An Overview

1
• Companies Act,2013

• Meaning and features,

• Kinds of companies

• Registration and Incorporation

• Memorandum of Association

• Articles of Association

• Prospectus

• Winding up of companies.

2
▪ History
▪ Companies Act, 2013
▪ Difference between Companies Act, 2013 and 1956

3
History:

⚫ An Act of the Parliament of India which regulates incorporation of a company,

responsibilities of a company, directors, dissolution of a company.

⚫ The Companies Act of 1956 (Act 1 of 1956) was passed by the Indian Government

⚫ It extends to the whole of India and applies to all classes of companies

⚫ It came into force on 1st April 1956

⚫ Has 658 sections and 15 schedules

⚫ The purpose of this act was to encourage investments in companies by providing certain
features like limited liability, transferability of shares etc.

4
Companies Act, 2013:

⚫ An Act of the Parliament of India which regulates incorporation of a company,

responsibilities of a company, directors, dissolution of a company.

⚫ The 2013 Act is divided into 29 chapters containing 470 sections as against 658 Sections in
the Companies Act, 1956 and has 7 schedules.

⚫ The Act came into force on 12th September 2013

⚫ Applicable from the financial year 1st April, 2014

⚫ Few changes like earlier:

⚫ Private companies maximum number of member was 50 and now it will be 200.
⚫ Reverse mergers (merger of foreign companies with Indian companies)
⚫ Introduced the requirement for valuations in several cases, including mergers and
acquisitions, by registered valuers

5
Difference between Companies Act, 2013 and 1956
Sl No Point Companies Act 2013 Companies Act 1956

Companies must have their financial year Companies were permitted to have financial
1 Financial Year
ending on 31 Mar every year year ending on a date decide by Company

2 Formats of Financial Statement Schedule III Schedule VI

As per rules, subject to Max 100.currently is 50 10 in banking business and 20 in any other
3 Maximum No of Partners
. business.
Max Shareholders in Pvt. Ltd
4 200 excluding past and present employees 50 excluding past and present employees
Company

Company which has only one person (natural

5 One Person Company (OPC) Did not exist
person) as its member

Section 53 prohibits issue of shares at a

discount.
Section 79 permitted issue of shares at a
6 Issue of Share at discount
However, Section 54 permits issue of discount.
ESOPs/Sweat Equity to its employees at a
discount.

6
Difference between Companies Act, 2013 and 1956
Sl No Point
7 Security Premium Reserve
8 Article of Association
Companies Act 2013
Utilisation of Securities Premium Reserve is
provided in Section 52(2)
Table F applies where Companies Limited by
shares does not adopt their own Articles of
Association.
Companies Act 1956
Utilisation of Securities Premium Reserve was
provided in Sec 77A and 78
Table A applied where Companies did not adopt
their own Articles of Association.

In the absence of a clause in the Articles of In the absence of a clause in the Articles of
9 Interest in Calls in Arrears Association, the maximum interest chargeable on Association, maximum interest chargeable on
Calls-in-arrears is 10% p.a. Calls-in-arrears was 5% p.a.

In the absence of a clause in the Articles of In the absence of a clause in the Articles of
10 Interest in Calls in Advance Association, the maximum interest payable on Association, the maximum interest payable on
Calls-in-advance is 12% p.a. Calls-in-advance was 6% p.a.

Sec39 a company shall not allot Securities unless Sec 69 the requirement of minimum
11 Minimum Subscription the amount stated in the prospectus as minimum subscription was with respect to Shares only
subscription has been subscribed & the sum paid

7
Appendix

8
 CMA Ramesh Rajagopalan and Prof. Prakruthi N Udupa
Disclaimer: This presentation is only for education purpose. It is just an hand out and you are
advised to refer to the prescribed book(s) and do further research for more insight into the
subject

9
An Overview

1
▪ Companies Act, 2013
▪ Company – Meaning and Definition
▪ Member – Meaning
▪ Share
▪ Meaning
▪ Types

2
Company – Meaning

▪ The term is used to describe an association of a number of persons, formed for some common
purpose and registered as per the law of companies

▪ A company is an association of many persons who contribute money or money's worth to a

common stock and employ it for a common purpose

▪ The common stock so contributed is denoted in money and is the capital of the company

Definition:
Section 2 (20) of the Companies Act, 2013, defines the term ‘Company’ as follows: “Company
means a company incorporated under this Act or under any previous company law.”

