Incorporation of Company and Matters Incidental Thereto

Table of Content

Introducation to Incorporation of Companies & Promotor
Formation of Company [Section 3]
Members Severally Liable in Certain Cases i.e. Reduction in Minimum Membership [Section 3A]
Incorporation of Company [Section 7]
Formation of Comapnies with Charitable Objects, etc. [Section 8]
Effect of Registration [Section 9]
Memorandum of Association – MOA [Section 4]
Articles of Association – AOA [SECTION 5]
Doctrine of Constructive Notice and Doctrine of Indoor Management
Act to Override Memorandum, Articles, etc. [Section 6]
Effect of Memorandum and Articles [Section 10]
Alteration of Memorandum [Section 13]
Alteration of Articles [Section14]
Alteration of Memorandum or Articles to Be Noted in Every Copy [Section 15]
Registered Office of Company [Section 12]
Commencement of Business etc. [Section 10A]
Conversion of Companies Already Registered [Section 18]
Subsidiary Company Not to Hold Shares in Its Holding Comapny [Section 19]
Service of Documents [Section 20]
Authentication of Documents, Proceedings and Contracts [Section 21]
Execution of Bills of Exchange, etc. [Section 22]

1. INTRODUCTION TO INCORPORATION OF COMPANIES & PROMOTOR

A company is a separate legal entity from its members. It has perpetual succession and can be incorporated only for lawful purposes. Prior to incorporation, promotion activities are essential. Promotion signifies a number of business operations familiar to the commercial world by which a company is brought into existence.

Persons who undertake promotion activities in order to incorporate the company are generally known as promoters. The section 2(69) of Companies Act, 2013 (herein after referred to as ‘the Act’) defines the term “Promoter” (already mentioned in chapter 1 of module; elaborated here). Promoter means a person;

Who has been named as promoter in a prospectus; or
Who is identified as promoter by the company in the annual return; or
Who has control over the affairs of the company, directly or indirectly whether as a shareholder, director or otherwise; or
In accordance with whose advice, directions or instructions the Board of Directors of the company is accustomed to act, but shall not include a person who is acting merely in a professional capacity such as attorney, technical or functional experts.

Students are advised to take note that above definition serves the purpose to make a person liable ‘in capacity of promoter’ for fraud through misstatement, but not highlighting what actually promoters do. Hence, considering the judicial pronouncements improves our understanding regarding role of promoter.

Promoter is one who undertakes to form a company with reference to a given project, and to set it going, and who takes the necessary steps to accomplish that purpose.To be a promoter, one need not necessarily be associated with the initial formation of the company; one who subsequently helps to arrange floating of its capital will equally be regarded as a promoter. Hence, “promoter” denotes any individual, association, partnership or a company that takes all the necessary steps to incorporate (create and mould) a company and set it going, in a fiduciary position.

2. FORMATION OF COMPANY [SECTION 3]

Earlier companies were granted rights by royal charter, but now a company may be incorporated by either a special Act of the legislature or under the Companies Act, 2013. Accordingly, an incorporated company may be either Chartered Company, Statutory Company, or Registered Company. Section 3 of the Act deals with registered companies.

FORMS OF COMPANIES

Kind of Companies

Sub-section 1 to section 3 provides that for lawful purpose, by subscribing their name to memorandum and complying with requirement of this Act;

A public company may be formed by seven (7) or more persons
A private company may be formed by two (2) or more persons
A one person company (as private company) may be formed by one (1) person.

Further, sub-section 2 to section 3 provides that, company formed as specified above may be incorporated either as;

Companies limited by shares; or
Companies limited by guarantee; or
Unlimited liability companies.

Note: A limited liability companies may be Companies limited by guarantee as well as shares.

Specified IFSC Public or Specified IFSC Private Company shall be formed only as a company limited by shares. IFSC Company means a company licensed to set up businesses in any International Financial Services Center in India, like in Gujarat International Finance Tec-City.

ONE PERSON COMPANY (OPC)

The Companies Act, 2013 for the first time allowed the formation of company by just one person with limited liability, called one person company; such a company is described as a private company under section 3(1)(c). Further section 3(1) along with rule 3 and 4 of the Companies (Incorporation) Rules, 2014, provides certain provisions specifically applicable in case of One Person Company listed below;

Who can form one person company?

Only a natural person, other than minor; who is an Indian citizen and whether resident in India or otherwise shall be eligible to incorporate a One Person Company.

Earlier, it was mandatory to be resident in India. Resident in India means a person who has stayed in India for a period of not less than one hundred and twenty days during the immediately preceding financial year.

OPC can’t be incorporated or converted into a company under section 8 of the Act. Further, OPC can’t carry out Non-Banking Financial Investment activities including investment in securities of any body-corporates.

Indicate Name & Consent Nominee

The memorandum of One Person Company shall also indicate the name of the natural person, other than minor; who is an Indian citizen, whether resident in India or otherwise (as nominee), along with his prior written consent in the Form No. INC-3, who shall, in the event of the subscriber’s death or his incapacity to contract become the member of the company.

Note: This provision is to ensure perpetual succession of legal existence of OPC.

The name of such nominated person in Form No. INC-32 (SPICe) along with consent of such nominee obtained in Form No. INC-3 and fee as provided in the Companies (Registration offices and fees) Rules, 2014 shall be filed with the Registrar at the time of incorporation of the company along with its memorandum and articles.

Note: A natural person shall not be member of more than a One Person Company at any point of time and the said person shall not be a nominee of more than a One Person Company

Where a natural person, being member in One Person Company in accordance with this rule becomes a member in another such Company by virtue of his being a nominee in that One Person Company, such person shall meet the above specified criteria (can be member of only one OPC) within a period of one hundred and eighty days.

Withdraw of Consent by Nominee

Such other person (nominee) may withdraw his consent by giving a notice in writing to such sole member and to the One Person Company

In this case, the sole member shall nominate another person as nominee within fifteen days of the receipt of the notice of withdrawal and shall send an intimation of such nomination in writing to the Company, along with the written consent of such other person so nominated in Form No. INC-3.

Note: Despite name of such other (old nominee) and another person (new nominee) specified in memorandum, any such change in the name of the person shall not be deemed to be an alteration of the memorandum.

Replacing Nominee with another one

The member may change the name of the person nominated by him at any time for any reason including in case of death or incapacity to contract of nominee and nominate another person (new nominee) after obtaining the prior consent of such another person in Form No. INC-3.

Member can do so by intimation in writing to the company.

This is not specified, either in Act or rules whether intimation shall be prior to making change or can be made afterward, but if we consider reasonable construction the intimation shall be ‘Prior Intimation’.

Any such change in the name of the person shall not be deemed to be an alteration of the memorandum.

When Nominee become Member

Where the sole member ceases to be the member and nominee become new member, then such new member shall nominate within fifteen days of becoming member, a person (new nominee) who shall in the event of his death or his incapacity to contract become the member of such company.

