held by others. Simultaneously, S Ltd. is holding 5% equity
shares of H Ltd. out of which 1% shares are held as a legal representative of a deceased member of H Ltd. On the basis of the given
information, examine and answer the following queries with reference to the provisions of the Companies Act, 2013 -
i Can S Ltd. make further investment in equity shares of H Ltd. during 2018-19?
ii Can S Ltd. exercise voting rights at Annual general meeting of H Ltd.?
iii Can H Ltd. allot or transfer some of its shares to S Ltd.?
Study Mat & RTP Nov 19 – S Ltd. is a company in which H Ltd. is holding 60% of its paid up share capital. One of the shareholder of
H Ltd. made a charitable trust and donated his 10% shares in H Ltd. and `50 crores to the trust. He appoints S Ltd. as the trustee. All
the assets of the trust are held in the name of S Ltd. Can a subsidiary hold shares in its holding company in this way?
MTP May 2021 - Kavya Ltd. has a paid up share-capital of Rs. 80 crores. Amjali Ltd. holds a total of Rs. 50 crores of Kavya Ltd. Now,
Kavya ltd. is making huge profits and wants to expand its business and is aiming at investing in Amjali Ltd. Kavya Ltd. has approached
you to analyse whether as per the provisions of the Companies Act, 2013, they can hold 1/10th of the share capital of Amjali Ltd.
RTP Nov 2021 - AB Limited issued equity shares of ` 1,00,000 (10000 shares of ` 10 each) on 01.04.2020 which have been fully subscribed
whereby XY Limited holds 4000 shares and PQ Limited holds 2000 shares in AB Limited. AB Limited is also holding 20% equity shares
of RS Limited before the date of issue of equity shares stated above. RS Limited controls the composition of Board of Directors of XY
Limited and PQ Limited from 01.08.2020. Examine with relevant provisions of the Companies Act, 2013:
1. Whether AB Limited is a subsidiary of RS Limited?
2. Whether AB Limited can hold shares of RS Limited?
3. Whether AB Limited can vote at Annual General Meeting of RS Limited held on 30.09.2020?
UBS
 No company shall, either by itself or through its nominees,
 hold any shares in its holding company and
 holding company shall NOT allot or transfer its shares to any of its subsidiary companies and
 any such allotment or transfer of shares of a company to its subsidiary company shall be void.
Provided that nothing in this sub-section shall apply to a case -

(a) where the subsidiary company holds such shares as the legal representative of a deceased member
of the holding company; or
(b) where the subsidiary company holds such shares as a trustee; or
(c) where the subsidiary company is a shareholder even before it became a subsidiary company of the
holding company.
Provided further that the subsidiary company referred to in the preceding proviso shall have a right to vote at a
meeting of the holding company only in respect of the shares held by it as a legal representative or as a trustee, as
referred to in clause (a) or clause (b) of the said proviso. - ID
Nov 2020 - S Ltd acquired 10% paid up share capital of H Ltd on 15th March 2017. H Ltd acquired 55% paid up share capital of S Ltd
on 10th March 2018. H Ltd on 25th September 2020 decided to issue bonus shares in the ratio of 1: 1 to the existing shareholders.
Accordingly, bonus shares were allotted to S Ltd. Examine under the provisions of the Companies Act, 2013 and decide -
(i) the validity of holding of shares by S Ltd. in H Ltd.
(ii) allotment of Bonus shares by H Ltd. to S Ltd.
Solution - As per Section 19 of the Companies Act, 2013, no company shall, hold any shares in its holding company and no holding
company shall allot or transfer its shares to any of its subsidiary companies and any such allotment or transfer of shares of a company
to its subsidiary company shall be void.
However, this shall not apply where the subsidiary company is a shareholder even before it became a subsidiary company of the
holding company.
In the given case, H Ltd. has acquired 55% paid up share capital of S Ltd. on 10th March 2018. Whereas, S Ltd. has been holding 10%
paid up share capital of H Ltd. since 15th March, 2017. The said instance as asked in the question falls under the exception stated
above.
Therefore -
(i) Holding of shares by S Ltd. in H Ltd. is valid in view of the proviso (c) to sub-section (1) of section 19 of the Act, which states
that the restrictions of provisions of section 19(1) will not be applicable where the subsidiary company is a shareholder even
before it became a subsidiary company of the holding company.
(ii) Allotment of bonus shares by H Ltd. to S Ltd. is also valid in view of the above proviso.
UP CAPITA
SECTION 20 - SERVICE OF DOCUMENT

