• Companies Act, 1956

  • PART II : INCORPORATION OF COMPANY AND MATTERS INCIDENTAL THERETO

    Certain companies, associations and partnerships to be registered as companies under Act

    11. Prohibition of associations and partnerships exceeding certain number.—(l) No company, association or partnership consisting of more than ten persons shall be formed for the purpose of carrying on the business of banking, unless it is registered as a company under this Act, or formed in pursuance of some other Indian Law.

    (2) No company, association or partnership consisting of more than twenty persons shall be formed for the purpose of carrying on any other business that has for its object the acquisition of gain by the company, association or partnership or by the individual members thereof, unless it is registered as a company under this Act, or is formed in pursuance of some other Indian law.

    (3) This section shall not apply to a joint family as such carrying on a business; and where a business is carried on by two or more joint families, in computing the number of persons for the purposes of sub-sections (1) and (2), minor members of such families shall be excluded.

    (4) Every member of a company, association or partnership carrying on business in contravention of this section shall be personally liable for all liabilities incurred in such business.

    (5) Every person who is a member of a company, association or partnership formed in contravention of this section shall be punishable with fine which may extend to 1[ten thousand rupees.

    Memorandum of Association

    12. Mode of forming incorporated company.—(1) Any seven or more persons, or where the company to be formed will be a private company, any two or more persons, associated for any lawful purpose may, by subscribing their names to a memorandum of association and otherwise complying with the requirements of this Act in respect of registration, form an incorporated company, with or without limited liability.

    (2) Such a company may be either—

    (a) a company having the liability of its members limited by the memorandum to the amount, if any, unpaid on the shares respectively held by them (in this Act termed “a company limited by shares”);

    (b) a company having the liability of its members limited by the memorandum to such amount as the members may respectively undertake by the memorandum to contribute to the assets of the company in the event of its being wound up (in this Act termed “ a company limited by guaranted”); or

    (c) a company not having any limit on the liability of its members in this Act termed “an unlimited company”).

    13. Requirements with respect to memorandum.—(1) The memorandum of every company shall state—

    (a) the name of the company with “Limited” as the last word of the name in the case of a public limited company, and with “Private Limited” as the last word of the name in the case of a private limited company;

    (b) the State in which the registered office of the company is to be situate;

    (c) in the case of a company in existence immediately before the commencement of the Companies (Amendment) Act, 1965, the objects of the company;

    (d) in the case of a company formed after such commencement,—

    (i) the main objects of the company to be pursued by the company on its incorporation and objects incidental or ancillary to the attainment of the main objects;

    (ii) other objects of the company not included in sub-clause (i); and

    (e) in the case of companies (other than trading corporations), with objects not confined to one State, the States to whose territories the objects extend.

    (2) The memorandum of a company limited by shares or by guarantee shall also state that the liability of its members is limited.

    (3) The memorandum of a company limited by guarantee shall also state that each member undertakes to contribute to the assets of the company in the event of its being wound up while he is a member or within one year after he ceases to be a member, for payment of the debts and liabilities of the company, or of such debts and liabilities of the company as may have been contracted before he ceases to be a member, as the case may be, and of the costs, charges and expenses of winding up, and for adjustment of the rights of the contributories among themselves, such amount as may be required, not exceeding a specified amount.

    (4) In the case of a company having a share capital—

    (a) unless the company is an unlimited company, the memorandum shall also state the amount of share capital with which the company is to be registered and the division thereof into shares of a fixed amount;

    (b) no subscriber of the memorandum shall take less than one share; and

    (c) each subscriber of the memorandum shall write opposite to his name the number of shares he takes. 

    14. Form of memorandum.—The memorandum of association of a company shall be in such one of the Forms in Tables B, C, D and E in Schedule I as may applicable to the case of the company, or in a Form as near thereto as circumstances admit.

    15. Printing and signature of memorandum.—The memorandum shall—

    (a) be printed,

    (b) be divided into paragraphs numbered consecutively, and

    (c) be signed by each subscriber (who shall add his address, description and occupation, if any,) in the presence of at least one witness who shall attest the signature and shall likewise add his address, description and occupation, if any. 

