Study Notes

Companies Act, 2013

Chapter II -Part 2-
Incorporation of a
Company
Companies Act, Chapter II Incorporation of a Company

INCORPORATION OF COMPANY AND MATTERS INCIDENTAL THERETO

Section Heading of the section

3 Formation of company
3A Members Severally liable in certain cases
4 Memorandum
5 Articles
6 Act to override memorandum, articles, etc.
7 Incorporation of company
8 Formation of companies with charitable objects, etc.
9 Effect of registration
10 Effect of memorandum and articles
11 Omitted
12 Registered office of company
13 Alteration of memorandum
Covered
14 Alteration of articles
in this
15 Alteration of memorandum or articles to be noted in every copy note
16 Rectification of name of company
17 Copies of memorandum, articles, etc., to be given to members
18 Conversion of companies already registered
19 Subsidiary company not to hold shares in its holding company
20 Service of documents
21 Authentication of documents, proceedings and contracts
22 Execution of bills of exchange, etc.

SECTION 8- FORMATION OF COMPANIES WITH CHARITABLE OBJECTS ETC.

 Charitable Companies are the Companies registered under the Companies Act as a
limited company:
 for the purpose of promotion of commerce, art, science, sports, education,
research, social welfare, religion, charity, protection of environment or any such
other object;
 with the intention to apply its profits, if any, or other income in promoting its
objects; and
 which prohibits the payment of any dividend to its members.
 Central Government may allow such person or association of persons to be registered
as a limited company:

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Companies Act, Chapter II Incorporation of a Company

 without the addition to its name of the word “Limited”, or as the case may
be, the words “Private Limited”
 Registrar on an application being made to him register such person or association
of persons as a charitable company.
 Such Charitable companies:
 enjoy all the privileges and be subject to all the obligations of limited companies;
 may have a firm as its member;
 can alter its memorandum or articles only with the previous approval of the
Central Government;
 may convert itself into company of any other kind only after complying with the
prescribed conditions;
 Central Government (CG) may revoke the license granted to charitable company if:
 such company contravene any of the requirements of this section or
 any of the conditions subject to which a license is issued or
 the affairs of the company are conducted fraudulently or in a manner violative of
the objects of the company or prejudicial to public interest, and
o 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
o the Registrar shall on application, in the prescribed form, register the
company accordingly
o On license being revoked by the CG; the CG may by order in the public
interest, direct that the company be wound up or amalgamated with
another company registered under this section after giving the company a
reasonable opportunity of being heard.
 If on the winding up or dissolution of a charitable company, there remains, after the
satisfaction of its debts and liabilities, any asset, they may:
 be transferred to another company registered under this section and having
similar objects, subject to such conditions as the Tribunal may impose, or;
 may be sold and proceeds thereof be credited to the Insolvency and Bankruptcy
Fund formed under section 224 of the Insolvency and Bankruptcy Code, 2016.
 Default:
 Company - punishable with fine of not be less than ten lakh rupees extendable
to one crore rupees and
 Director and every officer in default punishable with fine not less than twenty-five
thousand rupees extendable to twenty-five lakh rupees
o if proved that the affairs of the company were conducted fraudulently, every
officer in default shall be liable for action under section 447

SECTION 9- EFFECT OF REGISTRATION

 From the date of incorporation as mentioned in the certificate of incorporation, the

subscribers to the Memorandum and all other persons, as may from time to time
become members of the company, shall:

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Companies Act, Chapter II Incorporation of a Company

 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,
 power to acquire, hold and dispose of property, both movable and immovable,
tangible and intangible,
 to contract and to sue and be sued by the said name

SECTION 10- EFFECT OF MEMORANDUM & ARTICLES

 Section 10 (1) -the Memorandum and Articles when registered shall bind the company
and the members, 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.