Study Mat, MTP May 2021 & MTP Nov 2021 - Explain the provisions of the Companies Act, 2013 relating to the ‘Service of Documents’
on a company and the members of the company.
Serving of document to company
(1) A document may be served on a company or an officer thereof by sending it to the company or the officer at the
registered office of the company
 by registered post or
 by speed post or
 by courier service or
 by leaving it at its registered office or
 by means of such electronic or other mode as may be prescribed.
Provided that where securities are held with a depository, the records of the beneficial ownership may be served
by such depository on the company by means of electronic or other mode.
Serving of document to RoC or member

(2) Save as provided in this Act or the rules made thereunder for filing of documents with the Registrar in electronic
mode, a document may be served on Registrar or any member by sending it to him
 by post or
 by registered post or
 by speed post or
 by courier or
 by delivering at his office or address, or
 by such electronic or other mode as may be prescribed.
Provided that a member may request for delivery of any document through a particular mode, for which he shall
pay such fees as may be determined by the company in its AGM.
Explanation - For the purposes of this section, the term "courier" means a person or agency which delivers the
document and provides proof of its delivery.
Rule 35 – Deemed delivery by post
In case of DELIVERY BY POST, such service shall be deemed to have been effected –
(i) in the case of a notice of a meeting, at the expiration of 48 hours after the letter containing the same is posted; and
(ii) in any other case, at the time at which the letter would be delivered in the ordinary course of post.
Exemption – Nidhi company
Sub-section (2) of Section 20 shall apply subject to the modification that in the case of a Nidhi,
 the document may be served only on members who hold shares of
 more than INR 1,000 in face value or
 more than 1% of the total paid-up share capital of the Nidhis whichever is less
 For other shareholders, document may be served by a public notice in newspaper circulated in the district where the Registered Office of
the Nidhi is situated; and publication of the same on the notice board of the Nidhi.
(Notification June 05, 2015)
Study Mat & RTP Nov 2020 - Vijay, a member of Mayur Electricals Ltd. gave in writing to the company that the notice for any general
meeting be sent to him only by registered post at his residential address at Kanpur for which he deposited sufficient money. The
company sent notice to him by ordinary mail under certificate of posting. Vijay did not receive this notice and could not attend the
meeting and contended that the notice was improper.
Decide:
(i) Whether the contention of Vijay is valid.
(ii) Will your answer be the same if Vijay remains in London for two months during the notice of the meeting and the meeting held?
Solution - According to section 20(2) of the Companies Act, 2013, a document may be served on Registrar or any member by sending
it to him by post or by registered post or by speed post or by courier or by delivering at his office or address, or by such electronic or
other mode as may be prescribed.
Provided that a member may request for delivery of any document through a particular mode, for which he shall pay such fees as
may be determined by the company in its annual general meeting.
Thus, if a member wants the notice to be served on him only by registered post at his residential address at Kanpur for which he has
deposited sufficient money, the notice must be served accordingly, otherwise service will not be deemed to have been effected.
Accordingly, the questions as asked may be answered as under:
(i) The contention of Vijay shall be tenable, for the reason that the notice was not properly served.
(ii) In the given circumstances, the company is bound to serve a valid notice to Vijay by registered post at his residential address
at Kanpur and not outside India.
SECTION 21- AUTHENTICATION OF DOCUMENTS, PROCEEDINGS AND CONTRACTS
Save as otherwise provided in this Act –

(a) a document or proceeding requiring authentication by a company; or
(b) contracts made by or on behalf of a company,
may be signed by
 any KMP [section 2(51)] or
 an officer or employee of the company duly authorised by the Board in this behalf.
Specified IFSC Public/ Private Company
the words “an officer” read as “an officer or any other person”

