2OKENHONHOHORRNYYN SR 2SG8NSRSSRIS Sn on ronson Sebo S PSB Pe ODBNOAA ON: CONTENTS Introduction Definition of Company Doctrine of Lifting the Corporate veil Public Company, Private Co. & One Person Co. Conversion of Companies Companies Limited by Shares Holding Company and Subsidiary Company Government Company Foreign Company Mlegal Association Promoters Incorporation of Companies Memorandum of Association Articles of Association . Constructive Notice of Memorandum and Articles Doctrine of Indoor Management Prospectus Private Placement Shelf Prospectus Red-herring Prospectus Issuing Houses and Deemed Prospectus Global Depository Receipts Share Capital Share Sweat Equity Shares Bonus Shares Allotment of Shares Share Certificate Shares at a Premium Shares at a Discount Calls on Shares Lien on Shares Forefeiture of Shares 1" 14 20 24 25 26 28 30 31 35 38 49 54 55 58 64 66 67 67 68 69 74 76 77 78 80 82 83 83 84 8434 35 36 37 38 39 40 4 42 43 44. 45 46 47. 48 49. 50. 51 Surrender of Shares Transfer and Transmission of Shares Pre-emptive Right of Shareholders Debentures Right to Nominate Membership Meeting of Shareholders Board of Directors Meeting of Board Political Contributions Auditors Supremacy of Majority and Protection of Minority Sick Companies Winding up of the Company Contributories Dormant Company National Company Law Tribunal Removal of Name of Company 86 86 88 89 91 92 97 105 114 115 116 119 124 126 145 146 148 151- 152Notes On COMPANY LAW (The Companies Act,2013) Prepared by: Anil. K. Nair Advocate High Court of Kerala 2327390,2378489(0471) 2347135(0484) 9447500443 (Mob) Topic -1 Introduction The law relatirig to Companies in India is now contained in the Companies Act 2013. ‘Companies Act 2013._ One who traces the history of Company law in India can see that the first enactment on the subject of company law was passed in 1850, known as Joint Stock Companies Act, 1850. Thereafter, several amend- ments were made to the Act of 1850 and after India became independ- ent, the Government of India appointed in 1950, a committee of 12 mem- bers to make recommendations for the codification of Company law in- India. The Chairman of the Committee was Mr. H.C. Bhabha. The Committee submitted a comprehensive report on all aspects of Company law and it resulted in the most comprehensive legislation, the Companies Act, 1956. The Companies Act of 1956 was a consolidation of existing laws, statutory rules and certain principles laid down in decisions of the Courts in India and England. The Act of 1956 substantially incorporated provi- sions of the English Companies Act, 1948. In England a new enactment, namely the Companies Act of 1985,has come into force from 1-07-1985.Why the New Act ? Thé Companies Act of 1956 had been in force for about forty-five years and had undergone several amendments. However, a need wag felt to enact a mew legislation e' hi i in i ic “enViorr further lerate expansiofi and- growth of Indian economy. In order to achieve the desired object the Companies Bill,2009 was introduced in the Parliament. Subséquent to its Introduction, the Central Government received several suggestions for amendments in the said Bill. The Parliament Standing Committee on Finance also made numerous recommendations. In order to incorporate the recommendations of the Parliament Standing Committe, the Bill of 2009 required drastic amendments. Under such a circumstance the Central Government withdrew the Bill of 2009 and introduced the Companies Bill 2012 in the Parliament. " The Companies Bill having been passed by both the Houses of Parliament received the assent of President on 29th August,2013. It came on the Statute Book as THE COMPANIES ACT,2013 (Act 18 of 2013). By section 465 of the Companies Act,2013, the Companies Act,1956 was repealed. The Companies Act,1956 contained a total of 658 sections and 15 Schedules. The new Act of 2013 contains only 470 sections and VII schedules. Though the Act received the assent of the President of India on 29-08- 2013, only section 1 of the Act of 2013 came into force on 29-8-2-13. The remaining sections were not brought into force on different dates. Some of the sections were’brought into force on 12-09-2013. Again some other sections were brought into force on 01- 04- 2014, and on 06-06-2014. The remaining sections were” brought into force on 29-05-2015. Now all the sectféns of tife Act ‘of 2013 have been brought into force. tee +The Companies (Amendment) Act 2015 The Indian Government is actively working to improve the ease of joing business in India. Key initiative in this respect can be seen from he amendments made to the Companies Act, 2013 by the Companies( Amendment) Act,2015. The main object of the amendments is to make he company law more business or investor friendly. The Companies (Amendment) Bill 2015 was passed in Lok Sabha on 17- 12- 2014 and it was passed in the Rajya Sabha on 13-05-2015. The Companies Amendment Bill got the President's assent on 25-05-2015 and was published in the Official Gazette of India on 26-05-2015 as the Companies (Amendment) Act 2015. All the sections ( except sections 13.and 14) of the Companies (Amendment) Act, 2015 have come into force with effect from 29-05-2015. Salient features of the Amendment Act are given below: ~ 1. The Figure of Minimum Paid-up Capital Deleted . _ The figure of minimum paid-up capital of rupees one lakh for a private company [ section 2(68)] and of rupees five lakh for a public company [section 2(71] have been deleted. It is left to thé Central Government to prescribe the same from time to time. Thus now a private compafiy or a public company*éan be ‘started without-a minimum paid-up share capital. 2 The requirment of “Common Seal” is made Optional In Companies Act, 20#3, a common seal'was required for a Company to provide various authorizations and atte'stations on behalf of the Company. The requirement for common seal has now been made optional and the Directors signature is acceptable in lieu of the common seal of the Coinpany. 3 Section 11 of the Companies Act,2013 is Omitted, and the requirement of filing of documents with Registrar before commencing blisiness is dispensed with. .As per section 11 of the Companies Act,2013, a company having share capital could not start any business or exercise any borrow, powers unless - (i) a declaration is filed with the Registrar by a director that Ve, subscriber to the memorandum has paid the value of the Shay, agreed to be taken by him and (ii) the paid-up capital of the company is not less than tiy lakhs in the case of public company and one lakh in the case, private company. Further the company had to file with the Registrar a verification its registered office before strarting its business. As section 11 is omitted, a company can start its business withoy filing the required declaration of director and the verificaiton by the company. 4 Stringent Penalty for Company Inviting or Accepting Deposit The Companies Act, 2013 was silent with respect to the penalty o: fine for Companies inviting or accepting deposits from Public without approval from the Regulatory Authorities.-The Companies Amendment Act, 2015 has introduced stringent penalty for Directors of Companies that invite or accept or renew deposits contravening to the Companies Act, 2013. Through the Companies (Amendment) Act, 2015, a new section: section 76A - has been inserted to the Companies Act, 2013 prescribing penalty for inviting or accepting or renewing public deposit. . “Section 76A - Punishment for contravention of section 73 or sectior 76 Where a company accepts or invites or allows or causes any othe person to accept or invite on its behalf any deposit in contravention of th« manner or the conditions prescribed under section 73 or section 76 o rules made thereunder or if a company fails to repay the deposit or par thereof or any interest due thereon within the time specified under sectior 73 or section 76 or rites made thereunder or such further time as may be 4allowed by the Tribunal under section 73, - (a) the company shall, in addition to the payment of the amount of deposit or part thereof and the interest due, be punishable with fine which shall not be less than one crore rupees but which may extend to ten crore rupees; and (b) every officer of the company who is in default shall be punishable with imprisonment which may extend to seven years or with fine which shall not be less than twenty-five lakh rupees but which may extend to two crore rupees, or with both: Provided that if it is proved that the officer of the company who is in default, has contravened such provisions knowingly or wilfully with the intention to deceive the company or its shareholders or depo-itors or creditors or tax authorities, he shall bp liable for action under section 447" { ne 5 Dividend Cannot Be Declared by Company Running at Losses The