SECTION 10A- COMMENCEMENT OF BUSINESS etc.,

 (1) A company incorporated after the commencement of the Companies (Amendment)

Ordinance, 2018 and having a share capital shall commence any business or exercise
any borrowing powers only:
 when a declaration is filed by a director within a period of 180 days of the date of
incorporation of the company 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
 the company has filed with the Registrar a verification of its registered office as
provided in section 12 (2).
 (2) Default in complying with the requirements of this section:
 the company be liable to a penalty of fifty thousand rupees and
 every officer in default be liable to a penalty of one thousand rupees for each
day during which such default continues but not exceeding an amount of one
lakh rupees.
 (3) Where no declaration has been filed and the Registrar has reasonable cause to
believe that the company is not carrying on any business or operations, he may initiate
action for the removal of the name of the company from the register of companies.

SECTION 12- REGISTERED OFFICE OF THE COMPANY

 Section 12 (1) -company shall, within 30 days of its incorporation and at every time
thereafter, have a registered office capable of receiving and acknowledging all
communications and notices addressed to it.
 Section 12 (3) - every company to:
 paint or affix its name and address of its registered office, and keep the same
painted and affixed, on the outside of every office or place in which its business
is carried on;

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Companies Act, Chapter II Incorporation of a Company

 such display must be in a conspicuous position, in legible letters in characters

and letters of the local language in addition to any other language (if chosen by
the company);
 get its name, address of its registered office and the corporate identity number
and other details, on all its business letters, bill heads, notices and other official
publications.
 From the above provisions; the extremely high importance of the registered office of a
company can be well understood as it serves as the location where:
 necessary documents may be served upon, or deposited;
 notices, letters, etc., may be issued;
 inspection may be done, and communication may be made.

Note: The domicile and the nationality of a company is determined by the place of its registered
office. This is also important for determining the jurisdiction of the Court governing it.

 Notice of the situation of the registered office and of every change therein must be sent
to the Registrar (otherwise than through a statement as to the address of the registered
office in the annual report) within 30 days of the date of incorporation and the date of
change.
 This provision is designed to locate the spot where the records of the company could be
inspected and where the letters should be addressed and notices served upon the
company.
 Section 12 (5)- the registered office of:
 a company already in existence; outside the local limits of any city, town or
village where such office is situated at the commencement of this Act or where it
may be situated later by a special resolution passed by the company
 any other company; outside the local limits of any city, town or village where such
office is first situated or where it may be situated later by virtue of a special
resolution passed by the company:
 Company shall not 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.
 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 and if any default is found to be made in complying with the
requirements of maintaining a registered office, he may, initiate action for the removal of
the name of the company from the register of companies.

SECTION 13- ALTERATION OF MEMORANDUM

 Section 13 (1)- a company may, by special resolution, and after complying with the
procedure specified in this section alter the provisions of its Memorandum.
 Alteration of Capital clause:
 Authorization by AOA;

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Companies Act, Chapter II Incorporation of a Company

 Pass Ordinary Resolution in General Meeting;

 File notice of increase in share capital to ROC in Form SH 7 within 30 days of
passing of the resolution.
 Alteration of Liability clause:
 Alteration may be from Limited company to unlimited company or vice-versa;
 Pass a Special Resolution (SR) in General Meeting, File SR Copy to ROC (Form
MGT 14) within 30 days of passing SR.
 Alteration of Liability clause:
 Entire Name Change- Pass Special Resolution and Central Government
approval and MGT 14 to ROC for SR.
 Addition or deletion of word Private- Pass Special Resolution file FORM MGT
14 to RoC for SR.
 Change of name shall not be allowed to a company:
o which has defaulted in filing its annual returns or financial statements or any
document due for filing with the Registrar; or
o which has defaulted in repayment of matured deposits or debentures or
interest on deposits or debentures.
 On any change in the name of a company, 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.
 Alteration of Object clause: Pass SR in GM, File SR Copy to RoC (Form MGT 14)
within 30 days of passing SR, ROC shall register the same within 30 days.
 Additional compliance is applicable in case of alteration of object clause when
there are unutilized proceeds of prospectus issue.

Note: Requirement for change in objects in case of a company raised money through
prospectus and has unutilized money:

 Company, which has raised money from public through prospectus and still has any
unutilized amount out of the money so raised, shall not change its objects for which it
raised the money through prospectus unless a special resolution through postal
ballot is passed by the company; and
 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;
 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
Securities and Exchange Board.