SECTION 22 – EXECUTION OF BILLS OF EXCHANGE, ETC.
(1)
 A bill of exchange, hundi or promissory note shall be deemed to have been made, accepted, drawn or
endorsed on behalf of a company
 IF made, accepted, drawn, or endorsed in the name of, or on behalf of or on account of, the company by
any person acting under its authority, express or implied.
(2) A company may, by writing under its common seal, if any, authorise any person, either generally or in respect
of any specified matters, as its attorney to execute other deeds on its behalf in any place either in or outside
India.
Provided that in case a company does not have a common seal, the authorisation under this sub-section shall
be made by
 2 directors or
 by a director and the Company Secretary, wherever the company has appointed a Company Secretary
(3) A deed signed by such an attorney on behalf of the company and under his seal shall bind the company
Study Mat - Parag Constructions Limited is a leading infrastructure company. One of the directors of the company Mr. Parag has been
singing all construction contracts on behalf of company for many years. All the parties who ever deal with the company know Mr.
Parag very well. Company has got a very important construction contract from a renowned software company. Parag constructions
will do construction for this site in partnership with a local contractor Firoz bhai. Mr. Parag signed partnership deed with Firoz bhai
on behalf of company because he has an implied authority. Later in a dispute company denied to accept liability as a partner. Can
the company deny its liability as a partner?
Solution - As per section 22 of the Companies Act, 2013 a company may authorise any person as its attorney to execute deeds on its
behalf in any place either in or outside India. But common seal should be affixed on his authority letter or the authority letter should
be signed by two directors of the company or it should be signed by one director and secretary. This authority may be either general
for any deeds or it may be for any specific deed.
A deed signed by such an attorney on behalf of the company and under his seal shall bind the company as if it were made under its
common seal.
In the present case company has not neither given any written authority not affixed common seal of the authority letter. It means
that Mr. Parag is not legally entitled to execute deeds on behalf of the company. Therefore, deeds executed by him are not binding on
the company. Therefore, company can deny its liability as a partner.
Rule 38 - SIMPLIFIED PROFORMA FOR INCOPORATING COMPANY ELECTRONICALLY PLUS (SPICe+)
(1) The Application for incorporation of a company under this rule shall be in SPICe+: INC-32 along with e-Memorandum of
Association (e-MOA) in Form No. INC-33 and e-Articles of association (e-AOA) in Form no. INC-34.
(2) For the purposes of sub-rule (1),

 the application for allotment of DIN up to 3 Directors,
 reservation of a name,
 incorporation of company and
 appointment of Directors of the proposed company
shall be filed in SPICe+: INC-32, with the Registrar
Provided that in case of companies incorporated, with effect from the 26th day of January, 2018, with
 a NOMINAL CAPITAL of ≤ INR 15 lakhs OR
 in respect of companies not having a share capital whose number of members as stated in the articles of association
does not exceed 20,
fee on SPICe+: INC-32 shall not be applicable
(3) For the purposes of filing SPICe+: INC-32, the particulars of maximum of 3 directors shall be allowed to be filled, and
allotment of DIN of maximum of 3 proposed directors shall be permitted in case of proposed directors not having approved
DIN.
Form INC-35 – AGILE-PRO-S

Rule 38A – Application for registration of the Goods and Service Tax Identification Number (GSTIN), Employees’
State Insurance Corporation (ESIC) registration and Employees’ Provident Fund Organisation (EPFO) registration
and Profession Tax Registration and Opening of Bank Account and Shops & Establishment Registration
The application for incorporation of a company shall be accompanied by e-form AGILE-PRO (INC-35) containing an application
for registration of the following numbers, namely –
(a) GSTIN
(b) EPFO
(c) ESIC
(d) Profession Tax Registration
(e) Opening of Bank A/c
(f) Shops and Establishment Registration
Annexure 1 – Residuary Rules
Rule 8 – Names which resemble too nearly with name of existing company
(1) A name applied for shall be deemed to resemble too nearly with the name of an existing company, if, and only if, after
comparing the name applied for with the name of an existing company by disregarding the matters set out in sub-rule (2),
the names are same.
(2) The following matters are to be disregarded while comparing the names under sub-rule (1) –
(a) the words like Private, Pvt, Pvt., (P), OPC Pvt. Ltd., IFSC Limited, IFSC Pvt. Limited, Producer Limited, Limited,
Unlimited, Ltd, Ltd., LLP, Limited Liability Partnership, company, and company, & co, & co., co., co, corporation,
corp, corpn, corp or group;
(b) the plural or singular form of words in one or both names;