Notice of change to Registrar

In all the three case of change discussed above (Withdraw of Consent by Nominee, Replacing Nominee with another one and When Nominee become Member) the company within thirty days of receipt of notice of withdrawal of consent by nominee, intimation of change of nominee from member, or cessation; shall file the notice with the Registrar of such withdrawal of consent, change or cessation respectively and intimate the name of such another person (new nominee) in Form No. INC-4 along with the fee as provided in the Companies (Registration offices and fees) Rules, 2014 along with the prior written consent of such another person so nominated in Form No. INC-3.

Note: All the notices and intimations required above shall be in written only, whether specific form provided or otherwise.

3. MEMBERS SEVERALLY LIABLE IN CERTAIN CASES i.e. REDUCTION IN MINIMUM MEMBERSHIP [SECTION 3A]

Member may have limited or unlimited liability depending upon nature of company. Generally, the members are jointly liable for the debt of company, but they shall be severally liable for the payment of the debts of the company and may be severally sued therefore; if at any time:

The number of members of a company is reduced below seven (7) and two (2) in case of a public and private company, respectively; and
Such company carries on business for more than six months with reduced number of members; and
Every such person who carries on business after those six months is cognizant (aware) of the fact that business is carried reduced members

Such members are liable for the payment of the whole debts of the company contracted during that time (after elapse of six months)

4. INCORPORATION OF COMPANY [SECTION 7]

Steps for Incorporation

Note: Now, it is also required to submit a declaration that all the subscribers have paid the value of shares agreed to be taken by him apart from filling of verification of registered office before the commencement of business.

FILING OF THE DOCUMENTS AND INFORMATION WITH THE REGISTRAR [SUB-SECTION 1]

An application for registration of a company shall be filed, with the Registrar within whose jurisdiction the registered office of the company is proposed to be situated, in SPICe+(Simplified Proforma for Incorporating company Electronically Plus: INC32) along with the fee as provided under the Companies (Registration offices and fees) Rules, 2014 accompanied by following documents and information;

The duly signed memorandum of association and articles of association

The memorandum (e-MOA in Form No. INC-33) and article (e-AOA in Form No. INC-34) of company so furnished shall be duly signed by all the subscribers to the memorandum in the manner prescribed by rule 13 of the Companies (Incorporation) Rules, 2014 as stated below:

Each subscriber shall add his name, address, description & occupation, if any, in the presence of at least one witness who shall attest the signature, shall sign and add his name, address, description and occupation, if any.
Where a subscriber is illiterate, he shall affix his thumb impression or mark which shall be described as such by the person, writing for him, who shall place the name of the subscriber against or below the mark and authenticate it by his own signature and he shall also write against the name of the subscriber, the number of shares taken by him.
Note: The type written or printed particulars of the subscribers and witnesses shall be allowed as if it is written, so long as appends signature or thumb impression.
Where the subscriber is a body corporate, the memorandum and articles of association shall be signed by director, officer or employee of the body corporate duly authorized in this behalf by a resolution of the board of directors.
Where the subscriber is a Limited Liability Partnership, it shall be signed by a partner of the Limited Liability Partnership, duly authorized by a resolution approved by all the partners of the Limited Liability Partnership:
Note: In either case c or stated above, the person so authorized shall not, at the same time, be a subscriber to the memorandum and articles of Association.
Where subscriber to the memorandum is a foreign national residing outside India his signatures and address on the memorandum and articles of association and proof of identity shall be notarized by a Notary (Public) with a certificate. Further, if such person residing in a country outside the Commonwealth or which is not a party to the Hague Apostille Convention, 1961, the certificate of the Notary (Public) shall be authenticated by a Diplomatic or Consular Officer.
Where subscriber to the memorandum is a foreign national residing outside India and visited in India and intended to incorporate a company, in such case the incorporation shall be allowed if, he/she is having a valid Business Visa. In case of Person is of Indian Origin or Overseas Citizen of India, requirement of business Visa shall not be applicable.

Declaration of Compliance by Professional & Director, Manager or Secretary of company

A declaration 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 shall be be filled in Form No. INC-8 by:

an advocate, a chartered accountant, cost accountant or company secretary in practice who is engaged in the formation of the company and
a person named in the articles as director, manager or secretary of the company.

Declaration by subscribers to the memorandum and persons named as the first directors

A declaration in Form No. INC-9 from each of the subscribers to the memorandum and from persons named as the first directors (if any) in the articles, stating 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

He is not convicted of any offence in connection with the promotion, formation or management of any company, or
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 last five years,

Address for correspondence

The address for correspondence till its registered office is established.

Particulars of persons named as the first directors

The particulars i.e name, including surname or family name, the Director Identification Number (DIN), residential address, nationality and such other particulars including proof of identity of each person mentioned in the articles as first director of the company and his interest in other firms or bodies corporate along with his consent (Form No. DIR-2) to act as director of the company shall be filed in Form No. DIR-12 along with the fee as provided in the Companies (Registration offices and fees) Rules, 2014.

Particulars of subscribers to the memorandum

The following particulars of every subscriber to the memorandum shall be filled;

Name (including surname or family name) and recent Photograph affixed
Father’s/Mother’s name
Nationality, Proof of nationality in case the subscriber is a foreign national
Date and Place of Birth (District and State)
Educational qualification and Occupation
Permanent Account Number
Email id and Phone number of Subscriber
Permanent residential address and also Present address
Residential proof such as Bank Statement, Electricity Bill, Telephone / Mobile Bill, provided that Bank statement Electricity bill, Telephone or Mobile bill shall not be more than two months old
Proof of Identity (For Indian Nationals - Voter’s identity card, Passport copy, Driving License copy, Unique Identification Number (UIN) & for Foreign nationals and Non Resident Indians – Passport)
If the subscriber is already a director or promoter of a company(s), the particulars relating to name of the company; Corporate Identity Number;
Whether interested as a director or promoter

Where the subscriber to the memorandum is a body corporate, then the following particulars shall be filed with the Registrar

The name of the body corporate and Corporate Identity Number of the Company or Registration number of the body corporate, if any
GLN, if any
The registered office address or principal place of business
E-mail Id
If the body corporate is a company, certified true copy of the board resolution specifying inter-alia the authorization to subscribe to the MOA
If the body corporate is a limited liability partnership or partnership firm, certified true copy of the resolution agreed to by all the partners specifying inter alia the authorization to subscribe to the MOA
In case of foreign bodies corporate, the details relating to the copy of certificate of incorporation of the foreign body corporate; & the registered office address.

As per rule 12 of the Companies (Incorporation) Rules, 2014

In case any of the objects of a company requires registration or approval from sectoral regulators such as the RBI and SEBI, then such registration or approval shall be obtained by the proposed company before pursuing such objects and a declaration in this behalf shall be submitted at the stage of incorporation.