3
Member – Meaning

Effective from 12-09-2013 “member”, in relation to a company, means:

(i) The subscriber to the memorandum of the company who shall be deemed to have
agreed to become member of the company, and on its registration, shall be entered
as member in its register of members;

(ii) Every other person who agrees in writing to become a member of the company and
whose name is entered in the register of members of the company;

(iii) Every person holding shares of the company and whose name is entered as a
beneficial owner in the records of a depository

4
Share – Meaning
A share in the share capital of the company, including stock, is the definition of the term ‘Share’. This is in
accordance with Section 2 (84) of the Companies Act, 2013. In other words, a share is a measure of the
interest in the company’s assets held by a shareholder.

5
Share – Types

1) Equity shares
Equity share capital with reference to any company limited by shares, means all share capital
which is not preference share capital. It is further classified into the following types:

a) With voting rights:

These shares are the Ordinary Equity Shares. The Equity shareholders enjoy rights such as
right to dividend, bonus shares, voting etc.

b) Voting rights/Differential voting rights (DVR):

These shares come with voting rights that are not equal to ordinary equity shares. The
holders of these shares enjoys all other rights such as bonus shares, rights shares etc.,
which the holders of equity shares are entitled to, subject to the differential rights with
such shares that have been issued.

6
Share – Types

2) Preference Shares
The preference shares are those which have some preferential rights over the other types of shares.
This shares give the right to dividends and winding up benefits ahead of equity shareholders. They get
fixed dividend each year. They do not enjoy voting rights (or only have a vote only when their dividend
is in arrears). It is further classified into the following types:

a) Cumulative preference shares

> Fixed rate of dividend
> Arrears if any will receive in subsequent year
➢ During inadequate profit, dividend gets accumulated to the subsequent year
➢ There is no maximum time limit for accumulation, can accumulate for any number of years.

b) Non- Cumulative preference shares

> Fixed rate of dividend
> During inadequate profit, they will not receive anything
> Dividends cannot be carried forward

7
Share – Types

c) Participating preference shares

> Fixed rate of dividend
> Additional dividend as share in surplus profit if any left for equity shareholders
claim

d) Non-participating preference shares

> Fixed rate of dividend
> Not entitled to share in surplus profit if any left for equity shareholders claim

e) Convertible preference shares

➢Holder has the right to convert it into equity shares after certain period

8
Share – Types

f) Non-convertible preference shares

> Holder do not have the right to convert it into equity shares after certain period
➢ Such shares have the right to participate in any additional profits, available for paying
the equity shareholders

g) Redeemable preference shares

> Issued for a fixed term and are paid off after/before the expiry of the term or during the
lifetime of the company

h) Irredeemable preference shares

> It can be only redeemed during winding up
➢There is no provision for the arrangement of redemption
➢The rate doesn’t always have to be fixed and depends on contract between holder and
the management of entity.

9
Appendix

10
 CMA Ramesh Rajagopalan and Prof. Prakruthi N Udupa
Disclaimer: This presentation is only for education purpose. It is just an hand out and you are
advised to refer to the prescribed book(s) and do further research for more insight into the
subject

11
An Overview

1
▪ Companies Act, 2013
▪ Types of Company
1. On the basis of incorporation
2. On the basis of liability
3. On the basis of members
4. According to Domicile
5. Other types of Companies