A. Illustrations
(i) Green Technology Ltd. is same as Greens Technology Ltd. and Greens Technologies Ltd.
(ii) Pratap Technology Ltd. is same as Prataps Technology Ltd. and Prataps Technologies Ltd.
(iii) SM Computers Ltd. is not same as SMS Computers Ltd.
(c) type and case of letters, spacing between letters, punctuation marks and special characters used in one or both
names;
B. Illustrations
(i) ABC Ltd. is same as A.B.C. Ltd. and A B C Ltd.
(ii) TeamWork Ltd. is same as Team@Work Ltd. and Team-Work Ltd.
(d) use of different tenses in one or both names;

C. Illustrations
(i) Ascend Solutions Ltd. is same as Ascended Solutions Ltd. and Ascending Solutions Ltd.
(ii) Speak English Solutions Limited is same as Spoken English Solutions Limited.
(e) use of different phonetic spellings including use of misspelled words of an expression;
D. Illustrations
(i) Chemtech Ltd. is same as Chemtec Ltd., Chemtek Ltd., Cemtech Ltd., Cemtek Ltd., Kemtech Ltd., and Kemtek
Ltd.
(ii) Bee Kay Ltd is same as BK Ltd, Be Kay Ltd., B Kay Ltd., Bee K Ltd., B.K. Ltd. and Beee Kay Ltd.
(f) use of host name such as ‘www’ or a domain extension such as ‘net’, ‘org’, ‘dot’ or ‘com’ in one or both names;
E. Illustrations
(i) Ultra Solutions Ltd. is same as Ultrasolutions.com Ltd.
(ii) Supreme Ultra Solutions Ltd. is not the same as Ultrasolutions.com Ltd.
(g) the order of words in the names;

F. Illustrations
(i) Ravi Builders and Contractors Ltd. is same as Ravi Contractors and Builders Ltd.
(ii) Ravi Builders and Contractors Limited is not the same as Ravi Shankar Builders and Contractors Limited.
(h) use of the definite or indefinite article in one or both names;