Companies (Amendment ) Act, 2015 has inserted a fourth proviso to section 123(1) to the effect that “no company shall declare dividend unless carried over previous losses and depreciation not provided in previous year or years are set off against profit of the company for the current year”. Hence, companies having losses or negative reserves cannot declare dividends. In addition to the above stated amendments, the Companies (Amendment) Act,2015 has made several other amendments in various sections of the Act of 2013 so as to bring the company administration more easy.Topic - Il Definition of Company. Discuss the Characteristic, of aCompany. or ; Whatare the Advantages of Incorporation? The word “company” is defined in clause 20 of section 2 of the Companies Act, 2013. It is as follows: “Company” means “a company incorporated under this Act or under any previous company law” The definition in the Act does not disclose the real meaning of the word “company” and its “characteristics”. The word ‘company’ is used to denote an association of persons who have associated together to conduct or to carry on a_business for gain. The persons associating together will contribute some money for the conduct of the business and the total amount is known as_Share Capital of the Company. This share capital will be used by the Company to carry on its business. The profit deriving from the conduct of business will be divided among the members who have contributed money towards the share capital of the Company. It is known as dividend. The associa- tion of persons will be known by a separate name. The association will be incorporated (registered) under the Comanies Act and thereafter it will be a legal person having an artificial personality. A company is a “corporation aggregate”. It will be known by a It will be having “perpetual succession”. It is a legal separate name. rpetual succession person living only in the eyes of law. It can acquire properties in its own name. It can contract debts. The liability of the Company will be of its own. The member's liability will be only to the extent of the value of the shares they hold in the Company. The Company may have a common seal. It is the signature of the Company. Before the Amendment in 2015, seal. Itis requirement of common seal was mandatory. Now it is optional. 6Section 9 of the Companies Act, 2013 declares the effect of registration of a company.under the Companies Act. It is as follows: “From the date of incorporation mentioned in the certificate of incorporation, such subscribers to the memorandum and all other persons, as may, from time to time, become members of the company, shall be a body corporate by the name contained in the memorandum, capable of exercising all the functions of an incorporated company under this Act and having perpetual succession (“and a common seal - these words were omittted by Amendment Act, 2015) with power to acquire, hold and dispose of property, both movable and immovable, tangible and intangible, to contract and to sue and be sued, be the said name.” Section 9 of the Act, 2013 has been amended in 2015 and the words “and a common seal” have been omitted. The result is that now a company need not have a common seal. The advantages of registration of a company is in fact declared in section 9 of the Act. Essential Characteristics of a Registed Company ( Advantages of Incorporation) The following are the essential characteristics of a Company 1) Separate Legal Entity When a Company is incorporated under the Companies Act, a new legal person will be born and thereafter, the Company will be regarded as an entity separate from its members. This separate legal personality confers upon the Company some rights and liabilities apart from those of its members. — The “separate legal personality” of the Company was well estab- lished in the case Salomon v. Salomon & Co Ltd, (1897).Eacts of the Case Salomon was a_ shoe manufacturer. He registered a Company namely Salomon and Co Ltd with a total share capital of 30,000 pounds, His wife and five children took up one share of one pound each. Salomon took 20,000 shares of one pound and 10,000 pounds debentures. The debentures gave to Salomon a charge over the assets of the Company. The Company went into liquidation within a yeer due to general trade depression. At the time of winding up, the Company had an asset of 6,000 pounds. On the other hand, the liabilities of the Company amounted to 17,000 pounds. Salomon was entitled to get 10,000 pounds which were secured by debentures. 7,000 pounds were due to outside creditors. This liability was over and above the claim of share holders of the Company. The unsecured creditors claimed that the company was a mere agent of Salomon and hence they should be paid in priority to Salomon. The Court held that as soon as the Company was registered, it became a separate person independent from Salomon. Salomon is only a member of the Company. A Company can borrow money from its members and create the security upon its assets. In this case, the debentures are secured and Salomon could claim priority over unsecured creditors. A Company is an artifical, invisible and intangible person and lives only in the eyes of law. A Company is an entirely different person from its members. A Company is a legal person without physic and soul. It can act only through human agency. It can appoint any member as its servant. It will be liable to the employee member as in the case of any other employee. Lee v. Lee’s Air Farming Ltd. (1960) Lee formed a Company with a share capital of 3,000 pounds. He took share for 2,999 pounds. His wife took one share for one pound. Mr. Lee was the director of the Company. The Company appointed Mr. Lee 8as the Chief Pilot of the Company. While piloting the Company's plane, he was killed in an accident. The workers of the Company were insured and they were entitled to Compensation on death or injury. Mrs. Lee claimed the Compensation .The Court held that the Company is a separate legal person and it can appoint a member as its servant. Company would be liable to pay compensation to its workmen even though he is a member if he has sustained any injury in the course of his employment. 2) Perpetual Succession A Company is a legal person with perpetual succession. Perpetual succession means that the membership of a Company may change from time to time but that will not affect the continuity of the Company. According to F. Pollock, a company’s perpetuity is like the river Thames. The river Thames is still the same river though the parts which compose it are changing every instant. The Company will have a continuity in-existance irrespective of any change in the membership of that Company. The members may come and go but the company can go on for ever until dissolved by the process of law. According to Gower, the Company's existance will not be affected even though all the members of a Company were killed by a bomb. Not even a Hydrogen bomb can destroy it. 3)-Limited Liability A Company may be incorporated with limited liability.The liability may be limited by shares or by guarantee. If a Company is registered with limited liability, the liability of the members will be only to the extent of face value of the shares which are held by them or the amount guaranteed by them. If the face value of a share in a Company is Rs. 100/ -, the person who holds a share is liable only to the extent of Rs. 100/-. The creditors of the Company cannot get their claims satisfied beyond the assets of the Company. The Creditors cannot proceed against the personal property of the share holder for the satisfaction of their claim.4) Separate Property A Company is a legal person. It can acquire,own,enjoy or dispose of properties its own name. Although the capital of the Company js contributed by its share holders, they are not joint owners of Company’, property. In Bacha .F. Guzdar v. Commissioner of Income Tax(1955), Bacha .FGuzdar was a share holder of the Company which was engageq in agricultural operation. The Company gave dividend to Bacha.F. Guzdar, The Commissioner of Income Tax assessed the dividend to income tax. Bacha F. Guzdar contented that the income is agricultural income and hence not liable to tax. The Court held that income of the Company is agricultural income and not liable to be taxed as far as Company is con- cerned. Amember who received dividend from such a Company cannot claim that it is agricultural income because a Company is a legal person who can own, enjoy and dispose of its own property. A member of a Company has no insurable interest in the property of the Company. In Macaura v. Northern Assurance Company, Macaura insured the timber of a Company for Rs. 42,000 pounds. He was a major share holder of the Company. He insured the timber in his own name and not in the name of the Company. Later the timber was destroyed by fire. He claimed the insurance amount. The Court held that over the Company's properties, members have no insurable interest. 