2
Company – Types

1. On the basis of Incorporation

2. On the basis of Liability
3. On the basis of Members

3
Company – Types
1. On the basis of Incorporation:

i. Statutory Companies :
▪ These companies are constituted by a special Act of Parliament or State Legislature. These
companies are formed mainly with an intention to provide the public services.
▪ Though primarily they are governed under that Special Act, still the CA, 2013 will be applicable
to them except where the said provisions are inconsistent with the provisions of the Act
creating them (as Special Act prevails over General Act).
▪ The audit of such companies is conducted under the supervision, control and guidance of the
Comptroller and Auditor General of India.

ii. Registered Companies:

▪ Companies registered under the CA, 2013 or under any previous Company Law are called
registered companies.
▪ Such companies comes into existence when they are registered under the Companies Act and a
certificate of incorporation is granted to it by the Registrar.

4
Company – Types

2. On the basis of liability:

i. Companies limited by shares:

▪ A company that has the liability of its members limited by the memorandum to the
amount, if any, unpaid on the shares respectively held by them is termed as a
company limited by shares.

▪ The liability can be enforced during existence of the company as well as during the
winding up. Where the shares are fully paid up, no further liability rests on them.

▪ For example, a shareholder who has paid 75 on a share of face value 100 can be called
upon to pay the balance of 25 only. Companies limited by shares are by far the most
common and may be either public or private.

5
Company – Types
2. On the basis of liability:

ii. Companies limited by guarantee:

▪ Company limited by guarantee is a company that has the liability of its members limited to
such amount as the members may voluntarily undertake, by the memorandum, to
contribute to the assets of the company in the event of its being wound-up. In case of
such companies the liability of its members is limited to the amount of guarantee
undertaken by them.

▪ The members of such company are placed in the position of guarantors of the company’s
debts up to the agreed amount.

▪ If it has share capital, the liability of the members becomes two-fold; firstly, the amount
unpaid on the shares held by them and secondly, amount payable under the guarantee.

6
Company – Types

2. On the basis of liability:

iii. Unlimited Liability Companies:

▪ A company not having a limit on the liability of its members is termed as unlimited
company. Here the members are liable for the company’s debts in proportion to their
respective interests in the company and their liability is unlimited.

▪ Such companies may or may not have share capital. They may be either a public company
or a private company.

7
Company – Types

3. On the basis of number of members:

i. Public Company:
Defined u/s 2(71) of the CA, 2013 – A public company means a company which is not a private
company.
Section 3(1) of the CA, 2013– Public company may be formed for any lawful purpose by 7 or
more persons.
Section 149(1) of the CA, 2013 – Every public company shall have minimum 3 director in its
Board.
Section 4(1)(a) of the CA, 2013 – A public company is required to add the words “Limited” at
the end of its name.
It is the essence of a public company that its shares and debentures can be transferable freely
to the public unlike private company. Only the shares of a public company are capable of being
dealt in on a stock exchange.
A private company that is a subsidiary of a public company, will be considered a public
company.
8
Company – Types

3. On the basis of number of members:

ii. Private company:

Defined u/s 2(68) of the CA, 2013 – A private company means a company which by its
articles—
a. Restricts the right to transfer its shares;
b. Limits the number of its members to 200 hundred (except in case of OPC)
c. Start business with 2 Directors
d. No need to appoint Independent Directors
e. No need to issue Prospects as it is not inviting public to subscribe to its capital
f. Must have Pvt. Ltd. after its name

E.g. Oracle India Pvt. Ltd.

9
Company – Types

3. On the basis of number of members:

Note:
▪ Persons who are in the employment of the company; and persons who, having been formerly in the
employment of the company, were members of the company while in that employment and have
continued to be members after the employment ceased, shall be excluded.
▪ Where 2 or more persons hold 1 or more shares in a company jointly they shall be treated as a single
member.
▪ Prohibits any invitation to the public to subscribe for any securities of the company;
▪ Section 3(1) of the CA, 2013 – Private Company may be formed for any lawful purpose by 2 or more
persons.
▪ Section 149(1) of the CA, 2013 – Every Private company shall have minimum 2 director in its Board.
▪ Section 4(1)(a) of the CA, 2013 – A private company is required to add the words “Private Ltd” at the
end of its name.
▪ Special privileges – Private Companies enjoys several privileges and exemptions under the
Companies Act.