G. Illustrations
(i) Congenial Tours Ltd. is same as A Congenial Tours Ltd. and The Congenial Tours Ltd.
(ii) Isha Industries Limited is not the same as Anisha Industries Limited.
(i) a slight variation in the spelling of the two names including a grammatical variation thereof;
H. Illustrations
(i) Color Technologies Ltd. is same as Colour Technologies Ltd.
(ii) Disc Solutions Ltd. is same as Disk Solutions Ltd. but it is not same as Disco Solutions Ltd.
(j) complete translation or transliteration, and not part thereof, of an existing name, in Hindi or in English;
I. Illustrations
(i) National Electricity Corporation Ltd. is same as Rashtriya Vidyut Nigam Ltd.
(ii) Hike Construction Ltd. is not the same as Hike Nirman Ltd.
(k) addition of the name of a place to an existing name, which does not contain the name of any place;
J. Illustrations
(i) If Salvage Technologies Ltd. is an existing name, it is same as Salvage Technologies Delhi Ltd and Salvage
Delhi Technologies Ltd.
(ii) Retro Pharmaceuticals Ranchi Ltd. is not the same as Retro Pharmaceuticals Chennai Ltd.
(l) addition, deletion, or modification of numerals or expressions denoting numerals in an existing name, unless the
numeral represents any brand;
K. Illustrations
(i) Thunder Services Ltd is same as Thunder11 Services Ltd and OneThunder Services Ltd
(ii) Style Garments11 Ltd. is same as Style Garments Ltd and Style12 Garments Ltd.
(iii) One 11 Power Equipment Ltd is not the same as One Power Equipment Ltd, if One 11 represents a brand:
Rule 8A – Undesirable Names
The name shall be considered undesirable, if -
(a) it is prohibited under the provisions of section 3 of the Emblems and Names (Prevention and Improper Use) Act, 1950,
unless a previous permission has been obtained under that Act;
(b) the name includes a trade mark registered under the Trade Marks Act, 1999 in the same class of goods or services in
which the activity of the company is being carried out or is proposed to be carried out, unless the consent of the owner
of the trade mark has been obtained by the promoters;
(c) it includes any word or words which are offensive to any section of the people;
(d) the proposed name is identical with or too nearly resembles the name of a LLP
Provided that the provisions of rule 8 shall apply mutatis mutandis while determining whether a proposed name is too
nearly resembling the name of a LLP;
(e) the proposed name is identical with or too nearly resembles with a name which is for the time being reserved in
accordance with rule 9
(f) the company’s main business is financing, leasing, chit fund, investments, securities or combination thereof, but the
proposed name is not indicative of such related financial activities, viz., Chit Fund or Investment or Loan, etc.;
(g) the company’s name is indicative of activities financing, leasing, chit fund, investments, securities or combination
thereof, but the company’s main business is not related to such activities;
(h) it resembles closely the popular or abbreviated description of an existing company or LLPs;
(i) the proposed name is identical with or too nearly resembles the name of a company or LLP incorporated outside India
and reserved by such company or LLP with the Registrar
Provided that if a foreign company is incorporating its subsidiary company in India, then the original name of the holding
company as it is may be allowed with the addition of word India or name of any Indian State or city, if otherwise available
Provided further that provisions of rule 8 shall apply mutatis mutandis while determining whether a proposed name is
too nearly resembling the name of a company or limited liability partnership incorporated outside India;
(j) any part of the proposed name includes the words indicative of a separate type of business constitution or legal person
or any connotation thereof e.g. co-operative, sehkari, trust, LLP, partnership, society, proprietor, HUF, firm, Inc., PLC,
GmbH, SA, PTE, Sdn, AG, etc.;
Explanation - For the purposes of this clause, it is hereby clarified that the name including phrase ‘Electoral Trust’ may
be allowed for registration of companies to be formed under section 8 of the Act, in accordance with the Electoral Trusts
Scheme, 2013 notified by the Central Board of Direct Taxes (CBDT)
(k) the proposed name contains the words ‘British India’;
(l) the proposed name implies association or connection with an embassy or consulate of a foreign government;
(m) the proposed name includes or implies association or connection with or patronage of a national hero or any person
held in high esteem or important personages who occupied or are occupying important positions in the Government;
(n) the proposed name is identical to the name of a company dissolved as a result of liquidation proceeding and a period
of 2 years has not elapsed from the date of such dissolution:
Provided that if the proposed name is identical with the name of a company which is struck off, then the same shall not
be allowed before the expiry of 20 years from the date of publication in the Official Gazette being so struck off;
(o) it is identical with the name of LLP in liquidation or the name of a LLP which is struck off up to a period of 5 years;
(p) the proposed name include words such as ‘Insurance’, ‘Bank’, ‘Stock Exchange’, ‘Venture Capital’, ‘Asset
Management’, ‘Nidhi’, ‘Mutual Fund’, etc., unless a declaration is submitted by the applicant that the requirements
mandated by the respective regulator, such as IRDA, RBI, SEBI, MCA, etc. have been complied with by the applicant;
(q) the proposed name includes the word "State", in case the company is not a Government company;
(r) the proposed name is containing only the name of a continent, country, State, city such as Asia limited, Germany
Limited, Haryana Limited or Mysore Limited;
(s) Use of descriptive names, where the name merely consists of commonly used words to describe an activity.
(t) the proposed name includes name of any foreign country or a foreign city, the same shall be allowed if the applicant
produces any proof of significance of business relations with such foreign country
(u) the proposed name of a section 8 company under the Act does not include the words Foundation, Forum, Association,
Federation, Chambers, Confederation, Council, Electoral Trust and the like, etc.
(v) the proposed name of a Nidhi company under the Act does not have the last words “Nidhi Limited” as a part of its name.
(w) the proposed name has been released from the register of companies upon change of name of a company and 3 years
have not elapsed since the date of change unless a specific direction has been received from the competent authority
in the course of compromise, arrangement or amalgamation.
Rule 8B - Word or expression which can be used only after obtaining previous approval of Central Government
Board Central Small Scale Industries Development Development Scheme;