5) Transferability of Shares The shares of a Public Company are freely transferable and a shareholder can sell his shares in a Public Company in the open market. 6) Common Seal In England, the possession and use of Common Seal by Companies is avoided by the Companies Act, 1989. In India, before the Companies ( Amendment) Act,2015 a company had to have a common seal. The “SEAL” of the Company represented 10its official signature. On the common seal, the name of the Company had to be engraved. After the amendment in 2015, a company need not have a common seal of its own. The the documents of the company without its seal becomes valid after the amendment. 7) Capacity to Sue A Company is a legal person which can sue and be sued in its own name. 8) Application of Doctrine of Ultra Vires In the case of a company the application of ultra vires doctrine is an essential feature. It cannot go beyond the “object clause of the Memorandum of Association. 9) Winding Up In order to terminate functioning of a company special winding up procedure is prescribed by law. The company will cease to be in existence only by its compliance. Doctrine of Lifting the Corporate Veil or Disadvantages of Incorporation A Company is a separate legal person apart from its members.The Separate legal entity of the Company is well established in the decision of the case Salomon V. Salomon and Company Ltd. This principle may be called as the ‘ veil of incorporation’. The effect of this principle is that there will be a fictional veil between the Company and its members. After the incorporation, the Company can acquire properties in its own name, it can sue and be sued in its own name. The liability of the mem- bers will be limited to the face value of the shares held by them. The separate legal entity of Company has its own advantages. But the human ingenuity started to use the veil of corporate personality as a u=“ shield for committing fraud. The Veil of incorporation may be used fo, defrauding share holder, creditors and even the Government. The Cour, were compelled to break through or lift the corporate veil in order to fing out the real beneficiary behind the Company. The Courts in such 4 situation ignore the separate legal entity of the Company and punish thy persons who have misused the Company's name. For this purpose, the doctrine of lifting the corporate veil or breaking the wall of corporation ig evolved by the Courts. By pulling off the mask the Court can verify who underneith is really liable. Life Insurance Corporation of India V. Escorts Ltd. (1986) In this case, the Supreme Court observed that a Company is an independent and legal person distinct from the individuals who are its members. The Corporate Veil may be lifted and the individual member may be held liable for preventing the fraud or improper conduct. The circumstances under which the corporate veil may be lifted are the following: 1) Protection of Revenue If the corporate entity of a Company is used for tax evasion, the courts may ignore the corporate entity of the Company. The Supreme Court in Juggilal v. Commissioner of Income Tax (1969), held that the corporate entity of the Company will be disregarded when the name of the Company is used to circumvent tax obligation. In Re Sir Dinshaw Maneckjee Patit (1927), ‘D’ was an assesse of Income tax. He was receiving huge dividend and interest income from various Companies. He formed four private companies. He agreed with each Company to hold a block of shares and debentures. Thereafter, the dividend and interest income were received by these four companies in their own name and ‘D’ took pretended loans from these four companies By this way, he could avoid tax obligation. But the court held that the four Companies were registered only for the purpose of receiving dividends and interest and to hand them over to ‘D’ as loans. The Companies were formed purely for avoiding super tax and thus the Court rejected the 12olther (a) accompany limited by shares, or (b) a company limited by guaranteo,or (c) an unlimited company. Thus the Companies Act, 2013 recognises three types of companies. They are: (i) Public Company (ii) Private Company (ii) One Person Company, a private company Based on the liability of members, the companies formed may be classified into three. They are: (i) a company limited by shares, or (ii) a company limited by guarantee,or (iii) an unlimited company. Public Company Section 2(71) defines the expression “public company” Public Company means a company which - (a) is not a private company; (b) has a minimum paid-up capital as may be prescribed. [Section 2(71) was amended by the Companies (Amendment) Act,2015 and the requirement of minimum paid -up share capital of five lakh rupees has been omitted] Before the amendment, a public company had to have a minimum paid-up share capital of Rs. 5,00,000) Thus now a public company need to have a minimum paid-up share capital as may be prescribed by the Central Government. The Central Government has not yet prescribed the amount of minimum paid-up share capital that which a public company ought to have.A company can be called a “Public Company", If It satisfies thy following conditions: a) (2) (3) (4) (5) (8) (7) It should not be a private company. Along with the name of the company ,as shown in the Memorandum, the word “Limited’ should be used as the last word, A minimum of seven persons should have subscribed to the Memorandum of the company. It should have a minimum paid-up share capital as may be prescribed by the Central Government. The Articles of Association of the company should not restrict the right of its members to transfer its shares. The Articles of Association of the company should not contain any limit as to the maximum number of members The Articles of Association of the company should not prohibit it from making any invitation to the public to subscribe for any securities (shares and debentures) of the company. The minimum number of persons required to form a Public Company is seven and there is no limit to the maximum, Private Company Section 2(68 ) of the Act of 2013 defines the expression “ Private Company” A company registerd under the Act can be called a “Private Company” if it satisfies the following conditions: (i) A minimum of two persons should have subscribed to its 16elther - (a) a company limited by shares, or (b) a company limited by guarantee,or (c) an unlimited company. Thus the Companies Act, 2013 recognises three types of companies. They are: (i) Public Company (il) Private Company (iii) One Person Company, a private company Based on the liability of members, the companies formed may be classified into three. They are: (i) a company limited by shares, or (ii) a company limited by guarantee,or (iii) an unlimited company. Public Company Section 2(71) defines the expression “public company” Public Company means a company which - (a) is not a private company; (b) has a minimum paid-up capital as may be prescribed, [Section 2(71) was amended by the Companies (Amendment) Act,2015 and the requirement of minimum paid -up share capital of five lakh rupees has been omitted] Before the amendment, a public company had to have a minimum paid-up share capital of Rs. 5,00,000) Thus now a public company need to have a minimum paid-up share capital as may be prescribed by the Central Government. The Central Government has not yet prescribed the amount of minimum paid-up share capital that which a public company ought to have.A company can be called a “Public Company”, if it satisfies the following conditions: (1) (2) (3) (4) (5) (6) (7) It should not be a private company. Along with the name of the company ,as shown in the Memorandum, the word “Limited’ should be used as the last word. A minimum of seven persons should have subscribed to the Memorandum of the company. It should have a minimum paid-up share capital as may be prescribed by the Central Government. The Articles of Association of the company should not restrict the right of its members to transfer its shares. The Articles of Association of the company should not contain any limit as to the maximum number of members The Articles of Association of the company should not prohibit it from making any invitation to the public to subscribe for any “securities (shares and debentures) of the company. The minimum number of persons required to form a Public Company is seven and there is no limit to the maximum. Private Company Section 2(68 ) of the Act of 2013 defines the expression “ Private Company” A company registerd under the Act can be called a “Private Company’ if it satisfies the following conditions: (i) A minimum of two persons should have subscribed to its 