    16. Alteration of memorandum.—(1) A company shall not alter the conditions contained in its memorandum except in the cases, in the mode, and to the extent for which express provision is made in this Act.

    (2) Only those provisions which are required by section 13 or by any other specific provision contained in this Act to be stated in the memorandum of the company concerned shall be deemed to be conditions contained in its memorandum.

    (3) Other provisions contained in the memorandum including those relating to the appointment of a managing director or manager, may be altered in the same manner as the articles of the company, but if there is any express provision in this Act permitting of the alteration of such provisions in any other manner, they may also be altered in such other manner.

    (4) All references to the articles of a company in this Act shall be construed as including references to the other provisions aforesaid contained in its memorandum. 

    17. Special resolution and confirmation by Central Government required for alteration of memorandum.—(l) A company may, by special resolution, alter the provisions of its memorandum so as to change the place of its registered office from one State to another, or with respect to the objects of the company so far as may be required to enable it—

    (a) to carry on its business more economically or more efficiently; or

    (b) to attain its main purpose by new or improved means; or

    (c) to enlarge or change the local area of its operations; or

    (d) to carry on some business which under existing circumstances may conveniently or advantageously be combined with the business of the company; or

    (e) to restrict or abandon any of the objects specified in the memorandum; or

    (f) to sell or dispose of the whole or any part of the undertaking, or of any of the undertakings, of the company; or

    (g) to amalgamate with any other company or body of persons.

    (2) The alteration of the provisions of memorandum relating to the change of the place of its registered office from one State to another shall not take effect unless it is confirmed by the Central Government on petition.

    (3) Before confirming the alteration, the Central Government must be satisfied—

    (a) that sufficient notice has been given to every holder of the debentures of the company, and to every other person or class of persons whose interests will, in the opinion of the Central Government be affected by the alteration; and

    (b) that, with respect to every creditor who, in the opinion of the Central Government, is entitled to object to the alteration, and who signifies his objection in the manner directed by the Central Government, either his consent to the alteration has been obtained or his debt or claim has been discharged or has been determined, or has been secured:

    Provided that the Central Government may, in the case of any person or class of persons, for special reasons, dispense with the notice required by clause (a).

    (4) The Central Government shall cause notice of the petition for confirmation of the alteration to be served on the Registrar who shall also be given a reasonable opportunity of appearing before the Central Government and state his objections and suggestions, if any, with respect to the confirmation of the alteration.

    (5) The Central Government may make an order confirming the alteration on such terms and conditions, if any, as it thinks fit and may make such order as to costs as it thinks proper.

    (6) The Central Government shall, in exercising its powers under this section, have regard to the rights and interests of the members of the company and of every class of them, as well as to the rights and interests of the creditors of the company and of every class of them.

    (7) The Central Government may, if it thinks fit, adjourn the proceedings in order that an arrangement may be made to the satisfaction of the Central Government for the purchase of the interests of dissentient members; and may give such directions and make such orders as it thinks fit for facilitating or carrying into effect, any such arrangement:

    Provided that no part of the capital of the company may be expended for any such purchase.

    18. Alteration to be registered within three months.—(1) A company shall file with the Registrar—

    (a) a special resolution passed by a company in relation to clauses (a) to (g) of sub-section (1) of section 17, within one month from the date of such resolution; or

    (b) a certified copy of the order of the Central Government made under sub-section (5) of that section confirming the alterations, within three months from the date of order, as the case may be, together with a printed copy of the memorandum as altered and the Registrar shall register the same and certify the registration under his hand within one month from the date of filing such documents.

    (2) The certificate shall be conclusive evidence that all the requirements of this Act with respect to the alteration and the confirmation thereof have been complied with, and thenceforth the memorandum as so altered shall be the memorandum of the company.

    (3) Where the alteration involves a transfer of the registered office from one State to another, a certified copy of the order confirming the alteration shall be filed by the company with the Registrar of each of the States, and the Registrar of each such State shall register the same, and shall certify under his hand the registration thereof; and the Registrar of the State from which such office is transferred shall send to the Registrar of the other State all documents relating to the company registered, recorded or filed in his office.