 Alteration of the situation/registered office clause:

Type of a change Procedure to be followed

 By Board resolution
1. Change of registered office  Notice is to be given to the Registrar of
from one place to another Companies within 15 days from the date of the

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Companies Act, Chapter II Incorporation of a Company
place in the same city, town or
village. Section 12(5)
2. Change of registered office 
from one town to another town
in the same state. (RoC Same)
Section 12(5)
3. Change of registered office
from one town to another town
in the same state.
(RoC Different)
Section 12(5) proviso, 12(6) and
12(7)
4. Change of registered office
from one state to another
Section 13
SECTION 14- ALTERATION OF ARTICLES
 Subject to the provisions of the Companies Act and the MoA of the company; a company
may, by special resolution, alter its Articles.
 File SR Copy within 30 days to RoC along with altered AoA
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change.
 MoA is not required to be altered in this case
By special resolution.
 Special Resolution
 Permission of Regional Ddirector
 Special Resolution
 C.G. approval
 CG shall consider the right and interests of the
 members
 creditors and
 debenture-holders and
 other concerned persons of the company.
 CG my grant the approval if it is satisfied that –
a) Sufficient notice has been given to every
Debenture holder, creditor and every other person
whose interests may be affected by the alteration
and
b) Every creditor/debenture-holder who objects to
the alteration
 Has given his consent or
 His debt has been discharged or
 His debt has been secured
 Certified copy of CG order approving the alteration
shall be filed with the RoC of both the states.
 The Registrar of the State where the registered
office is being shifted to, shall issue a fresh
certificate of incorporation indicating the alteration.
 The powers of CG have been delegated to
Regional Director.
Companies Act, Chapter II Incorporation of a Company

 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 the Central
Government.
 Any application pending before the Tribunal, as on the date of commencement of the
Companies (Amendment) Ordinance, 2018, shall be disposed of by the Tribunal.

SECTION 15- ALTERATION OF MEMORANDUM & ARTICLES

 To be noted in every copy of the memorandum or articles, as the case may be.
 Default:
 by company and every officer- penalty of one thousand rupees for every copy of
the memorandum or articles issued without such alteration.

SECTION 16- RECTIFICATION OF NAME OF COMPANY

 Company on its first registration or on its registration by a new name, is registered

by a name which:
 in the opinion of the Central Government (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;
 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 made to the CG within three 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 Central Government, is identical with or too
nearly resembles to an existing trade mark
o CG 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 three
months from the issue of such direction, after adopting an ordinary
resolution for the purpose.
 Where a company changes its name or obtains a new name, 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 Central Government, who shall carry out necessary
changes in the certificate of incorporation and the memorandum.
 Company if defaults in complying with any direction given, the CG shall allot a
new name to the company 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:
 this shall not prevent a company from subsequently changing its name in
accordance with the provisions of section 13.

SECTION 17- COPIES OF MEMORANDUM, ARTICLES, ETC., TO BE GIVEN TO MEMBERS

 Company on a request being made by aa member; send within 7 days of request and
subject to the payment of such fees as may be prescribed, a copy of:
 MoA

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Companies Act, Chapter II Incorporation of a Company

 AoA
 Every agreement and resolution referred to in section 117(1), if and in so far as
they have not been embodied in the memorandum or articles.

SECTION 18- CONVERSION OF COMPANIES ALREADY REGISTERED

 A company may convert itself in some other class of company by altering its
memorandum and articles of association.
 The Registrar shall on an application made by the company and on being satisfied that
the provisions applicable for registration of companies have been complied with, close
the former registration of the company and after registering the document, issue a
certificate of incorporation in the same manner as its first registration.