16Memorandum (except in the case of One Person Company). (ii) Along with the name of the company ,as shown in the Memorandum, the words “Private Limited’ should be used as last words. (iii) It should have a minimum paid-up capital as may be prescibed. [Section 2(68) was amended by the Companies (Amendment) Act,2015 and the requirement of minimum paid -up share capital of one lakh rupees has been omitted] Thus now a private company need to have a minimum paid-up share capital as may be prescribed by the Central Government. The Central Government has not yet prescibed the amount of minimum paid-up share capital that which a private company ought to have. (c) The Articles of the company should contain restriction as to the right of its members to transfer its shares. (d) The Articles of the company should limit the maximum number of members to two hunderd, excluding past and present employee members. If two or more persons hold one share in a company jointly, they shall be treated as a single member. The minimum number of members required to form a Private Company is two and the maximum is two hundred ( excluding past and present employee members). The words ‘Private Limited’ are to be added at the end of its name. Distinction between a Public Company and a Private Company 14) | The minimum number of persons required to form a Public Company is seven. The minimum number of persons required is two, in the case of Private Companies. A One Person Company is also treated as a private company, but it need to have only one member.2) In the case of a Public Company, there is no restriction as to the maximum number of members. In the case of a Private Company, the maximum number of members cannot exceed two hundred (excluding past or present employee members). 3) A Public Company can invite general public to subscribe shares or debentrues of the Company. A Private Company cannot invite general public to subscribe the shares or debentures of the Company. 4) A Public Company's shares can be freely transferred. A Private Company’s shares cannot be freely transferred. 5) A Public Company must have at least three directors in the Board of Directors: (Section 149) A Private Company must have at least two directors. In the case of One Person Company, it should have one director in its Board of Directors: (Section 149). 6) The managerial remuneration ( remuneration payable to its directors and managers) of a Public Company cannot exceed 11% of its net profits in any financial year: ( Section 197(1) of the Act, 2013). ‘ In the case of Private Company there is no such restriction. 7) Inthe case of Public Company, the quorum for a general meeting is five. In the case of Private Company the quorum is two.One Person Company It is a new concept introduced in the company law. A person who intends to start his business as_a company with one person only can now register his business house under the Companies Act, with the benefit of limited liability. Section 2(62) of the Act defines the expression “One Person Company”. It means a company which has only.one person as a member. A One Person Company is treated as a private company for all purposes. Thus the provisions applicable to a private company (except the requirement as to the minimum and maximum members) are applicable to a One Person Company. 3 A One Person Company can be formed for any lawful purpose. The Memorandum of the Company should be subscribed by the person who intends to form the One Person Company. The memorandum of a One Person Company shall indicate the name of the other person (nominee), with his prior written consent in the prescribed form, who shall, in event of the subscriber's death or his incapacity to contract, become the member of the company. The written consent of that person (nominee) shall also be filed with the Registrar at the time of incorporation of the One Person Company along with its memorandum and articles. In order to register a One Person Company, as in the case of a private company, it should have a paid-up share capital as may be prescribed by the Central Government. The Articles of the One Person Company should - (i) prohibit any invitation to the public to subscribe for any securities of the company (ii) restrict the right to transfer its shares.The Companies ( Incorporation ) Rules,2014 provides for the following rules in relation to One Person Company. 1. Only a natural person who is an Indian citizen and resident in India shall be eligible to incorporate a One Person Company, 2. Only a natural person who is an Indian citizen and resident in India shall be a nominee for the sole member of a One Person Company. The term “resident in India” means a person who has stayed in India for a period of not less than one hundred and eighty two days during the immediately preceding calendar year. No person shall be eligible to incorporate more than a One Person Company or become nominee in more than one such company. No minor shall become member or nominee of the One Person Company or can hold share with beneficial interest. Such company cannot carry out Non-Banking Financial Investment ties including investment in securities of any body corporates. acti Topic -V Conversion of Companies Section 18 of the Companies Act,2013 permits conversion of a company from one class to another. Thus a private company can be converted into a public company. So also a public company can be converted into a private company. The conversion is to be effected by alteration of Memorandum and Articles of the company. Section .13 provides for alteration of Memorandum. Section 14 provides for alteration of Articles. Voluntary Conversion of a One Person Company into a Public Company or a Private Company A One Person Company can convert itself into a public company or 20a private company. The conversion is to be effected by alteration of Memorandum and Articles of the company. Section 13 provides for alteration of Memorandum, Section 14 provides for alteration of Articles. In order to convert It into a private company, the number of members and directors is to be increased to two, It can be converted into a public company by increasing the minimum number of members to seven and number of directors to a minimum of three. A One Person Company cannot convert voluntarily into any kind of company unless two years have expired from the date of incorporation of One Porson Company. However if the threshold limit ( paid up share capital) is increased beyond fifty lakh rupees or its average annual turnover during the relevant period exceeds two crores rupees within two years of its incorporation, it shall cease to be entitled to conti" ‘e as a One Person Company and it has to convert itself within six months into either a private company or a public company. The One Person Company has to make an application to the Registrar for effecting conversion. The Registrar shall on the application made by the company, close the former registration and issue a certificate of incorporation in the same manner as its first registration. The conversion and the new registration of a company 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. Conversion of One Person Company - By Operation of Law Rule 6 of the Companies ( Incorporation) Rules, 2014 deals with conversion of a One Person Company into a Public Company or a Private Company. By Rule 6(1) of the Rules, if the paid up share capital of a One Person Company exceeds fifty lakh rupees or its average annual turnover during the relevant period exceeds two crore rupees, it shall cease to 2be entitled to continue as a One Person Company. Such One Person Company shall be required to convert itsejy, within six months of the date on which its paid up share capital js increased beyond fifty lakh rupees or the last day of the relevant Periog during which its average annual turnover exceeds two crore rupees, as the case may be, into either a private company with minimum of two members and two directors or a public company with at least of seven members and three directors. The One Person Company shall, within a period of sixty days from the date on which it ceased to be a One Person Company, give notice to the Registrar informing that it has ceased to be a One Person Company and that it is now required to convert itself into a private company or a public company because of its paid-up share capital exceeded fifty lakh rupees or average annual turnover exceeded two crore. The One Person Company shall alter its memorandum and articles by passing a resolution to give effect to the conversion. In order to convert it into a private company, the number of members and directors is to be increased to two. It can be converted into a public company by increasing the minimum number of members to seven and number of directors to a minimum of three. The One Person Company has to make an