In case of a Company being incorporated as a Nidhi, the declaration by the Central Government under Section 406 of the Act shall be obtained by the Nidhi before commencing the business and a declaration in this behalf shall be submitted at the stage of incorporation by the Company.

ISSUE OF CERTIFICATE OF INCORPORATION ON REGISTRATION

The Registrar on the basis of documents and information filed, shall register all the documents and information in the register and issue a certificate of incorporation in the Form No. INC-11 to the effect that the proposed company is incorporated under this Act. Certificate of Incorporation shall mention permanent account number of the company where if it is issued by the Income-tax Department.

ALLOTMENT OF CORPORATE IDENTITY NUMBER (CIN)

On and from the date mentioned in the certificate of incorporation, 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 of incorporation.

MAINTENANCE OF COPIES OF ALL DOCUMENTS AND INFORMATION

The company shall maintain and preserve copies of all the documents and information as originally filed at its registered office, till its dissolution under this Act.

FURNISHING OF FALSE OR INCORRECT INFORMATION OR SUPPRESSION OF MATERIAL FACT AT THE TIME OF INCORPORATION (I.E. DURING INCORPORATION PROCESS)

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 for fraud under section 447.

COMPANY ALREADY INCORPORATED BY FURNISHING ANY FALSE OR INCORRECT INFORMATION OR REPRESENTATION OR BY SUPPRESSING ANY MATERIAL FACT (i.e. POST INCORPORATION)

Where, at any time after the incorporation of a company, it is proved that the company has been got incorporated by

furnishing any false or incorrect information or representation or
by suppressing any material fact or information in any of the documents or declaration filed or made for incorporating such company, or
by any fraudulent action,

Then, the promoters, the persons named as the first directors of the company and the persons making declaration under this section shall each be liable for action for fraud under section 447.

ORDER OF THE TRIBUNAL

Where a company has been got incorporated by

furnishing false or incorrect information or representation, or
by suppressing any material fact or information in any of the documents or declaration filed or made for incorporating such company or
by any fraudulent action,

Then, the tribunal (NCLT) on being satisfied that the situation so warrants, in response to an application made to it, may pass order as it may deem fit including;

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
direct that liability of the members shall be unlimited; or
direct removal of the name of the company from the register of companies; or
winding up of the company; or

Provided that before making any such order:

the company shall be given a reasonable opportunity of being heard in the matter; and
the Tribunal shall take into consideration the transactions entered into by the company, including the obligations, if any, contracted or payment of any liability

5. FORMATION OF COMPANIES WITH CHARITABLE OBJECTS, ETC. [SECTION 8]

The underlying purpose of formation of company is not always making profit through operating economic activities, it may have charitable or social objects.

WHO CAN ISSUE AND GET THE LICENSE UNDER SECTION 8(1)?

As per section 8, the Central Government (ROC in its behalf) may grant such a licence if it is proved to the satisfaction that a person or an association of persons proposed to be registered under this Act as a limited company

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;
intends to apply its profits (if any) or other income in promoting its objects; and
intends to prohibit payment of any dividend to its members.

REGISTRATION OF COMPANY USING LICENSE

After granting licence, an application shall be made to registrar under section 8(1) itself for registration of company in the manner specified in rule 19 of the Companies (Incorporation) Rules 2014.

Application for registration

A person or an association of persons desirous of incorporating a company with limited liability under section 8(1), shall make an application to registrar in Form SPICe+ (Simplified Proforma for Incorporating company Electronically Plus: INC32) along with the fee as provided in the Companies (Registration offices and fees) Rules, 2014.

Supporting document along with Application

The application furnished as specified above shall be accompanied by the following documents;

The memorandum and articles of association of the proposed company in the Form No. INC-13 and Form No. INC-31, respectively;
An estimate of the future annual income and expenditure of the company for next three years, specifying the sources of the income and the objects of the expenditure;
The declaration in by an Advocate, a Chartered Accountant, cost accountant or Company Secretary in practice Form No. INC-14 and by each of the persons making the application in Form No. INC-15, that;

- the memorandum and articles of association have been drawn up in conformity with the provisions of section 8 and rules made thereunder and
- all the requirements of the Act and the rules made thereunder relating to registration of the company under section 8 and matters incidental or supplemental thereto have been complied with;

ALTERATION OF MEMORANDUM AND ARTICLES REQUIRES PRIOR PERMISSION OF GOVERNMENT

A company registered under this section requires prior permission from;

Central Government (power delegated to regional directors) for alteration of its memorandum and
Central Government (power delegated to ROCs) for alteration of its articles.

CONVERSION INTO ANY OTHER KIND OF COMPANY

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 in rule 21 and 22 of the Companies (Incorporation) Rule 2014 as described below;

A company shall pass a special resolution at a general meeting for approving such conversion
An explanatory statement to notice of such general meeting must set-out the details on reason of such conversion.
The company shall file an application in Form No. INC-18 with the Regional Director with the fee along with a certified true copy of the special resolution and a copy of the Notice convening the meeting including the explanatory statement for approval for conversion.
Also attach the proof of serving of the notice served by registered post or
hand delivery, to:
♦ the Chief Commissioner of Income Tax having jurisdiction over the company,
♦ Income Tax Officer who has jurisdiction over the company,
♦ the Charity Commissioner,
♦ the Chief Secretary of the State in which the registered office of the company is situated,
♦ any organisation or Department of the Central Government or State Government or other authority under whose jurisdiction the company has been operating.
A copy of the application with annexures as filed with the Regional Director shall also be filed with the Registrar.
The company shall, within a week from the date of submitting the application to the Regional Director, publish a notice at its own expense, and a copy of the notice, as published, shall be sent forthwith to the Regional Director and the said notice shall be in Form No. INC-19 and shall be published;
♦ at least once in a vernacular newspaper in the principal vernacular language of the district in which the registered office of the company is situated, and having a wide circulation in that district, and at least once in English language in an English newspaper having a wide circulation in that district; and
♦ on the website of the company, if any, and as may be notified or directed by the Central Government.
The company should have filed all its financial statements and Annual Returns upto the financial year preceding the submission of the application to the Regional Director and all other returns required to be filed under the Act up to the date of submitting the application to the Regional Director
On receipt of the application, and on being satisfied , the Regional Director shall issue an order approving the conversion of the company into a company of any other kind subject to such terms and conditions as may be imposed in the facts and circumstances of each case.
Before imposing the conditions or rejecting the application, the company shall be given a reasonable opportunity of being heard by the Regional Director
On receipt of the approval of the Regional Director, the company shall convene a general meeting of its members to pass a special resolution for amending its memorandum of association and articles of association and the Company shall thereafter file these with the Registrar (with declaration to adhere conditions if any, imposed by Regional Director)
On receipt of the documents referred above, the Registrar shall register the documents and issue the fresh Certificate of Incorporation.