    (4) The Central Government may, at any time, by order extend the time for the filing of documents or for the registration of the alteration under this section by such period as it thinks proper. 

    19. Effect of failure to register.—(1) No such alteration as is referred to in section 17 shall have any effect until it has been duly registered in accordance with the provisions of section 18.

    (2) If the documents, required to be filed with the Registrar under section 18 are not filed within the time allowed under that section, such alteration and the order of the Central Government made under subsection (5) of section 17 and all proceedings connected therewith shall, at the expiry of such period, become void and inoperative:

    Provided that the Central Government may, on sufficient cause shown, revive the order on application made within a further period of one month.

    Provisions with respect to names of companies

    20. Companies not to be registered with undesirable names.—(1) No company shall be registered by a name which, in the opinion of the Central Government, is undesirable.

    (2) Without prejudice to the generality of the foregoing power, a name which is identical with, or too nearly resembles,—

    (i) the name by which a company in existence has been previously registered; or

    (ii) a registered trade mark, or a trade mark which is subject of an application for registration, of any other person under the Trade Marks Act, 1999, may be deemed to be undesirable by the Central Government within the meaning of sub-section (1).

    (3) The Central Government may, before deeming a name as undesirable under clause (ii) of sub-section (2), consult the Registrar of Trade Marks.

    21. Change of name by company.—A company may, by special resolution and with the approval of the Central Government signified in writing change its name:

    Provided that no such approval shall be required where the only change in the name of a company is the addition thereto or, as the case may be, the deletion therefrom, of the word “Private”, consequent on the conversion in accordance with the provisions of this Act of a public company into a private company or of a private company into a public company.

    22. Rectification of name of company.—(1) If, through inadvertence or otherwise, a company on its first registration or on its registration by a new name, is registered by a name which,—

    (i) in the opinion of the Central Government, is identical with, or too nearly resembles, the name by which a company in existence has been previously registered, whether under this Act or any previous companies law, the first-mentioned company, or

    (ii) on an application by a registered proprietor of a trade mark, is in the opinion of the Central Government identical with, or too nearly resembles, a registered trade mark of such proprietor under the Trade Marks Act, 1999, such company,—

    (a) may, by ordinary resolution and with the previous approval of the Central Government signified in writing, change its name or new name; and

    (b) shall, if the Central Government so directs within twelve months of its first registration or registration by its new name, as the case may be, or within twelve months of the commencement of this Act, whichever is later, by ordinary resolution and with the previous approval of the Central Government signified in writing change its name or new name within a period of three months from the date of the direction or such longer period as the Central Government may think fit to allow:

    Provided that no application under clause (ii) made by a registered proprietor of a trade mark after five years of coming to notice of registration of the company shall be considered by the Central Government.

    (2) If a company makes default in complying with any direction given under clause (b) of sub-section (1), the company, and every officer who is in default, shall be punishable with fine which may extend to one thousand rupees for every day during which the default continues.

    23. Registration of change of name and effect thereof.—(1) Where a company changes its name in purs1ance of section 21 or 22, the Registrar shall enter the new name on the register in the place of the former name, and shall issue a fresh certificate of incorporation with the necessary alterations embodied therein; and the change of name shall be complete and effective only on the issue of such a certificate.

    (2) The Registrar shall also make the necessary alteration in the memorandum of association of the company.

    (3) The change of name shall not affect any rights or obligations of the company, or render defective any legal proceedings by or against it; and any legal proceedings which might have been continued or commenced by or against the company by its former name may be continued by or against the company by its new name. 

    24. Change of name of existing private limited companies.—(1) In the case of a company which was a private limited company immediately before the commencement of this Act, the Registrar shall enter the word ‘Private’ before the word ‘Limited’ in the name of the company upon the register and shall also make the necessary alterations in the certificate of incorporation issued to the company and in its memorandum of association.

    (2) Sub-section (3) of section 23 shall apply to a change of name under sub-section (1), as it applies to a change of name under section 21. 