application to the Registrar for effecting conversion. The Registrar shall on the application made by the company, close the former registration and issue a certificate of incorporation in the same manner as its first registration. The conversion and the new registration of a company 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 22Conversion of Private Company into One Person Company Rule 7 of the Companies (Incorporation) Rules,2014 provides for conversion of a Private Company into a One Person Company. A Private Company having paid-up share capital of fifty lakh rupees or less and average annual turnover not exceeding two crore rupees may convert itself into One Person Company by passing a special resolution in the general meeting. Before passing such resolution, the company shall obtain “No Objection” in writting from members and creditors. The company shall file copy of the special resolution with the Registrar of Companies within thirty days from the date of passing of such resolution. The company shall file an application for its conversion into One Person Compe. The following documents are to be attached along with the application. (i) A declaration of Directors - The directors of the company shall give a declaration by way of affidavit confirming that all members and creditors of the company have given their consent for conversion, the paid up share capital of the company is fifty lakhs rupees or less and the average annual turnover is less than two crores rupees. (ii) A list of members and list of creditors (iii) the latest audited Balance Sheet and the Profit and Loss Account. (iv) The copy of No Objection letter of secured creditors. If all the above conditions are satisfied, the Registrar shall issue the Certificate stating that it is One Person Company. 23Topic -VI Companies Limited by Shares On the basis of liability of members, Companies may be classifieg into three heads: 1) Companies limited by Shares 2) Companies limited by guarantee 3) Companies with unlimited liability. In the case of a Company limited by shares, the liability of each member is limited to the face value of shares held by him. If the shares are fully paid, the lability of the share holder is nil. However, to this general rule, there WAS one statutoty exception. Under Sectlon 45 of the Companies Act, 1956, if at any time the number of members of a Company is reduced below 7, in the case of a Public Company, or below 2, in the case of a Private Company, and the Company carries on business for more than 6 months with reduced numb every person who Is a member of the Company during the time that It carries busine: after 6 months and Is aware of the fact that the Company carries on business with reduced number shi be severally lable for the whole debts of the Company contracted after 6 months. Problem The number of members In a Public Company became reduced to 6 on 10th November 2004. The Company Incurs trade debts on 11th November 2004, 2nd April 2005, 17th May 2005 and 18th May 2005, Discuss the liability of members of the Company. The members will be personally llable for tho: debts contracted after May 10th 2008, le., after 6 months from the day on which the minimum number is reduced below the required number under the law. The Companies Act,2013 does not contain a provision similar to section 45 of the old Act. Thus, now, no member will be personally liable eventhough the number of members is reduced below the required minimum, if the company is registered as a limited company, 24In the case of companies limited by guarantee, the liability of members will be limited to the extent of guaranteed amount. In the case of unlimited companies the members’ liability will be unlimited as in the case of unlimited partnership. Topic - Vil Holding Company and Subsidiary Company Section 2(46) of the the Companies Act,2013 defines a “Holding Company” and section 2(87) defines a “Subsidiary Company.” \f a company has control over the affairs of another company it is known as Holding Company. The company which is controlled by the Holding Company is known as Subsidiary Company. Under the following circumstances, a company becomes Subsidiary Company of a Holding Company. 1. If the composition of Board of Directors of the company is controlled by the Holding Company 2. If more than half in nominal value of equity share capital of the company is held by Holding Company. \f a Subsidiary Company has control over another company, that company will also be deemed to be the Subsidiary Company of the Holding Company. The Holding Company and its Subsidiary Companies shall be treated as separate entities. The annual accounts of a Subsidiary Company will be annexed with the annual accounts of the Holding Company. Subsidiary Company not to hold share: in Its Holding Company By section 19 (1) of the Act,2013, a subsidiary company shall not 2shold any shares in its holding company and no holding company shajj allot or transfer its shares to any of its subsidiary companies and any such allotment or transfer of shares of a company to its subsidiary company shall be void. This section shall not be applicable to the following cases: (a) If the subsidiary company holds such shares as the legal representative of a deceased member of the holding company. j (b) If the subsidiary company holds such shares as a trustee;or (c) _ If the subsidiary company is a shareholder even before it became a subsidiary company of the holding company. The subsidiary companies holding the shares of a holding company as a legal representative or as a trustee only have right to vote at a meeting of the holding company. The subsidiary company became a shareholder before it became a subsidiary company shall not have right to vote at a meeting of the holding company. Topic -VIII Government Company Section 2(45) of the Companies Act, 2013 defines a Government Company. If the Central Government or any State Government or the Governments ( Central and State or States) hold at least 51% of paid- up share capital of a company , that company becomes a Government Com- pany. A subsidiary company of a Government Company will also be a Government Company. Special provisions applicable to Government Companies is contained in Chapter XXIII ( sections 394 & 395) of the Act 1 The auditor of a Government Company shall be appointed by 26the Comptroller and Auditor -General of India. 2 The Comptroller and Auditor -General shall have the power to direct the manner in which the Company's accounts shall be audited by the auditor. The Comptroller and Auditor - General shall also have the power to conduct a supplementary audit of the accounts of the company. 3 The auditor of the company shall submit a copy of his audit report to the Comptroller and Auditor -General of India . 4 The Comptroller and Auditor -General has a right to comment upon the audit report. 5 The comment upon the audit report shall be placed before the annual general meeting of the company. 6 If the Central Government is a member of a Government Company, it shall prepare an annual report on the working and affairs of the company within three months of its annual general meeting. The annual report shall be laid before both Houses of Parliament together with a copy of the audit report and any comment upon the audit report made by the Comptroller and Auditor -General of India. 7 Ifa State Government is a member of a Government Company, the State Government shall prepare an annual report on the working of the company within three months of its annual general meeting and the annual report shall be laid before the State Legislature along with audit report and any comment upon the audit report made by the Comptroller and Auditor - General of India. 27Topic - IX Foreign Company Section 2(42) of the Companies Act,2013 defines a “foreign company Chapter XXII (sections 379 to 393 of the Act deals with specia) Provisions applicable to companies incorporated outside India. A company which is incorporated outside India and has a place of business in India is called foreign company. A foreign company establishing a place of business within India shall, within thirty days of the establishment of the place of business, deliver to the Registrar for registration the following documents 1. A certified copy of the Charter, Statute or Memorandum and Articles or any instrument containing the constitution of the company. If the instrument is not in English language, a certified translation of that will have to be filed. 2. The full address of the registered or principal office of the Company. 3. The full address of the Directors and Secretary of the company. 4. The name and address of any person or persons resident in India, authorised to accept on behalf of the company service of processes and any notices required to be served on the company. 