authority
Commission Federal Khadi and Village Industries Prime Minister or Statute or Statutory
Corporation Chief Minister
Authority Republic Financial Corporation and the like Minister Court or Judiciary
Undertaking President Municipal Nation Governor
Union; National Rashtrapati Panchayat Forest Bureau
Corporation
The use of word Scheme with the name of Government(s), State, India, Bharat or any government authority or in any
manner resembling with the schemes launched by Central, state or local Governments and authorities
Notes
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Chapter 2 Incorporation

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Chapter 2 Incorporation

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Incorporation of Company and Matters Incidental Thereto

Section Particulars Section Particulars

3 Formation of company 12 Registered office of Company

Division I Section 3 to 3A Promotion & Formation of a Company

Division I – Promotion & Formation of a Company

PROMOTION AND PROMOTER

Promotion of a company involves

Legal position of Promoter

PRE - INCORPORATION OR PRELIMINARY CONTRACTS OR PROMOTERS’ CONTRACT

SECTION 3- FORMATION OF A COMPANY

Legal requirements for formation

Additional requirements for formation of OPC → read with Rule 4

Appointment of Nominee + his consent

Provided also that

Classification of a company basis liability

(2) A company formed under sub-section (1) may be either -

Exemption – Specified IFSC Public/ Private company

(Rule 5 --- Omitted ---)

Rule 6 – Conversion of OPC into a Public company or a Private company

SECTION 3A- MEMBERS SEVERALLY LIABLE IN CERTAIN CASES

If at any time the number of members of a company is reduced

Division II – Memorandum & Articles

Section 2(56) – Memorandum

(1) The memorandum of a company shall state –

(e) in the case of a company having a share CAPITAL -

Exemption – Government company

DOCTRINE OF ULTRA VIRES

Extracts of objects clause

Nature of contract made by company with M/s. Richie

Consequences of Ultra-vires Act

Ultra-vires the company vs. Ultra-vires the directors

POWERS WHICH ARE NOT IMPLIED

Examples of some powers which are NOT implied -

Section 453 – Punishment for Improper use of ‘Limited’ or ‘Private Limited’

Name NOT to be undesirable

(2) The name stated in the memorandum shall NOT –

Prior approval of CG for prescribed words

(Rule 8, 8A & 8B – refer Annexure 1 at the end of this Chapter)

Rule 9 – Reservation of Name or Change of Name

Rule 9A – Extension of Reservation of Name in certain cases

(a) IF the company has NOT been INCORPORATED,

Table A MOA of a company limited by shares

Section 2(5) – Articles

 Articles cannot supersede Memorandum. AOA are subordinate to MOA.

Regulations in the Articles

Rule 10 - Where Articles Contains Entrenchment Provisions

Model articles → read with Rule 11

(6) The articles of a company shall be in respective forms specified in Schedule I in

Applicability to existing companies

DOCTRINE OF CONSTRUCTIVE NOTICE

DOCTRINE OF INDOOR MANAGEMENT OR TURQUAND’S RULE

Effect of the doctrine

EXCEPTIONS to the doctrine of Indoor management

 Rouben v. Great Fingal Consolidated

SECTION 6 - ACT TO OVERRIDE MEMORANDUM, ARTICLES, ETC.

Division III – Incorporation

SECTION 7- INCORPORATION OF A COMPANY

Application + Documents to be filed with RoC

Preservation of documents by company

Consequences of furnishing false information

Consequences if a company is incorporated by furnishing false information

Powers of Tribunal in case of furnishing false information

Provided that before making any order under this sub-section -

SECTION 8 - FORMATION OF COMPANY WITH CHARITABLE OBJECTS, ETC.