    25. Power to dispense with “Limited” in name of charitable or other company.—(1) Where it is proved to the satisfaction of the Central Government that an association—

    (a) is about to be formed as a limited company for promoting commerce, art, science, religion, charity or any other useful object, and

    (b) intends to apply its profits, if any, or other income in promoting its objects, and to prohibit the payment of any dividend to its members, the Central Government may by licence, direct that the association may be registered as a company with limited liability, without the addition to its name of the word “Limited” or the words “Private Limited”.

    (2) The association may thereupon be registered accordingly; and on registration shall enjoy all the privileges, and (subject to the provisions of this section) be subject to all the obligations, of limited companies.

    (3) Where it is proved to the satisfaction of the Central Government—

    (a) that the objects of a company registered under this Act as a limited company are restricted to those specified in clause (a) of sub-section (1), and

    (b) that by its constitution the company is required to apply its profits, if any, or other income in promoting its objects and is prohibited from paying any dividend to its members, the Central Government may, by licence, authorise the company by a special resolution to change its name, including or consisting of the omission of the word “Limited” or the words “Private Limited”; and section 23 shall apply to a change of name under this sub-section as it applies to a change of name under section 21.

    (4) A firm may be a member of any association or company licensed under this section, but on the dissolution of the firm, its membership of the association or company shall cease.

    (5) A licence may be granted by the Central Government under this section on such conditions and subject to such regulations as it thinks fit, and those conditions and regulations shall be binding on the body to which the licence is granted, and where the grant is under sub-section (1), shall, if the Central Government so directs, be inserted in the memorandum, or in the articles, or partly in the one and partly in the other.

    (6) It shall not be necessary for a body to which a licence is so granted to use the word “Limited” or the words “Private Limited” as any part of its name and unless its articles otherwise provide, such body shall, if the Central Government by general or special order so directs and to the extent specified in the direction, be exempt from such of the provisions of this Act as may be specified therein.

    (7) The licence may at any time be revoked by the Central Government, and upon revocation, the Registrar shall enter the word “Limited” or the words “Private Limited” at the end of the name upon the register of the body to which it was granted; and the body shall cease to enjoy the exemption granted by this section:

    Provided that, before a licence is so revoked, the Central Government shall give notice in writing of its intention to the body, and shall afford it an opportunity of being heard in opposition to the revocation.

    (8) (a) A body in respect of which a licence under this section is in force shall not alter the provisions of its memorandum with respect to its objects except with the previous approval of the Central Government signified in writing.

    (b) The Central Government may revoke the licence of such a body if it contravenes the provisions of clause (a).

    (c) In according the approval referred to in clause (a), the Central Government may vary the licence by making it subject to such conditions and regulations as that Government thinks fit, in lieu of, or in addition to, the conditions and regulations, if any, to which the licence was formerly subject.

    (d) Where the alteration proposed in the provisions of the memorandum of a body under this sub-section is with respect to the objects of the body so far as may be required to enable it to do any of the things specified in clauses (a) to (g) of sub-section (1) of section 17, the provisions of this sub-section shall be in addition to, and not in derogation of, the provisions of that section.

    (9) Upon the revocation of a licence granted under this section to a body the name of which contains the words “Chamber of Commerce”, that body shall, within a period of three months from the date of revocation or such longer period as the Central Government may think fit to allow, change its name to a name which does not contain those words; and—

    (a) the notice to be given under the proviso to sub-section (7) to that body shall include a statement of the effect of the foregoing provisions of this sub-section; and

    (b) section 23 shall apply to a change of name under this subsection as it applies it change of name under section 21.

    (10) If the body makes default in complying with the requirements of sub-section (9), it shall be punishable with fine which may extend to five thousand rupees for every day during which the default continues.

    Articles of Association

    26. Articles prescribing regulations.—There may in the case of a public company limited by shares, and there shall in the case of an unlimited company or a company limited by guarantee or a private company limited by shares, be registered with the memorandum, articles of association signed by the subscribers of the memorandum, prescribing regulations for the company.

    27. Regulations required in case of unlimited company, company limited by guarantee or private company limited by shares.—(1) In the case of an unlimited company, the articles shall state the number of members with which the company is to be registered and, if the company has a share capital the amount of share capital with which the company is to be registered.

    (2) In the case of a company limited by guarantee, the articles shall state the number of members with which the company is to be registered.