4. The full address of the principal place of business in India. The above stated documents have to be filed with the Registrar of the State where the principal place of business is situated and with the Registrar at New Delhi. A foreign company shall conspicuously exhibit on the outside of every office or place where it ca~ries on business in India the name of 28the country where it is incorporated in English and in one of the local languages. A foreign company shall, in every calendar year, make out a balance sheet and profit and loss account and deliver three copies of those documents to the Registrar. A foreign company may, even if it has no place of business in India, issue a prospectus offering shares or debentures for subscription. The prospectus must be registered with the Registrar before it is issued to the public. - If any foreign company ceases to have a place of business in India, it shall give notice of the fact to the Registrar. If any foreign company fails to comply with any of the foregoing provisions, the company shall be punishable with fine which shall not be less than one lakh rupees but which may extend to three lakh rupees and in the case of a continuing offence, with an additional fine which may extend to fifty thousand rupees for every day during which the default continues and every officer of the foreign company who is in default shall be punishable with imprisonment for a term which may extend to six months or with fine which shall not be less than twenty-five thousand rupees but which may extend to five lakh rupees, or with both. 29Topic - X Illegal Association Section 464 of the Companies Act, 2013 deals with prohibition , association or partnership of persons exceeding certain number. By section 464 of the Act, no “associaton” or “partnership” consisting of more than fifty numbers (by Rule 10 of the Companies Miscellaneou; Rules,2014) shall be formed for the purpose of carrying on any business that has for its object the acquisition of gain by the association o; partnership or by the individual members thereof, unless it is registered as a company under the Act or is formed under any other law for the time being in force. There can be a co-operative society with more than fifty members. However it is to be registered under the Co-operative Societies Act. There cannot be a partnership business with more than fifty partners. If a partnership is formed with more than fifty person, every member of the partnership shall be punishable with fine which may extend to one lakh rupees and shall also be personally liable for all the liabilities incurred in such business. If an association of fifty or more persons conduct an activity without an object of making profit, it does not require registration under the Companies Act. An illegal association cannot enter into any contract. It cannot sue any member or outsider. The prohibition in section 464 of the Act is not applicable to a Joint Hindu Family carrying on a business. But if the business is carried of by two or more families in partnership and total number exceeds fifty, then section 464 will be applicable. 30The prohibition in section 464 is not applicable to an association or partnership, if it is formed by professionals who are governed by special Acts. Topic - XI Promoter In the formation of a company, certain preliminary steps are necessary. Usual steps in the formation of the company are following:- 1) Preparation of Memorandum of Association of the Company 2) Preparation of Articles of Association of the Company. 3) Entering into Preliminary Contracts. 4) Registration of the Company All these steps are taken by certain persons known as Promoters. Individuals, firms, association of persons or syndicates can act as promoters. A promoter is a person who undertakes the necessary preliminary steps incidental to the formation of a company. According to Palmer,” a Promoter is a person who originates the scheme for the formation of the Company. He prepares the Memorandum and Articles of the Company. He settles the terms of Preliminary Contracts. He finds out the first directors. He prepares Prospectus and makes arrangement for advertising and circulating the prospectus. According to Gower,” as a Potmaker is the sole creator of the pots, the Promoter is the sole creator of the Company”. The Promoter settles the Company's name. He settles the details of company’s Memorandum and Articles. He arranges for the printing of the Memorandum and Articles. He determines the nomination of directors, solicitors, bankers, auditors and secretary. He arranges the registered office of the Company. He arranges for the registration of the Company. He is, in fact, responsible for bringing the Company into existance. 31Section 2(69) of the Companies Act,2013 defines the expression promoter. The following persons are treated as promoters of the Company, (i) A person who has been named as promoter In a prospectus. (ii) A person who Is identified as a promoted by the company in the annual return to be filed with the Registrar under section 92 of the Act. (iil) A person who has control over the affairs of the company, directly or indirectly whether as a shareholder, director or otherwise. (iv) A person in accordance with whose advice, directions or instructions the Board of Directors of the company is accustomed to act. However, a person who is acting merely in a professional capacity would not be treated as a Promoter. Legal relationship between Promoter and Company A Promoter is neither an agent nor a trustee of a proposed Company. He is not an agent because there is no principal. He is not a trustee because the beneficiary is not in existance. However, from the moment he acts with the Company in mind, a Promoter stands in a fiduciary position towards the proposed Company. The important consequences that follows from the creation of a fiduciary relationship between the Promoter and the Company he brings into existance are the following. 1) Disclosure of Interest nope shall not make any profit from the sale of his own property to the Company without disclosing material facts. If a Promoter contracts to sell his own property to the Company without making a full disclosure, the Company may either repudiate the sale or affirm the contract and recover profits made out of it by the Promoter. Erlanger V. New Sembrero Phosphate Company ( 1878) ‘E’ was head of a syndicate. The syndicate purchased an island containing mines of Phosphate for 55,000 pounds. ‘E’ then formed a 32Company. Thereafter a contract was made between ‘X’, a nominee of the syndicate and the company for the purchase of island at 1,10,000 pounds. The details of the sale were not disclosed to the share holders. The Com- pany filed a suit to rescind the contract of sale. The House of Lords held that, since the Promoters had not disclosed the profit which they made, the Company could rescind the contract. 2) Secret profit A Promoter shall not make any profit at the expense of the Company without knowledge and consent of the Company. If he has earned secret profit, the Company can compel him to account for it. In Gluckstein V. Barnes (1900), the Court held that the promoters who have made secret profit should account for it and they are bound to pay to the Company the secret profits they made. Remuneration of Promoters A Promoter is entitled to a reasonable remuneration for the services of a Promoter. He can take the remuneration for his services in one of the following ways. . 14) He may sell his own property at a profit to the Company for cash or fully paid shares. But the fact should be disclosed to the share holders. 2) He may take a commission on the shares sold. 3) He may be given an option to buy a certain number of shares in the Company at par. 4) He may be paid a lumpsum by the Company. Duty of Promoter_as_ regards Prospectus The Promoter who issues prospectus for inviting applications for shares should issue it with full particulars. The prospectus should not contain any untrue or misleading statements or should not omit any material fact. The Promoter will be liable for false statement in the Prospectus. 