10
Appendix

11
 CMA Ramesh Rajagopalan and Prof. Prakruthi N Udupa
Disclaimer: This presentation is only for education purpose. It is just an hand out and you are
advised to refer to the prescribed book(s) and do further research for more insight into the
subject

12
An Overview

1
▪ Companies Act, 2013
▪ Types of Company
1. On the basis of incorporation
2. On the basis of liability
3. On the basis of members
4. According to Domicile
5. Other types of Companies

2
Company – Types

4. According to Domicile
5. Other types of Companies

3
Company – Types

4. According to Domicile:

1. Foreign company: (E.g. Refer Notes)

Defined u/s 2(42) of the CA, 2013 – “foreign company” means any company or body
corporate incorporated outside India which,—
✓ has a place of business in India whether by itself or through an agent, physically or
through electronic mode; and
✓ conducts any business activity in India in any other manner.
Section 379 to Section 393 of the CA, 2013 prescribes the provisions which are applicable
on such companies.

2. Indian Company:
A company formed and registered in India is known as an Indian Company.

4
Company – Types

5. Other Types of Company:

a. Section 8 Company: (E.g. Refer Notes)

A company is registered as a limited company under section 8 of the CA, 2013 and holds
the licence from Central Government (CG) and

1. 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;

2. intends to apply its profits, if any, or other income in promoting its objects; and

3. intends to prohibit the payment of any dividend to its members.

4. Many companies primarily have charitable and non-profit objectives

5
Company – Types

5. Other Types of Company:

b. Government Company: (E.g. Refer Notes)

Defined u/s 2(45) of the CA, 2013 – “Government company” means any company in which
not less than 51 % of the paid-up share capital is held by the Central Government, or by
any State Government or Governments, or partly by the Central Government and partly
by one or more State Governments, and includes a company which is a subsidiary
company of such a Government company. Explanation – “paid-up share capital” shall be
construed as “total voting power”, where shares with differential voting rights have been
issued.

Special privileges: Government Company enjoys several privileges and exemptions under
the Companies Act. (E.g. Word STATE is allowed, End with word Limited, Dividend need
not be deposited in a separate scheduled bank etc.) - ESI
6
Company – Types

5. Other Types of Company:

c. Small Company: (E.g. Refer Notes)

Defined u/s 2(85) of the CA, 2013 – “small company” means a company, other than a public
company,—
1. paid-up share capital of which does not exceed Rs. 50 lakh or such higher amount as may
be prescribed which shall not be more than Rs. 10 crore; and
2. turnover of which as per P&L account for the immediately preceding financial year does not
exceed Rs. 2 crore or such higher amount as may be prescribed which shall not be more
than Rs. 100 crore
Exclusion from the Meaning of Small Company:
▪ a holding company or a subsidiary company;
▪ a company registered under section 8; or
▪ a company or body corporate governed by any special Act;
Special privileges: Small Company enjoys several privileges and exemptions under the Companies
Act. (Refer Notes)
7
Company – Types
5. Other Types of Company:

d. Subsidiary Company:
Defined u/s 2(87) of the CA, 2013 – “subsidiary company” or “subsidiary”, in relation to any other
company (that is to say the holding company), means a company in which the holding company—
1. controls the composition of the Board of Directors; or
2. exercises or controls more than one-half of the total voting power either at its own or
together with one or more of its subsidiary companies:
Provided that such class or classes of holding companies as may be prescribed shall not have
layers of subsidiaries beyond such numbers as may be prescribed.

e. Holding Company:
Defined u/s 2(46) of the CA, 2013 –“holding company”, in relation to one or more other
companies, means a company of which such companies are subsidiary companies;
Explanation: For the purposes of this clause, the expression “company” includes any body
corporate.