    (3) In the case of a private company having a share capital, the articles shall contain provisions relating to the matters specified in sub-clauses (a), (b) and (c) of clause (iii) of sub-section (1) of section 3; and in the case of any other private company, the articles shall contain provisions relating to the matters specified in the said sub-clauses (b) and (c). 

    28. Adoption and application of Table A in the case of companies limited by shares.—(l) The articles of association of a company limited by shares may adopt all or any of the regulations contained in Table A in Schedule I.

    (2) In the case of any such company which is registered after the commencement of this Act, if articles are not registered, or if articles are registered, insofar as the articles do not exclude or modify the regulations contained in Table A aforesaid, those regulations shall, so far as applicable, be the regulations of the company in the same manner and to the same extent as if they were contained in duly registered articles. 

    29. Form of articles in the case of other companies.—The articles of association of any company, not being a company limited by shares, shall be in such one of the Forms in Tables C, D and E in Schedule 1 as may be applicable, or in a Form as near thereto as circumstances admit:

    Provided that nothing in this section shall be deemed to prevent a company from including any additional matters in its articles in so far as they are not inconsistent with the provisions contained in the Form in any of the Tables C, D and E, adopted by the company. 

    30. Form and signature of articles.—Articles shall—

    (a) be printed;

    (b) be divided into paragraphs numbered consecutively; and

    (c) be signed by each subscriber of the memorandum of association (who shall add his address, description and occupation, if any,) in the presence of at least one witness who shall attest the signature and shall likewise add his address, description and occupation, if any. 

    31. Alteration of articles by special resolution.—(1) Subject to the provisions of this Act and to the conditions contained in its memorandum a company may, by special resolution, alter its articles:

    Provided that no alteration made in the articles under this sub-section which has the effect of converting a public company into a private company, shall have effect unless such alteration has been approved by the Central Government.


    (2) Any alteration so made shall, subject to the provisions of this Act, be as valid as if originally contained in the articles and be subject in like manner to alteration by special resolution.

    (2A) Where any alteration such as is referred to in the proviso to subsection (1) has been approved by the Central Government, a printed copy of the articles as altered shall be filed by the company with the Registrar within one month of the date of receipt of the order of approval.

    (3) The power of altering articles under this section shall, in the case of any company formed and registered under Act No. 19 of 1857 and Act No. 7 of 1860 or either of them, extend to altering any provisions in Table B annexed to Act 19 of 1857, and shall also, in the case of an unlimited company formed and registered under the said Acts or either of them, extend to altering any regulations relating to the amount of capital or its distribution into shares, notwithstanding that those regulations are contained in the memorandum. 

    Change of registration of companies

    32. Registration of unlimited company as limited, etc.—(1) Subject to the provisions of this section,—

    (a) a company registered as unlimited may register under this Act as a limited company; and

    (b) a company already registered as a limited company may reregister under this Act.

    (2) On registration in pursuance of this section, the Registrar shall close the former registration of the company, and may dispense with the delivery to him of copies of any documents with copies of which he was furnished on the occasion of the original registration of the company; but, save as aforesaid, the registration shall take place in the same manner and shall have effect, as if it were the first registration of the company under this Act.

    (3) The registration of an unlimited company as a limited company under this section shall not affect any debts, liabilities, obligations or contracts incurred or entered into, by, to, with or on behalf of, the company before the registration, and those debts, liabilities, obligations and contracts may be enforced in the manner provided by Part IX of this Act in the case of a company registered in pursuance of that Part. 

    General provisions with respect to memorandum and articles

    33. Registration of memorandum and articles.—(1) There shall be presented for registration, to the Registrar of the State in which the registered office of the company is stated by the memorandum to be situate—

    (a) the memorandum of the company;

    (b) its articles, if any; and

    (c) the agreement, if any, which the company proposes to enter into with any individual for appointment as its managing or whole-time director or manager.

    (2) A declaration by an advocate of the Supreme Court or of a High Court, an attorney or a pleader entitled to appear before a High Court, or a Secretary or a chartered accountant in whole-time practice in India who is engaged in the formation of a company, or by a person named in the articles as a director manager or secretary of the company, that all the requirements of this Act and the rules thereunder have been complied with in respect of registration and matters precedent and incidental thereto, shall be filed with the Registrar; and the Registrar may accept such a declaration as sufficient evidence of such compliance.