33elimin or P. Preliminary contracts are the contracts made between the Promote; and third parties on behalf of the proposed Company. The Promoter of a Company usually enter into contracts to acquire some property or right for the company which is yet to be incorporated. Such contracts are calleg Preliminary or Pre-incorporation Contracts. In Kelnar V. Baxter (1866), the court held that a company which is formed subsequent,to the preliminary contract cannot ratify the contract as it was not in existance at the time of entering into contract. In this case, the Promoters of a Hotel Company signed an agreement for the purchase of wine on behalf of the proposed company. The company was incorporated and _ it ratified the contract made by the promoters. The wine was supplied by the contracting party and the company consumed the wine. Before paying the price, the company went into liquidation. The suppliers of wine claimed the price from the liquidator. The Court held that preliminary contracts could not be ratified by the company after its incorporation. The Promoters are personally liable to pay the price. A Company cannot, after its incorporation, enforce the contract made before its incorporation. A company cannot ratify a contract entered into by the promoters on its behalf before incorporation. The rule that a company is not bound by preliminary contracts is subject to an important statutory exception. Section 15 and 19 of the Specific Relief Act, 1963 deal with specific performance of preliminary contracts. When the promoters of a company have, before its incorpora- tion, entered into a contract for the purpose of the company and such contract is warranted by the terms of incorporation, specific perform- ance may be obtained by the company or enforced against the company. The Company, however, should have accepted the preliminary contract and communicated such acceptance to the other party to the contract. 34Topic - XIl Incorporation of a Company or Registration of a company lication for Incorpor: , By rule 12 of the Companies ( Incorporation Rules),2014, for the registration of a company, an application shall be filed with the Registrar within whose jurisdiction the registered office of the company is proposed to be situated, in Form No. INC-2 ( for One Person Company) and Form No. INC-7 ( other than One Person Company) along with the fee as provided in the Companies ( Registration Offices and Fees) Rules, 2014. Documents to be filed for Registration By section 7 of the Act,2013, in order to register a company, the following documents and information are to be filed with the Registrar within whose jurisdiction the registered office of a company is proposed to be situated. (a) The Memorandum and Articles of the company duly signed by all the subscribers to the memorandum (b) A declaration in Form No. INC -8 by an advocate, a charted accountant, cost accountant or company secretary in practice, who is engaged in the formation of the company, and by a person named in the Articles as a director, manager or secretary of the company, that all the requirements of the Act and the rules made thereunder in respect of registration have been complied with. (c) An affidavit from each of the subscribers to the memorandum and from persons named as the first directors, if any, in the articles that he is not convicted of any offence in connection with the promotion, formation or management of any company, or that he has not been found guilty of any fraud or misfeasance or any breach of duty to any company under the Act or any previous company law during the preceding five years and that all the documents filed with the Registrar for registration of the company contain information that is correct and complete and true to the best of his knowledge and belief. The affidavit shall be submitted by 35each of the subscribers to the memorandum and each of the first director, named in the articles in Form No. INC -9. (d) The address for correspondence till its registered office jg established. (e) The particulars of name, including surname or family name residential address, nationality and such other particulars of every subscriber to’the memorandum along with proof of identity. (f) The particulars of the persons mentioned in the articles as the first directors of the company, their names, including surnames or family names, the Director Identification Number, residential address, nationality and such other particulars including proof of identity. (g) The particulars of the interests of the persons mentioned in the articles as the first directors of the company in other firms or bodies corporate along with their consent to act as directors of the company. 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 to the effect that the proposed company is incorporated under the Act. On and from the date mentioned in the Certificate of Incorporation, the Registrar shall allot the company a corporate identity number, which shall be a distinct identity for the company and which shall also be inclued in the certificate. The company shall maintain and preserve at its registered office copies of all documents and information as originally filed with the Registrar until its dissolution. Punishment for Fraud By section 7(5) of the Act, if any person furnishes any false or incorrect particulars of any informaton or suppresses any material information, of which he is aware in any of the documents filed with the Registrar in relation to the registration of a company, he shall be liable for action under section 447 of the Act. 36Section 447 provides for punishment for fraud. Any person who is found to be guilty of fraud shall be punishable with imprisonment tor a term which shall not be loss than six months but which may extend to ten years and shall siso be liable to fine which shall not be lese than the amount involved in the fraud, but which may extend to three time the amount involved in the fraud, By section 7(6) if at any time after the incorporation of a company, itis proved that the company has been got incorporated by furnishing any false or incorrect information or representation or by suppressing any matérial fact or information, in any of the docurnent or declastion filed or made for incorporating such company or by any fraudulent action, the promoters, the persons named as the first directors of the company and the persons making declaration ( advocate, chartered accounted etc.,) shall each be liable for action under section 447 of the Act. Removal of the name of the Company from the Register By section 7(7) of the Act, if a 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, the Tribunal may, on an application made to it - (4) pase such order, as it may think fit, for regulation of the management of the company including changes, if any, in its memorandum and articles, in public interest or in the interest of the company and its members and creditors; or (b) direct that liability of the members shall be unlimited; or (c) direct removal of the name of the company from the register of companies; or (d) pass an order for the winding up of the company; or (®) pa6e such other orders as it may deem fit. Before making any order the Tribunal shall give to the company a reasonable opertunity of being heard In the matter.Topic - XIll Memorandum of Association of Company In order to register a company one of the documents to be filed wit, the Registrar of companies is Memorandum of Company. The Memorandum is the Charter of the company. It is the dominant instrument and it defines the limits of the company’s powers and objects. Any act of the company beyond the limits of it's powers. and objects as defined in the Memorandum will be ultra vires and void. The Memorandum of a company is the constitution of the company, It defines the relation of the company with outside world and the scope of In Ashbury Railway Carriage and Iron Co. v. Riche(1857), the Court held that the Memorandum of a Company is its charter and defines the limitations of powers of the Company. In Cotman V. Brougham(1918), the court held that the purpose of Memorandum of Association are two fold: 1) The prospective share holders who contemplate the investment of their saving should know the field in which it is going to be used. 2) It will give information to anyone who deals with the company to know whether the contract he intends to make with the company is within the objects of the company. The Memorandum of a Company shall be printed, divided into paragraphs, numbered consecutively and signed by seven subscribers in the case of a public company. If it is a private company, at least two subscribers must sign the Memorandum. In the case of One Person Company the person registering the company should sign it. 38LL SSF The Mamorsndum of a company le to be prepared ae provided in the forms given in Bahedule | The forine of Memorandum of different companies Is given in the tabla contained In ohedule |, There are five tables In Sohedule |; they ara table A,14,0,0 and Table A is the form of Mamorandurmn of Aesoolation of a Company limited by shares Table (3 is the form of Memorandum of Association of a Company limited by guarantes and not having 4 share capital, Table © is the form of Memorandum of Association of a company limited by guaranties and having 4 share capital, Table 2 is the form of Memorandum of Association of an unlimited company snd not having 4 share capital, Tabie E Is the form of Memorandum of Association of an unlimited company and having share capital, Contents of Memorandum Section 4 of the Companiss Act,2013 states that the