8
Company – Types
5. Other Types of Company:

f. Associate Company:
Defined u/s 2(6) of the CA, 2013 – “associate company”, in relation to another company,
means a company in which that other company has a significant influence, but which is
not a subsidiary company of the company having such influence and includes a joint
venture company.

Explanation: For the purpose of this clause:

1. the expression “significant influence” means control of at least 20% (upto 50%) of
total voting power, or control of or participation in business decisions under an
agreement;
2. the expression “joint venture” means a joint arrangement whereby the parties that
have joint control of the arrangement have rights to the net assets of the
arrangement;

9
Company – Types
5. Other Types of Company:

g. Producer Company:
Common parlance- A producer company can be defined as a legally recognized body of
farmers/ agriculturists with the aim to improve the standard of their living, and ensure a
good status of their available support, incomes and profitability.

Definition- “Producer Company” means a body corporate having objects or activities

specified in section 581B and registered as Producer Company under the Companies Act,
2013.

Section 581B:
Production, Harvesting, Procurement, Grading, Pooling, Handling, Marketing, Selling,
Export of primary produce of the Members or Import of goods or services for their
benefit:

10
5. Other Types of Company: h. Dormant Company:
5. In case of company is formed and registered under this Act for a future project or to hold an
asset or intellectual property and has no significant accounting transaction, such a company
or an inactive company may make an application to the Registrar for obtaining the status of a
dormant company.
6. Thereafter Registrar on consideration of the application shall allow the status of a dormant
company to the applicant and issue a certificate.

7. “Inactive company” means a company which has not been carrying on any business or
operation, or has not made any significant accounting transaction during the last two
financial years, or has not filed financial statements and annual returns during the last two
financial years.

8. In case of a company which has not filed financial statements or annual returns for two
financial years consecutively, the Registrar shall issue a notice to that company and enter the
name of such company in the register maintained for dormant companies.

9. Registrar have power to strike off the name of a dormant company from the register of
dormant companies, which has failed to comply with the requirements of this section.
11
Appendix

12
 CMA Ramesh Rajagopalan and Prof. Prakruthi N Udupa
Disclaimer: This presentation is only for education purpose. It is just an hand out and you are
advised to refer to the prescribed book(s) and do further research for more insight into the
subject

13
An Overview

1
▪ Companies Act, 2013
▪ Registration & Incorporation

2
Company – Registration / Incorporation

The Companies Act, 2013 details the regulations and company registration papers essential
for the incorporation of a company.

Promoters

Section 2(69) of the Companies Act, 2013, defines promoters as an individual who:-
• Is named as a promoter in the prospectus or in the annual returns of the company.
• Controls the affairs of a company, directly or indirectly.
• Advises, directs, or instructs the Board of Directors.

Hence, we can say that promoters are people who originally come up with the idea of the
company, form it and register it. However, solicitors, accountants, etc. who act in their
professional capacity are NOT promoters of the company.

3
Company – Registration / Incorporation

Formation of a Company

Section 3 of the Companies Act, 2013, details the basic requirements of forming a company as follows:

• Formation of a public company involves 7 or more people who subscribe their names to
the memorandum and register the company for any lawful purpose.

• Similarly, 2 or more people can form a private company.

• One person can form a One-person company. Sec. 2(62) defines OPC

▪ A single shareholder holds 100% shareholding.

▪ Only a natural person who is a resident of India and also a citizen of India can form a one-
person company.

4
Company – Registration / Incorporation

Registration or Incorporation of a Company

Section 7 of the Companies Act, 2013, details the procedure for incorporation of a company. Here
is the procedure:

Filing of company registration papers with the registrar

To incorporate a company, the subscriber has to file the following company registration papers
with the registrar within whose jurisdiction the location of the registered office of the proposed
company falls.

1. The Memorandum and Articles of the company.

2. All subscribers have to sign on the memorandum.
3. The person who is engaged in the formation of the company has to give a declaration
regarding compliance of all the requirements and rules of the Act.
4. A person named in the Articles also has to sign the declaration.