SECTION 19- SUBSIDIARY COMPANY NOT TO HOLD SHARES IN ITS HOLDING

COMPANY

 A subsidiary company cannot:

 either by itself or through its nominees hold any shares in its holding company
and
 no holding company shall allot or transfer its shares to any subsidiary companies.
o Any such allotment or transfer of shares in a company to its subsidiary is
void.
 Exception: The section however does not apply where:
 the subsidiary company holds shares in its holding company as the legal
representative of a deceased member of the holding company, or
 the subsidiary company holds such shares as a trustee, or
 the subsidiary company was a shareholder in the holding company even before it
became its subsidiary.

SECTION 20- SERVICE OF DOCUMENTS

 The various modes in which documents may be served on the company, on the
members and also on the registrars is as follows:
 Serving document to company or an officer thereof at the registered office of
the company by:
o registered post, or
o speed post, or
o courier service, or
o leaving it at its registered office, or
o means of such electronic or other mode as may be prescribed.

However, 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 registrar or member:

o documents be filed with Registrar in electronic mode,

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Companies Act, Chapter II Incorporation of a Company

o document may be served on Registrar or any member by sending it to him

by:
 Post, or
 registered post, or
 speed post, or
 courier, or
 by delivering at his office or address, or
 by such electronic or other mode as may be prescribed.

Note: However, 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. In
case of delivery by post, such service shall be deemed to have been effected:

 in the case of a notice of a meeting, at the expiration of 48 hours after the letter
containing the same is posted; and
 in any other case, at the time at which the letter would be delivered in the ordinary
course of post.

SECTION 21- AUTHENTICATION OF DOCUMENTS, PROCEEDINGS AND CONTRACTS

 A document or proceeding requiring authentication by a company or contracts

made by or on behalf of a company may be signed by:
 any key managerial personnel, or
 an officer or employee of the company duly authorized by the Board in this
behalf.

SECTION 21- AUTHENTICATION OF DOCUMENTS, PROCEEDINGS AND CONTRACTS

 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.
 A company may, by writing under its common seal if any, authorize 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.
 in case a company does not have a common seal, the authorization be made by
two directors or by a director and the Company Secretary, wherever the
company has appointed a Company Secretary.
 A deed signed by such an attorney on behalf of the company and under his seal shall
bind the company.

CORPORATE IDENTITY NUMBER (CIN)

 CIN is a unique 21digit Alpha-Numeric Code issued by Ministry of Corporate Affairs

(MCA) for all the Companies registered under Companies Act, 2013.

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Companies Act, Chapter II Incorporation of a Company

L74899DL1995PLC067827

 Here in the above example, we have taken CIN of PVR Limited's from MCA Website and
code is broken into different categories for reader to understand the structure of CIN with
ease.
 Listing Status - First Alphabet:
o First Letter (alphabet) of CIN suggests Listing Status of the Company.
Where L indicates, the Company is listed on a recognized stock
exchange in India and
o U indicates it is unlisted Company.
 2 to 5 Industry Code - next 5 numbers:
o Immediately, after Listing status, CIN has 5 numeric digits which
represents Industry Code of the Company.
o Every Company, registered under Companies Act, 2013, has a Main
Object.
o All those main objects are divided into few broad categories and these 5
digits represents the major activity or the industry of the Company.
 6 & 7 State of Registration - 2 Alphabets:
 While Company registered under Companies Act, 2013 can have operations
anywhere in India, it is mandatory for Companies to have 1 Registered Office
address.
 The Registered office generally denotes primary place of business for various
purposes including Tax.
 2 digit denotes State in which Company is primarily registered.
 8 to 11 Year of Incorporation - 4 numbers:
 4 number immediately after state code represent year of Incorporation
(registration) of the Company.
 12 to 14 Status of the Company - 3 Alphabets:
 Under the Companies Act, 2013, the Companies are divided into various types,
such as Private Company, Public Company, Government Companies, Section 8
Companies etc. So, the 3 Alphabets immediately after incorporation indicates the
status of the Company. Here:
o PLC means a Public Company
o PTC means a Private Company
o NPL means Section 8 Company or Company incorporated with charitable
objects
o FTC means a Foreign Company; and
o GOI indicates a Government Company.

 15 to 21 Registration Number – 6-digit numeric code:

 Last 6-digit numeric code, is RoC registration number or a number with which the
Company is registered with RoC

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