REVOCATION OF LICENSE

a. The Central Government (power delegated to regional director) 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
the affairs of the company are conducted fraudulently, or in violation of the objects of the company or prejudicial to public interest,

Note: On revocation, the Registrar shall put ‘Limited’ or ‘Private Limited’ against the company’s name in the register.

Before such revocation a written notice must be served on such company and opportunity to be heard in the matter shall be given.

b. Where a licence is revoked and the Central Government is satisfied, that it is essential in the public interest; then after giving a reasonable opportunity of being heard; by order it may direct that

Company be wound up under this Act. Excess assets on the winding up or dissolution, after the satisfaction of its debts and liabilities, 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 credited to the Insolvency and Bankruptcy Fund formed under section 224 of the Insolvency and Bankruptcy Code, 2016.
Company be amalgamated with another company registered under this section and having similar objects. The Central Government empowered with overriding effects to provide the said amalgamation to form single entity with such constitution, properties, powers, rights, interest, authorities and privileges and with such liabilities, duties and obligations as may be specified in the order.

PENALTY/ PUNISHMENT IN CONTRAVENTION

Penalty for offences under section 8 are summarised below;

Offence	Penalty
company makes any default in complying with any of the requirements laid down in this section	company shall, be punishable with fine varying from ten lakh rupees to one crore rupees
	directors and every officer of the company who is in default shall be punishable with fine varying from twenty-five thousand rupees to twenty-five lakh rupees
the affairs of the company were conducted fraudulently	every officer in default shall be liable for action under section 447

FIGURE- SUMMARY OF SUB-SECTION 6 TO 11 OF SECTION 8

Additional reading

Relaxations available to a Section 8 Company include;

Can call its general meeting by giving a clear 14 days’ notice instead of 21 days.
Requirement of minimum number of directors, independent directors etc. does not apply.
Need not constitute Nomination and Remuneration Committee and Shareholders Relationship Committee.

6. EFFECT OF REGISTRATION [SECTION 9]

Section 9 of the Act provides for the effect of registration of a company, it states;

From the date of incorporation specified in the certificate of incorporation, the subscribers to the memorandum and all other persons, who may become members of such company, shall be a body corporate by the name as contained in the memorandum

Thereafter such body corporate, by the said name; shall be 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.

SUMMARY OF SECTION 9

7. MEMORANDUM OF ASSOCIATION – MOA [SECTION 4]

Memorandum of association (MOA) is the fundamental document for the formation of the company, hence considered as its charter or constitution. Memorandum defines the relationship of the company with outsiders because it enables all those who deals with the company to know what its powers are and what activities it can engage in. The memorandum shall contains the following clauses:

Name Clause
Situation Clause (also called registered office clause)
Objects Clause
Liability Clause
Capital Clause (applicable, if company is formed with share capital)
Association Clause or Subscription Clause (specifically drafted in case of OPC)
Nomination Clause (applicable, in case of OPC)

Section 4 of the Act along with relevant rules from the Companies (Incorporation) Rules 2014, provides for the requirements with respect to memorandum.

NAME CLAUSE [SECTION 4 (1) (a) READ WITH SUB-SECTION 2 TO 5]

The name of the company with the last word “Limited” in the case of a public limited company, or “Private Limited” in the case of a private limited company.

Application for reserving name for proposed company [sub-section 4]

A person may make an application in SPICe+ (Simplified Proforma for Incorporating Company Electronically Plus: INC-32) accompanied by fee, as provided in the Companies (Registration Offices and Fees) Rules, 2014, to the Registrar for reservation of a name set out in the application as name of the proposed company.

Application for reserving the name for the changing name of existing company [sub-section 4]

A person may make an application, using web service RUN (Reserve Unique Name) along with fee as provided in the Companies (Registration Offices and Fees) Rules, 2014, to the Registrar for the reservation of a name set out in the application as the name to which the company proposes to change its name. Resubmission shall be allowed within 15 days, for rectification of defect, if any.

Restriction regarding names and use of words & expressions therein [subsection 2 and 3]

Sub-section 2 states the name mentioned in the memorandum shall not be;

Identical with or resemble too nearly to the name of an existing company registered under this Act or any previous company law; or
Such, use of which by the company will constitute an offence under any law for the time being in force; or
Such, use of which by the company is undesirable in the opinion of the Central Government (this power of Central Government has been delegated to ROC)13
Further, sub-section 3 provides, unless the previous approval of the Central Government has been obtained; a company shall not be registered with that name;
Which contains any word or expression that is likely to give the impression that the company is in any way connected with, or having the patronage of, the Central Government, any State Government, or any local authority, corporation or body constituted by the Central Government or any State Government under any law for the time being in force; or
Which includes words or expressions namely Board; Commission; Authority; Undertaking; National; Union; Central; Federal; Republic; President; Rashtrapati; Small Scale Industries; Khadi and Village Industries Corporation; Financial Corporation and the like; Municipal;; Development Authority; Prime Minister or Chief Minister; Minister; Nation; Forest corporation; Development Scheme; Statute or Statutory; Court or Judiciary; Governor; Bureau; and 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.

Reservation of name [sub-section 5]

Upon receipt of an application the Registrar may, on the basis of information and documents furnished along with the application, reserve the name for a period of twenty days from the date of approval or such other period.

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 sixty days from the date of approval.

Cancellation of reserved name [sub-section 5]

Where after reservation of name, it is found that name was applied by furnishing wrong or incorrect information, then

if the company has not been incorporated, the reserved name shall be cancelled and the person who has made the application shall be liable to a penalty which may extend to one lakh rupees;
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.

SITUATION CLAUSE - SECTION 4 (1) (b)

Section 4(1)(b) requires, the memorandum of a company shall mention the name of state, where registered office is proposed to be situated.

The situation (place) of registered office is important from perspective of;

Establishing the domicile of company for the purpose of determining jurisdictions in context to compliance (ROC, RD etc.), judicial aspects (bench of NCLT, high court etc.), fiscal aspects (taxation), and for many other purposes.
Place at which the company’s statutory books must normally be kept (in case of public company, general meeting also required to be conducted at registered office or in the city where it is situated).
Act as the address to which notices and other communications can be sent.

A company shall, within thirty 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.

OBJECT CLAUSE & DOCTRINE OF ULTRA VIRES

Section 4(1)(c), requires the memorandum of a company shall state the objects for which the company is proposed to be incorporated and any matter considered necessary in furtherance thereof.

A company can’t depart away to do anything beyond or outside its objects stated in memorandum and if any act done beyond that will be ultra vires and void, same can’t be ratified even by the assent of the whole body of shareholders.

It is worth noting here that Memorandum of company can be altered to widen the scope of objects, but such alteration shall have prospective effect only; not the retrospective, hence an act once ultra-vires remain so ever.

A company may do anything which is incidental to and consequential upon the objects specified and such act will not be an ultra vires act.16 To illustrate for trade one have rent or own a building, issue invoices, make and receive payments.

Essence of the Doctrine of Ultra Vires

The Doctrine of Ultra Vires is meant to protect shareholders and the creditors of the company or anyone who deals with the company.