Memorandum of @ Company shall contain the following details, 1) Name The Memorandum of s company shall state the name of the company with the last word “Limited” in the case of 4 public limited company, or the last word “ Private Limited” in the case of 4 private limited company, The name stated in the Memorandum shall not « (a) be identical with or resemble too nearly to the name of an existing company. (b) b6 such that its use by the company |e undesirable in the opinion of the Central Government (6) 6 such that its use by the company will constitute an offence under any jaw for the time being in force. Rule & (1) of the Companiss ( Incorporation) Rules, 2014 give Quidlines for determining whether 4 proposed name is identical with anther or not, Go also the Mule (2) declares when the name shall be YWRMASIOS Undesirable ”The Emblems and Names (Prevention of Improper Use) Act, 1954 prohibits the use of the following names: 1) United Nations 2) The Government of India 3) State Government. A company shall not be registered with a name which contains any word or expression which is likely to give the impression that the company is in any way connected with, or having the patronage of, (i) the Central Government, (ii) any State Government, or (iii) any local authority, corporation or body constituted by the Central Government or any State Government. However a company using such a name can be registered if it has obtained previous approval of the Central Government for the use of such word or expression. If a Company is registered with a name which resembles the name of an existing company, the old company can apply to the court for an injunction to restrain the new company from adopting the identical name. If the names of two companies contain any word which is in common use, its use cannot be restrained. Asiatic Govt: Security Life Insurance Co. Ltd V. New Asiatic| Insurance Co. Ltd. ACompany was incorporated under the name New Asiatic Insurance | Co.Ltd. Another Company, Asiatic Government Security Life Insurance Company, which was registered earlier, filed a suit for restraining the new company from using the name on the ground that two names resem- bled to a large extent. The Court held that the two names were not identical and the suit was dismissed.Ewing V. ButterCup Margarine Co,(1917) The Plaintiff was carrying on trade under the name Buttercup Dairy Co. Anew company registered under the name Buttercup Margarine Company. The plaintiffs filed a suit for injunction. The Court granted injunction. Change of Name The right of a Company to alter its Memorandum is contained in section 13 of the Companies Act, 2013. A company can at any time change its name. The formalities required are- 1) A special resolution ( a resolution passed by three-forth majority in the general meeting of the members of the company), and 2) ‘The approval of the Central Government in writing. If a Company changes its name, the registrar shall enter the new name on the Register and shall issue a fresh certificate of incorporation. Achange of name will not affect any right or obligation of the Company. The company continues as if no change has taken place, as in the case of the “old wine in new bottle”. Rectification of name of Company By section 16(1) of the Act,2013, if, through inadvertence or otherwise, a company on its first registration or on its registration by a new name, is registered by a name which - (a) in the opinion of the Central Government, is identical with or too nearly resembles the name by which a company in existence had been previously registered, it may direct the company to change its name and the company shall change its name or new name within a period of three Months from the issue of such direction, after adopting an Ordinary Resolution for the purpose. If an application is made to the Central Government by a registered Propritor of a trade mark alleging that the name of a company is identical 4.with or too nearly resembles to the registered trade mark of such Proprito, the Central Government may direct the company to change its name i such a direction is given, the company shall change its name after adopting an Ordinary Resolution for the purpose. After changing the name the company shall within a period of fiftee, days from the date of change, give notice of the change to the Registra, along with the order of the Central Government. The Registrar shall carry out necessary changes in the certificate of incorporation and the memorandum. If the company makes default in complying with any direction given by the Central Government, the company shall be punishable with fine of one thousand rupees 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 five thousand rupess but which may extend to one lakh rupess. 2) Office Clause The Memorandum of Association must mention the State in which the registered office of the company is to be situated. The situation of the registered office of the company determines its domicile and nationality. In the Memorandum of Association of the company, the office address need not be shown. However, by section 12 of the Act, a company shall, on and from the fifteenth day 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. The company shall furnish to the Registrar “verification” (address and some documents) of its registered office within a period of thirty days of its incorporation. The verification of the registered office is to filed in the Form No INC-22. The following documents are to be attached along with the form: (a) The registered document of the title to the premises of the registered office in the name of the company. 42(b) The notarized copy of lease or rent agreement in the name of the company along with a copy of rent paid receipt not older than one month. (c) The authorization from the owner to use the premises by the company as its registered office and proof of ownership. (d) The proof of evidence of any utility service like telephone, electricity etc., showing the address of the premises in the name of the owner which is not older than two months. 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. The name shall be engraved in legible characters on its seal, if any ( Now seal is not compulsory. If there is a seal, the name should be engraved in legible characters on it) . In the 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. c { Regi off The registered office of a Company may - 1) - Change from one place to another place in the same City, Town or Village. 2) Change from one Town to another Town in the same State 3) Change from one State to another State. In the case of change of office from one place to another place in the same city, town or village, after changing the office, a verification is to be given to the Registrar within 15 days of the change. In the case of change of office from one town to another town, a special resolution is required to be passed at a general meeting of the share holders and verification (showing address and documents of title) is to be filed with the Registrar within 15 days. 43if the change of office has the effect of shifting the office from the jurisdiction of one Registrar of Companies to that of another within the same State, permission.of the Regional Director must be gbtained by filing 20 application in the presoribed form. The Regional Director has to-confirm the company’s application within a period of 30 days. After getting the confirmation of the Regional Director, the company must file a copy of the confirmation with the Registrar of Companies within sixty days. The Registrar has to register the same and issue a certificate to the company within thirty days from the date of filing of confirmation. In case of shifting of office from one state to another state, a special sesolution is required to be passed at the general meeting of the share holders. in order to effect the alteration, the confirmation of the Central Government is to be obtained. When the confirmation is given by the ‘Central Government, a certified copy of the order confirming the alteration Shall be filed with the Registrars of both the states. All the records of the Company shail be tranferred to the registrar of ‘the State in which the segistered office of the Company is transferred. 3) Object of Clause The Memorandum of Association of every Company shall clearly State the objects of the Company. The object clause shail state:- 1) The objects for which the company is proposed to be incorporated { main objects). 2) Matters considered necessary for furtherance of main objecis {incidental or ancillary matters to the attainment of main objects). in Ashbury Railway Carriage fron Company V. Riche (1875), the court held that a statement of objects in the Memorandum has two purposes. 1) dt states affirmatively the ambit and extent of vitality and power of the company.