    Explanation.—For the purposes of this sub-section, “chartered accountant in whole-time practice in India” means a chartered accountant within the meaning of clause (b) of sub-section (1) of section 2 of the Chartered Accountants Act, 1949 (38 of 1949) who is practising in India and who is not in full-time employment.

    (3) If the Registrar is satisfied that all the requirements aforesaid have been complied with by the company and that it is authorised to be registered under this Act, he shall retain and register the memorandum, the articles, if any, and the agreement referred to in clause (c) of sub-section (1), if any.

    34. Effect of registration.—(1) On the registration of the memorandum of a company, the Registrar shall certify under his hand that the company is incorporated and, in the case of a limited company that the company is limited.

    (2) From the date of incorporation mentioned in the certificate of incorporation, such of the subscribers of the memorandum and other persons, as may from time to time be members of the company, shall be a body corporate by the name contained in the memorandum, capable forthwith of exercising all the functions of an incorporated company, and having perpetual succession and a common seal, but with such liability on the part of the members to contribute to the assets of the company in the event of its being wound up as is mentioned in this Act.

    35. Conclusiveness of certificate of incorporation.—A certificate of incorporation given by the Registrar in respect of any association shall be conclusive evidence that all the requirements of this Act have been complied with in respect of registration and matters precedent and incidental thereto, and that the association is a company authorised to be registered and duly registered under this Act.

    36. Effect of memorandum and articles.—(1) Subject to the provisions of this Act, the memorandum and articles shall, when registered, bind the company and the members thereof to the same extent as if they respectively had been signed by the company and by each member, and contained covenants on its and his part to observe all the provisions of the memorandum and of the articles.

    (2) All money payable by any member to the company under the memorandum or articles shall be a debt due from him to the company.

    37. Provision as to companies limited by guarantee.—(1) In the case of a company limited by guarantee and not having a share capital, and registered on or after the first day of April, 1914, every provision in the memorandum or articles or in any resolution of the company purporting to give any person a right to participate in the divisible profits of the company otherwise than as a member shall be void.

    (2) For the purpose of. the provisions of this Act relating to the memorandum of a company limited by guarantee and of this section, every provision in the memorandum or articles, or in any resolution, of any company limited by guarantee and registered on or after the first day of April, 1914, purporting to divide the undertaking of the company into shares or interests, shall be treated as a provision for a share capital, notwithstanding that the nominal amount or number of the shares or interests is not specified thereby. 

    38. Effect of alteration in memorandum or articles.—Notwithstanding anything in the memorandum or articles of a company, no member of the company shall be bound by an alteration made in the memorandum or articles after the date on which he became a member, if and so far as the alteration requires him to take or subscribe for more shares than the number held by him at the date on which the alteration is made, or in any way increases his liability as at that date, to contribute to the share capital of, or otherwise to pay money to, the company:

    Provided that this section shall not apply—

    (a) in any case where the member agrees in writing either before or after a particular alteration is made, to be bound by the alteration; or

    (b) in any case where the company is a club or the company is any other association and the alteration requires the member to pay recurring or periodical subscriptions or charges at a higher rate although he does not agree in writing to be bound by the alteration. 

    39. Copies of memorandum and articles, etc., to be given to members.—(1) A company shall, on being so required by a member, send to him within seven days of the requirement and subject to the payment of a fee of one rupee, a copy each of the following documents as in force for the time being—

    (a) the memorandum;

    (b) the articles, if any;

    (c) Omitted

    (d) every other agreement and every resolution referred to in section 192, if and insofar as they have not been embodied in the memorandum or articles.

    (2) If a company makes default in complying with the requirements of this section, the company, and every officer of the company who is in default, shall be punishable, for each offence, with fine which may extend to five hundred rupees.