Enunciation of Doctrine of Ultra Vires

The doctrine of ultra vires was first enunciated by the House of Lords in a classic case, Ashbury Railway Carriage and Iron Co. Ltd. v. Riche.17

The memorandum of the company in the said case defined its objects thus: “The objects for which the company is established are to make and sell, or lend or hire, railway plants to carry on the business of mechanical engineers and general contractors…….”

The company entered into a contract with M/s. Riche, a firm of railway contractors to finance the construction of a railway line in Belgium. On subsequent repudiation of this contract by the company on the ground of its being ultra vires, Riche brought a case for damages on the ground of breach of contract, as according to him the words “general contractors” in the objects clause gave power to the company to enter into such a contract and, therefore, it was within the powers of the company. More so because the contract was ratified by a majority of shareholders.

The House of Lords held that the contract was ultra vires the company and, therefore, null and void. The term “general contractor” was interpreted to indicate as the making generally of such contracts as are connected with the business of mechanical engineers. The Court held that if every shareholder of the company had been in the room and had said, “That is a contract which we desire to make, which we authorise the directors to make”, still it would be ultra vires. The shareholders cannot ratify such a contract, as the contract was ultra vires the objects clause, which by Act of Parliament, they were prohibited from doing.

Effects of Doctrine of Ultra Vires

The key effect will be as under;

Whenever an ultra vires act has been or is about to be undertaken, any member of the company can get an injunction to restrain it from proceeding with it.18
Neither party (even outsider) can sue for enforcement or specific performance of such agreement. Reason explained under heading Constructive Notice

LIABILITY CLAUSE

Section 4(1)(d) requires, the memorandum of a company shall state;

In the case of a company limited by shares the liability of its members is limited to the amount unpaid, if any, on the shares held by them; and
In the case of a company limited by guarantee, the amount up to which each member undertakes to contribute:

- to the assets of the company in the event of its being wound-up while he is a member or within one year after he ceases to be a member, for payment of the debts and liabilities of the company or of such debts and liabilities as may have been contracted before he ceases to be a member, as the case may be; and
- to the costs, charges and expenses of winding-up and for adjustment of the rights of the contributories among themselves

Note: Those shareholders who are members of the company at the time of its winding-up are included in list 'A'. They are primarily liable for making payment to the company at the time of its winding-up. While list 'B' consists of those persons who were the members of the company during the 12 months preceding the date of winding-up. B list contributories are liable to contribute if the amount realised from the contributories of list ‘A’ is not sufficient to discharge the liabilities of the company.

CAPITAL CLAUSE

Section 4 (1) (e) (i) requires, in the case of a company having a share capital, the memorandum of a company shall state;

The amount of share capital with which the company is to be registered (usually termed as authorised or nominal capital); and
The division thereof into shares of a fixed amount (i.e. face value and number of shares); and
The number of shares which the subscribers to the memorandum agree to subscribe which shall not be less than one share.

SUBSCRIPTION CLAUSE

Section 4 (1) (e) (ii) requires, the memorandum of a company shall state, the number of shares each subscriber to the memorandum intends to take, indicated opposite his name, in the case of a company having a share capital.

NOMINATION CLAUSE (ONLY IN CASE OF ONE PERSON COMPANY)

Section 4 (1) (f), requires, the memorandum of a company shall state the name of the person (nominee) who, in the event of death of the subscriber, shall become the member of the company, in the case of One Person Company.

FORMS AND SCHEDULE RELATED TO MEMORANDM [SUB-SECTION 6]

The memorandum of a company shall be in respective forms specified in Tables A, B, C, D and E in Schedule I to the Act, as the case shown in figure;

Forms of MOA

8. ARTICLES OF ASSOCIATION – AOA [SECTION 5]

Actually, articles of association of a company contains internal rules and regulations of the company. It is complementary to Memorandum and together give effect as charter of the company. Article establish a contract between the company and the members and between the members inter se. This contract governs the ordinary rights and obligations incidental to membership in the company.

Section 5 of the Companies Act, 2013 and rule 10 and 11 of the Companies (Incorporation) Rules, 2014 seeks to provide the contents and model of articles of association. The provisions are state below;

CONTENTS AND MATTERS TO BE INCLUDED [SUB-SECTION 1 AND 2]

The articles of a company shall contain;

The regulations for management of the company.
Such matters as may be prescribed (rules 11 of the Companies (Incorporation)

Rules, 2014 refers to the matters specified in the model forms given under schedule I to the Act).

However, a company may also include such additional matters in its articles as may be considered necessary for its management.

PROVISION FOR ENTRENCHMENT [SUB-SECTION 3 TO 5]

Usually an article of association may be altered by passing special resolution but entrenchment makes it more difficult to change the articles, in manner specified ahead;

Article may contain provisions for entrenchment [Sub-section 3]

The articles may provide that specified provisions contained in it may be altered only if conditions that are more restrictive and harder than those applicable in the case of a special resolution, are met or complied with.

Manner of inclusion of the entrenchment provision [Sub-section 4]

The provisions for entrenchment shall only be made either:

On formation of a company, or
By an amendment in the articles agreed to
1. By all the members of the company in the case of a private company and
2. By a special resolution in the case of a public company.

Summary of Section 5(4)

Notice to the registrar of the entrenchment provision [Sub-section 5 read with Rule 10 of the Companies (Incorporation) Rules, 2014]

The company shall give notice to the Registrar of entrenchment provisions included in article

In the SPICe+(Simplified Proforma for Incorporating company Electronically Plus: INC-32), along with the fee as provided in the Companies (Registration offices and fees) Rules, 2014 at the time of incorporation of the company, and
In case of existing companies, in Form No. MGT-14 within thirty days from the date of entrenchment of the articles, along with the fee as provided in the Companies (Registration offices and fees) Rules, 2014.

Summary of Section 5(5) and Rule 10

MODEL FORMS OF ARTICLES [SUB-SECTION 6 TO 8]

Sub-section 6 provides that the articles of a company shall be in respective forms specified in Tables, F, G, H, I and J in Schedule I to the Act as specified in figure. Such forms are called model forms.

Further, sub-section 7 provides leeway to company, in adopting all or any of the regulations contained in the model articles applicable to such company.

Forms of AOA

9. DOCTRINE OF CONSTRUCTIVE NOTICE AND DOCTRINE OF INDOOR MANAGEMENT

Both the doctrines carries the counter effect to each other, doctrine of constructive notice put onus on outsider to be aware of what is stated in MOA and AOA; whereas doctrine of indoor management protects such outsider from internal irregularities.

DOCTRINE OF CONSTRUCTIVE NOTICE

Essence of Doctrine of Constructive Notice

All those who are dealing with company deemed to be aware of what is stated in its MOA and AOA, in its true perspective, because both this documents are public documents.