5
Company – Registration / Incorporation

4. Each subscriber to the Memorandum and individuals named as first directors in the
Articles should submit an affidavit with the following details:
• Declaration regarding non-conviction of any offence with respect to the
formation, promotion, or management of any company.
• He has not been found guilty of fraud or any breach of duty to any company in
the last five years.
• The documents filed with the registrar are complete and true to the best of his
knowledge.

5. Address for correspondence until the registered office is set-up.

6. If the subscriber to the Memorandum is an individual, then he needs to provide his full
name, residential address, and nationality along with a proof of identity. If the subscriber
is a body corporate, then prescribed documents need to be provided.

6
Company – Registration / Incorporation

7. Individuals mentioned as subscribers to the Memorandum in the Articles need to provide the
details specified in the point above along with the Director Identification Number.

8. The individuals mentioned as first directors of the company in the Articles must provide
particulars of interests in other firms or bodies corporate along with their consent to act as
directors of the company as per the prescribed form and manner.

Issuing the Certificate of Incorporation

Once the Registrar receives the information and company registration papers, he registers all information
and documents and issues a Certificate of Incorporation in the prescribed form.

Corporate Identity Number (CIN) - Section 12

The Registrar also allocates a Corporate Identity Number (CIN), unique 21 Digit to the company which is a
distinct identity for the company. The allotment of CIN is on and from the company’s incorporation date.
The certificate carries this date.

7
Company – Registration / Incorporation

Maintaining copies of Company registration papers: Section-7 sub-section (1)

The company must maintain copies of all information and documents until dissolution.

a. Memorandum of Association
b. Articles of Association
c. Record of Private Placement (Sec,42 read with Rule 14)
d. Register of renewed and duplicate share certificate
e. Register of Sweat Equity register (Form No. SH-3)
f. Register of Transfer & Transmission of Equity/ Preference Shares (Sec. – 56)
g. Register of Securities buyback [Section -68 (9)]
h. Register of Deposit [(Section 73 and 76)]
i. Register of Members - Section 88 (1) (a)

8
Company – Registration / Incorporation

Furnishing false information at the time of incorporation: During the formation of a company, an
individual can:

• Furnish incorrect or false information

• Suppress any material information in the documents provided to the Registrar for the
incorporation, on purpose

In such cases, the individual is liable for action for fraud under section 447.

• False Statement (Sec.448)

• False Evidence (Sec.449)
• Where no specific penalty or punishment is provided (Sec.450)
• Case of repeated defaults (Sec.451)
• Wrongful withholding of property
• Improper use of “Limited” or “Private Limited” (Sec.453)
9
Appendix

10
 CMA Ramesh Rajagopalan and Prof. Prakruthi N Udupa
Disclaimer: This presentation is only for education purpose. It is just an hand out and you are
advised to refer to the prescribed book(s) and do further research for more insight into the
subject

11
An Overview

1
▪ Companies Act, 2013
▪ Memorandum of Association (MOA)
▪ Object
▪ Definition
▪ Different parts of MOA
▪ Alteration / Change

2
Company – Memorandum of Association

Object of registering a Memorandum of Association or MOA

▪ The MOA of a company contains the object for which the company is formed. It identifies the
scope of its operations and determines the boundaries it cannot cross.

▪ It is a public document according to Section 399 of the Companies Act, 2013. Hence, any
person who enters into a contract with the company is expected to have knowledge of the
MOA.

▪ It contains details about the powers and rights of the company.

▪ Under no circumstance can the company depart from the provisions specified in
the memorandum. If it does so, then it would be ultra vires the company and void.

3
Company – Memorandum of Association

Memorandum of Association (MOA) – Definition: As per section 2 of the Companies Act,

2013 memorandum means the memorandum of association of a company as originally framed
or as altered from time to time in pursuance of any previous company law or of this Act.