Enunciation of Doctrine of Constructive Notice

The doctrine of constructive notice is based on the rule laid down in Ernest v Nicholls. It was held for the first time that any person who is dealing with the company is deemed to be familiar with the contents of all the public documents of the company. The memorandum and the articles of association of every company are registered with the Registrar of Companies. The office of the Registrar is a public office. Hence, the memorandum and the articles of association become public documents. It is therefore the duty of person dealing with a company to inspect its public documents and makesure that his contract is in conformity with their provisions.

As observed by Lord Hatherley whether a person actually reads them or not, he is to be in the same position as if he had read them.

Effect of Doctrine of Constructive Notice

Every person (dealing with company) shall be presumed to know the contents of the documents and understood them in their true perspective.

Absence of notice of MOA and AOA cannot be an excuse to claim relief for outsiders.21 Even if the party dealing with the company does not have actual notice of the contents of these documents, it is presumed that he has an implied (constructive) notice of them.

Criticism of Doctrine of Constructive Notice

The ‘Doctrine of Constructive Notice’ is an unreal doctrine. People know a company through its officers and not through its documents. Since it does not take notice of the realities of business life, hence caused inconvenient for business transaction.

To illustrate, where the directors or other officers of the company were empowered under the articles to exercise certain powers subject only to certain prior approvals or sanctions of the shareholders, it is difficult for an outsider to ascertain whether necessary sanctions and approvals have been obtained before a certain officer exercises his powers or not.

Therefore, to mitigate such a situation, those dealing with the company can assume that if the directors or other officers are entering into those transactions, they would have obtained the necessary sanctions. This is known as the ‘Doctrine of Indoor Management’ or Turquand’s Rule, and act as an exception to the constructive notice.

The Europe Communities Act, 1972 has abrogated this doctrine through effect of its section 9. Even in India also the Calcutta High Court22 enforced a security which was not signed in accordance with the company’s articles.

DOCTRINE OF INDOOR MANAGEMENT

Essence of Doctrine of Indoor Management

The people who are dealing with company are entitled to presume that internal proceedings and requirements has been duly met. Enunciation of Doctrine of Indoor Management The Doctrine of Indoor Management was first laid down in the case of Royal British Bank v. Turquand.

The directors of a company were authorised by the articles to borrow on bonds such sums of money as should from time to time, by a resolution of the company in general meeting, be authorised to be borrowed. The directors gave a bond to Turquand without the authority of any such resolution. The question arose whether the company was liable on the bond. Held, the company was liable on the bond, as Turquand was entitled to assume that the resolution of the company in general meeting had been passed.

Rationale of Doctrine of Indoor Management

What happens internally in a company is not a matter of public knowledge. An outsider can only presume the intentions of a company, but not know the information he/she is not privy to.

If not for the doctrine, the company could escape creditors by denying the authority of officials to act on its behalf.

Exceptions to Doctrine of Indoor Management

Relief on the ground of ‘indoor management’ cannot be claimed by an outsider dealing with the company in the following circumstances;

Knowledge of irregularity: In case this ‘outsider’ has actual knowledge of irregularity within the company, the benefit under the rule of indoor management would no longer be available. In fact, he/she may well be considered part of the irregularity.
Negligence: If with a minimum of effort, the irregularities within a company could be discovered, the benefit of the rule of indoor management would not apply. The protection of the rule is also not available where the circumstances surrounding the contract are so suspicious as to invite inquiry, and the outsider dealing with the company does not make proper inquiry.
Forgery: The rule does not apply where a person relies upon a document that turns out to be forged since nothing can validate forgery. A company can never be held bound for forgeries committed by its officers.
Where the question is in regard to the very existence of an agency.
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.

10. ACT TO OVERRIDE MEMORANDUM, ARTICLES, ETC. [SECTION 6]

The provisions of this Act shall have overriding effect to the provisions contained in;

Memorandum of company; or
Articles of company; or
Any agreement executed by it; or
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

Any provision contained in the memorandum, articles, agreement or resolution, to the extent in conflict to the provisions of the Act; shall be void.

Note: This section starts with saving clause i.e. “Save as otherwise ….”, means if any other section of the Act says that provisions contained in the memorandum, articles, agreement or resolution is superior then we will treat it accordingly.

11. EFFECT OF MEMORANDUM AND ARTICLES [SECTION 10]

Sub-section 1 to Section 10 aims to impart contractual force to the Memorandum and Articles. It provides, when the memorandum and articles got registered; it shall bind the

Members to the company;
Company to the members;
Members to the members;

To observe all the provisions of the memorandum and of the articles, as signatory thereof.

12. ALTERATION OF MEMORANDUM [SECTION 13]

PROCEDURE OF ALTERATION OF MEMORANDUM

Alteration includes the making of additions, omissions and substitutions. Section 13 of the Act along with Rules 29 to 32 of the Companies (Incorporation) Rules, 2014 provides the provisions that deals with the alteration of the memorandum, detailed below;

Alteration by special resolution [Sub-section 1]

Company may alter the provisions of its memorandum with the approval of the members by a special resolution. Further, as per section 13(6) (a) company shall file with the Registrar, such special resolution.

Name change of the company [Sub-section 2 and 3]

As per sub-section 1, any change in the name of a company shall be effected only with the approval of the Central Government (power delegated to ROC by Central Government)28 in writing in Form No. INC-24 along with fee.

However, no such approval shall be necessary where the change in the name of the company is only the addition/deletion of the word “Private”, on the conversion of any one class of companies to another class in accordance with the provisions of the Act.

As per clause (b) to sub-section 6 to section 13, the approval from the Central Government, shall be filled with registrar by the company. Practically importance of provision is demeaned as power of central government is already delegated to ROC.

Further, as per sub-section 2, 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 in the Form No. INC-25 with the new name and the change in the name shall be complete and effective only on the issue of such a certificate.

RECTIFICATION OF NAME OF COMPANY [SECTION 16]

Where Central Government (power of Central Government under this section conferred (delegated) upon Regional Directors by section 458 of the Act) 29 is of opinion that name (original or revised/new) of company is identical with or too nearly resembles to the name by which a company in existence;

On its own or
On an application by a proprietor of already registered trade mark under the Trade Marks Act, 1999

Then it may direct the company to change its name;

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.

Note - Application by a proprietor of registered trade mark shall be made within three years of incorporation or registration or change of name of the company Further, the company, after changing its name or obtains a new name shall give notice of the change to the Registrar along with the order of the Central Government (Regional Directors) within a period of fifteen days from the date of such change.

Registrar on receipt of notice shall carry out necessary changes in the certificate of incorporation and the memorandum.

If a company makes default in complying with any directions for rectification;

company shall be punishable with fine of ` 1,000 for every day during which the default continues and
every officer who is in default shall be punishable with fine which shall not be less than ` 5000 but which may extend to ` 1,00,000.

Change in the registered office [Sub-section 4, 5, and 7]

Application (sub-section 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 Central Government (power delegated to Regional Director by Central Government) on an application in Form No. INC-23 along with the fee and shall be accompanied by the following documents, namely;

Copy of Memorandum of Association, with proposed alterations;
Copy of the minutes of the general meeting at which the resolution authorising such alteration was passed, giving details of the number of votes cast in favour or against the resolution;
Copy of Board Resolution or Power of Attorney or the executed vakalatnama, as the case may be.
List of creditors and debenture holders
Acknowledgment of service of a copy of the application with complete annexures to the Registrar and Chief Secretary of the State Government or Union territory where the registered office is situated at the time of filing the application.

Advertisement in Newspapers

The Company not more than thirty days before the date of filing the above application, shall advertise in the Form No. INC-26 in the vernacular newspaper in the principal vernacular language in the district and in English language in an English newspaper with wide circulation in the state in which the registered office of the company is situated.

Dispose of the application by central government [sub-section 5]

The Central Government (power delegated to Regional Director by Central Government) shall dispose of the application of change of place of the registered office within a period of 60 days. Before passing of order, Central Government may satisfy itself that-

the alteration has the consent of the creditors, debenture-holders and other persons concerned with the company, or
the sufficient provision has been made by the company either for the due discharge of all its debts and obligations, or
adequate security has been provided for such discharge.

Filing of the certified copy of the order with the registrar [sub-section 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 Central Government approving the alteration shall be filed by the company with the Registrar of each of the States in Form No. INC-28 along with the fee within thirty days from the date of receipt of certified copy of the order, who shall register the same.

Issue of fresh certificate of incorporation [sub-section 7]

The Registrar of the State where the registered office is being shifted to, shall issue a fresh certificate of incorporation indicating the alteration.

Change in the object of the company [Sub-section 8 and 9]

Who can make change in object clause & How? [Sub-section 8]

Where the company has raised money from public through prospectus and has any un-utilised amount out of the money so raised, can change the objects for which the money so raised is to be applied only after passing a special resolution through postal ballot and the notice in respect of the resolution for altering the objects shall contain the following particulars, namely;

Total money received;
Total money utilized for the objects stated in the prospectus;
Un-utilized amount out of the money so raised through prospectus,
Particulars of the proposed alteration or change in the objects;
Justification for the alteration or change in the objects;
Amount proposed to be utilised for the new objects;
Estimated financial impact of the proposed alteration on the earnings and cash flow of the company;
Other relevant information which is necessary for the members to take an informed decision on the proposed resolution;
Place from where any interested person may obtain a copy of the notice of resolution to be passed.

Advertisement [Sub-section 8]

The advertisement giving details of each resolution to be passed for change in objects, simultaneously to the dispatch of postal ballot notices to shareholders; shall

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
Hosted on the website of the company, if any.

Dissenting shareholders to change of object [Sub-section 8]

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 Securities and Exchange Board of India.

Registrar to certify the registration on alteration of the objects [sub-section 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 under clause (a) to sub-section 6 of this section.

Sub-section 10 provides that alteration made under this section (section 13) shall have effect only after it has been registered in accordance with provisions of section.

Sub-section 11 states any alteration of the memorandum, in the case of a company limited by guarantee and not having a share capital, intending to give any person a right to participate in the divisible profits of the company otherwise than as a member, shall be void. This provision is confirming and extending provision to Section 4(7).

13. ALTERATION OF ARTICLES [SECTION 14]

Section 14 of the Companies Act, 2013, vests companies with power to alter its articles. A company cannot divest itself of these powers31. Matters as to which the memorandum is silent can be dealt with by the alteration of article. The law with respect to alteration of articles is as follows:

ALTERATION BY SPECIAL RESOLUTION [SUB-SECTION 1]

A company may alter its articles by a special resolution, subject to the provisions of this Act and the conditions contained in its memorandum. Alteration of articles include alterations having the effect of conversion of a private company into a public company or vice-versa,

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 on an application made within sixty days from the date of passing of special resolution, be filed with Regional Director in e-Form No. RD-1 along with the fee as provided in the Companies (Registration Offices and Fees) Rules, 2014 and shall be accompanied by the following documents, namely;

Draft copy of Memorandum of Association and Articles of Association, with proposed alterations;
Copy of the minutes of the general meeting at which the special resolution authorising such alteration was passed together with details of votes cast in favour and or against with names of dissenters;
Copy of Board resolution or Power of Attorney dated not earlier than thirty days, as the case may be, authorising to file application for such conversion;
Declaration by a key managerial personnel regarding the compliance under difference section of the Act and rules made there under;

In case of a private company, where post alteration the articles no longer include the restrictions and limitations which are required to be included in the articles of a private company under this Act, then such company shall cease to be a private company, from the date of such alteration.

FILING OF ALTERATION WITH THE REGISTRAR [SUB-SECTION 2]

Every alteration of the articles and a copy of the order of the Central Government 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 Form No. INC 27 along with fee, who (Registrar) shall register the same.

Sub-section 3 provides that alteration made under sub-section 1 and registered under sub-section 2 subject to provision of this, shall be valid and have effect as if it were originally contained in the Articles.

14. ALTERATION OF MEMORANDUM OR ARTICLES TO BE NOTED IN EVERY COPY [SECTION 15]

Section 15 of the Act requires that every alteration made in memorandum and articles of a company shall be noted in every copy. Be it issued in electronic form or otherwise; because MOA and AOA considered to be public document under section 399.

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.

15. REGISTERED OFFICE OF COMPANY [SECTION 12]

A company is considered to be a separate legal entity from the members. Once a company gets incorporated, it is required to maintain a registered office. This is a physical office where the corporation will receive service of legal documents from ROC or in case of a lawsuit, etc.

This address cannot be a P.O. Box but must be a physical location where someone is present, to receive service of legal documents during normal business hours. It could be different from a Head Office or Corporate office.

Section 12 of the Companies Act, 2013 seeks to provide for the registered office of the companies for the communication and serving of necessary documents, notices, letters etc. The domicile and the nationality of a company is determined by the place of its registered officer. This is also important for determining the jurisdiction of the court.

REGISTERED OFFICE & VERIFICATION THEREOF [SUB-SECTION 1 & 2]

As per sub-section 1, a company shall, within thirty 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.

Further, sub-section 2 requires the company shall furnish to the Registrar verification of its registered office within a period of thirty days of its incorporation.

LABELING OF COMPANY [SUB-SECTION 3]

Every company shall;

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 are not those of the language/s in general use in that locality, then also in the characters of that language/s.
Have its name engraved in legible characters on its seal, if any;
Get its name, address of its registered office and the Corporate Identity Number 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
Have its name printed on hundies, promissory notes, bills of exchange and such other documents as may be prescribed:

Note:

Where a company has changed its name(s) during the last two years, it shall paint or affix or print, both or all such names in case of point a as well as c above.

In case of One person company, the words ‘‘One Person Company’’ shall be mentioned in brackets below the name of such company, wherever its name is printed, affixed or engraved.