Memorandum of Association (MOA) – Different Parts: As Memorandum of Association (MOA) is

an important documents which outlines the company laws under which a company will work and
function. It has several clauses which defines some pertinent aspects under provision of The
Companies Act, 2013 which are as follows:-
1. Name Clause
2. Situation/ Registered State Clause
3. Object clause
4. Liability clause
5. Capital Clause
6. Subscriber Clause

4
Company – Memorandum of Association

i. Name Clause of Memorandum of Association:

▪ The name of the company should be stated in this clause.

▪ A company name should be which is not identical in any manner to any existing company

▪ There are some words which are strictly prohibited to be used in names of company in any
manner. (E.g. State etc.)

▪ The Word “Private/PVT Limited” should be in end of any private company. And the word
“Limited” should be in the end of every public limited Company.

▪ As per section 8, (companies formed not for profit), company are not required to use the word
“Private Limited/ Pvt. Limited or Limited” at the end of their company name.

5
Company – Memorandum of Association

ii. Situation Clause of Memorandum of Association:

In this clause the state name of company’s registered office is mentioned. The Company should
intimate the location of registered office to the registrar within 30 days from the date of
incorporation in case the permanent address of company is not given.

It is one of important aspects as all the correspondence for company will be sent on this. Note
that just a few months of lapse, many companies have been struck off/ name has been removed
due to non-maintenance of registered address of company able to receive and acknowledge the
letters of company.

Once a company has been registered, it should have a proper registered office until, the company
is closed.

6
Company – Memorandum of Association

iii. Objects Clause of Memorandum of Association:

Every company have specific business which they will run after a company is incorporated. This
clause states all the business which this proposed company will commence after incorporation
that too in detail.

As per The Companies Act, 2013 only Main objects and other objects which are ancillary to main
objects are covered. (E.g. Sugar industry)

Any business run apart from this can lead to closure of business. Again, there are some business
which are required approval from different authorities like for loan and capital funding, Reserve
Bank of India (RBI) is required. For commencing insurance business approval from Insurance
Regulatory and development authority of India (IRDAI).

7
Company – Memorandum of Association

iv. Liability Clause of Memorandum of Association:

This clause states the liability of the members of the company. The Liability can be limited or unlimited
which means at the time of winding up of company, a company with limited liability, members are required
to pay amount upto the value of nominal value of shares taken by them but in case of unlimited members
are required to pay without any limit for the debt or payment which a company is required to pay.

v. Capital Clause of Memorandum of Association:

This clause states the Authorised Capital of the company and total number of shares along with value of
per share. This is the limit a company can raise its capital maximum amount. For example, if company’s
authorised capital is 10 Lakhs and paid up at the time of incorporation is 1 Lakh, company can raise its
capital upto 9 lakhs. But nothing more than 9 lakhs.
There is no limit for amount of authorised capital a company can have in India as per The Companies Act,
2013.

8
Company – Memorandum of Association

vi. Subscription Clause of Memorandum of Association:

It contains the names and addresses of the first subscribers. The subscribers to the Memorandum
must take at least one share.

The minimum number of members is two (2) in case of a private company, seven (7) in case of a
public company and one (1) in case of One Person Company (OPC) as per The Companies Act,
2013.

The above clause are required to be inserted in MOA. Omission of any of above clause will lead to
refusal of company incorporation by Registrar of Companies (ROC).

9
Company – Memorandum of Association

Memorandum of Association (MOA) – Alteration / Change

As per section 13 of The Companies Act, 2013 Memorandum of Association (MOA) can be altered
anytime but there are certain conditions which have to be complied before alteration.

Provisions/section governs the alteration/changes of Memorandum of Association (MOA)

Section 13 of The Companies Act, 2013 governs the process and conditions for alteration in
Memorandum of Association (MOA).

The following clauses can be changed as per this section

1. Name Clause
2. Situation Clause
3. Object Clause
4. Capital Clause

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Appendix

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 CMA Ramesh Rajagopalan and Prof. Prakruthi N Udupa
Disclaimer: This presentation is only for education purpose. It is just an hand out and you are
advised to refer to the prescribed book(s) and do further research for more insight into the
subject

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