NOTICE OF CHANGE & VERIFICATION TO REGISTRAR [SUB-SECTION 4]

Notice of every change of the situation of the registered office after the date of incorporation of the company, verified in the Form No. INC-22, along with fee as prescribed shall be given to the Registrar within 30 days of the change, who shall record the same.

APPROVAL/CONFIRMATION OF CHANGE [SUB-SETION 5]

Change by passing of special resolution

The registered office of the company shall be changed only by passing of special resolution by a company, outside the local limits of any city, town or village where such office is situated or where it may be situated later by virtue of a special resolution passed by the company.

Change of registered office outside the jurisdiction of registrar

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. Application shall be made in Form No. INC-23 along with fee.

COMMUNICATION AND FILING OF CONFIRMATION [SUB-SECTION 6]

The confirmation of change of registered office from jurisdiction of one registrar to another registrar within the same state, shall be:

Communicated within 30 days from the date of receipt of application by the Regional Director 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 thirty days from the date of filing of such confirmation.

PENALTIES IN CASE OF DEFAULTS [SUB-SECTION 8]

If any default is made in complying with the requirements of this section, the company and every officer who is in default shall be liable to a penalty of one thousand rupees for every day during which the default continues but not exceeding one lakh rupees.

Summary of Provisions applicable in case of change of place of registered office

16. COMMENCEMENT OF BUSINESS ETC. [SECTION 10A]

CONDITIONS FOR COMMENCEMENT OF BUSINESS

A company incorporated

After the commencement of the Companies (Amendment) Ordinance, 2019 and
Having a share capital

Shall commence any business or exercise any borrowing powers only if;

The company has filed with the Registrar a verification of its registered office as provided in sub-section (2) of section 12, and
A declaration is filed with the Registrar, by a director, within a period of 180 days of the date of incorporation of the company, in Form No. INC-20A, duly verified by a Company Secretary or a Chartered Accountant or a Cost Accountant, in practice, along with prescribed fee; 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

Note:

Section 12(2) i.e. Verification of registered office with registrar, discussed earlier heading i.e. 15 in this chapter.
In the case of a company pursuing objects requiring registration or approval from any sectoral regulators such as the Reserve Bank of India, Securities and Exchange Board of India, etc., the registration or approval, as the case may be from such regulator shall also be obtained and attached with the declaration.

OUTCOME WHERE CONDITIONS ARE NOT SATISFIED

Penalty

If any default is made in complying with the requirements of this section, the penalty shall be:

Liable	Quantum of penalty
Company	Fifty thousand rupee
Every officer who is in default	One thousand rupees for each day during which such default continues but not exceeding an amount of one lakh rupees.

Declaration not filled by director within 180 days

Where no declaration has been filed by directors within a period of 180 days of the date of incorporation with the Registrar 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 under Chapter XVIII.

Note: Action by registrar for removal of name can be take place simultaneously with levy of penalty.

17. CONVERSION OF COMPANIES ALREADY REGISTERED [SECTION 18]

Section 18 of the Act, empower a company to convert itself into some other class of company by altering its memorandum and articles of association.

Following is the law with respect to the conversion of the companies already registered.

BY ALTERATION OF MEMORANDUM AND ARTICLES

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 of the company in accordance with the provisions of this Chapter.

FILE AN APPLICATION TO THE REGISTRAR

Wherever conversion to be done under section 18, Registrar on basis of an application filled with it by company, shall after satisfying himself that the provisions applicable for registration of companies have been complied with,

Close the former registration of the company; and
After registering the required documents, issue a certificate of incorporation in the same manner as its first registration.

Students may also refer to: Rule 6, 7, 7A, and 20 to 22 of the Companies (Incorporation) Rules, 2014 and 37 and 38 of the Companies (Incorporation) Rules, 2016 & Form Nos. INC-5 & INC-6 under the Companies (Incorporation) Rules, 2014 and INC-27 under the Companies (Incorporation) Rules, 2016.

NO EFFECT ON THE DEBTS, LIABILITIES ETC. INCURRED BEFORE CONVERSION

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.

To put in more simple way, the company remains the same entity as it was before in respect of its debts and liabilities, obligations or contracts.

18. SUBSIDIARY COMPANY NOT TO HOLD SHARES IN ITS HOLDING COMPANY [SECTION 19]

As per section 19 of the Act, a subsidiary company is not allowed to hold shares of its holding company. The prohibition also extends up to the nominees of the subsidiary company.

Consequently, any allotment or transfer of shares in a holding company to its subsidiary shall be void. If the holding company is a guarantee or unlimited company, not having a share capital the above restriction will apply on holding the interest, whatever be the form of interest.

The prohibition does not apply to the following cases:

Where the subsidiary is concerned as a legal representative of a deceased member of the holding company; or
Where the subsidiary holds such shares as a trustee; or
Where the subsidiary company is a shareholder even before it became a subsidiary company of the holding company.

19. SERVICE OF DOCUMENTS [SECTION 20]

Section 20 of the Companies Act, 2013 read with Rule 35 (Service of Documents) of Companies (Incorporation) Rules, 2014, provides the mode in which documents may be served on the company, on the members and also on the registrars. Law with respect to the service of documents is as follows-

SERVING OF DOCUMENT TO COMPANY OR AN OFFICER THEREOF

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
speed post, or
courier service, or
leaving it at its registered office, or
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 MEMBERS

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
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.

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 annual general meeting.

For the purposes of this section, the term “courier” means a person or agency which delivers the document and provides proof of its delivery.

The term “electronic transmission” means a communication that creates a record that is capable of retention, retrieval (recovery) and review, and which may thereafter be rendered into clearly legible tangible form. It may be made by

Facsimile telecommunication (fax) or electronic mail (email), which the company or the officer has provided from time to time for sending communications,
Posting of an electronic message board or network that the Registrar or the member has designated for those communications, and which transmission shall be validly delivered upon the posting, or
Other means of electronic communication, in respect of which the company or the officer has put in place reasonable systems to verify that the sender is the person purporting to send the transmission.

Further sub-section 2 provides, 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.

20. AUTHENTICATION OF DOCUMENTS, PROCEEDINGS AND CONTRACTS [SECTION 21]

As per section 21 of the Act:

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 personnel37, or
An officer or employee of the company duly authorized by the Board in this behalf.

21. EXECUTION OF BILLS OF EXCHANGE, ETC. [SECTION 22]

Sub-section 1 provides, 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. Authority can be either express or implied.

Formal deeds can be executed only through a power of attorney. Therefore sub-section 2 and 3 together provides;

A company may, by writing under
- Its common seal, if any,
- Where in case a company does not have a common seal, then authorized by 2 directors or by a director and the Company Secretary, wherever the company has appointed a Company Secretary.
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.
Deed signed by such an attorney on behalf of the company and under his seal shall bind the company.

Summary of sub-section 2