    40. Alteration of memorandum or articles, etc., to be noted in every copy.—(1) Where an alteration is made in the memorandum or articles of a company, or any resolution, referred to in section 192, every copy of the memorandum, articles, agreement or resolution issued after the date of the alteration shall be in accordance with the alteration

    (2) If, at any time, the company issues any copies of the memorandum, articles, resolution or agreement, which are not in accordance with the alteration or alterations made therein before that time, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to one hundred rupees for each copy so issued.

    Membership of company

    41. Definition of “member”.—(l) The subscribers of the memorandum of a company shall be deemed to have agreed to become members of the company, and on its registration, shall be entered as members in its register of members.

    (2) Every other person who agrees in writing to become a member of a company and whose name is entered in its register of members, shall be a member of the company.

    (3) Every person holding equity share capital of a company and whose name is entered as beneficial owner in the records of the depository shall be deemed to be a member of the concerned company. 

    42. Membership of holding company.—(1) Except in the cases mentioned in this section, a body corporate cannot be a member of a company which is its holding company and any allotment or transfer of shares in a company to its subsidiary shall be void.

    (2) Nothing in this section shall apply—

    (a) where the subsidiary is concerned as the legal representative of a deceased member of the holding company; or

    (b) where the subsidiary is concerned as trustee, unless the holding company or a subsidiary thereof is beneficially interested under the trust and is not so interested only by way of security for the purposes of a transaction entered into by it in the ordinary course of a business which includes the lending of money.

    (3) This section shall not prevent a subsidiary from continuing to be a member of its holding company if it was a member thereof either at the commencement of this Act or before becoming a subsidiary of the holding company, but, except in the cases referred to in sub-section (2), the subsidiary shall have no right to vote at meetings of the holding company or of any class of members thereof.

    (4) Subject to sub-section (2), sub-sections (1) and (3) shall apply in relation to a nominee for a body corporate which is a subsidiary, as if references in the said sub-sections (1) and (3) to such a body corporate included references to a nominee for it.

    Private companies

    43. Consequences of default in complying with conditions constituting a company a private company.—Where the articles of a company include the provisions which, under clause (iii) of sub-section (1) of section 3, are required to be included in the articles of a company in order to constitute it a private company, but default is made in complying with any of those provisions, the company shall cease to be entitled to the privileges and exemptions conferred on private companies by or under this Act, and this Act shall apply to the company as if it were not a private company:

    Provided that the Central Government on being satisfied that the failure to comply with the conditions was accidental or due to inadvertence or to some other sufficient cause, or that on other grounds it is just and equitable to grant relief, may, on the application of the company or any other person interested and on such terms and conditions as seem to the Central Government just and expedient, order that the company be relieved from such consequences as aforesaid.

    43A. Private company to become public company in certain cases.— (1) Save as otherwise provided in this section, where not less than twenty- five per cent of the paid-up share capital of a private company having a share capital, is held by one or more bodies corporate, the private company shall,—

    (a) on and from the date on which the aforesaid percentage is first held by such body or bodies corporate, or

    (b) where the aforesaid percentage has been first so held before the commencement of the Companies (Amendment) Act, 1960 (65 of 1960), on and from the expiry of the period of three months from the date of such commencement unless within that period the aforesaid percentage is reduced below twenty-five per cent of the paid-up share capital of the private company, become by virtue of this section a public company:

    Provided that even after the private company has so become a public company, its articles of association may include provisions relating to the matters specified in clause (iii) of sub-section (1) of section 3 and the number of its members may be, or may at any time be reduced, below seven:

    Provided further that in computing the aforesaid percentage, account shall not be taken of any share in the private company held by a banking company, if, but only if, the following conditions are satisfied in respect of such share, namely:—

    (a) that the share—

    (i) forms part of the subject-matter of a trust,

    (ii) has not been set apart for the benefit of any body corporate, and

    (iii) is held by the banking company either as a trustee of that trust or in its own name on behalf of a trustee of that trust; or

    (b) that the share—

    (i) forms part of the estate of a deceased person,

    (ii) has not been bequeathed by the deceased person by his will to any body corporate, and

    (iii) is held by the banking company either as an executor or administrator of the deceased person or in its own name on behalf of an executor or administrator of the deceased person, and the registrar may, for the purpose of satisfying himself that any share is held in the private company by a banking company as aforesaid, call for at any time from the banking company such books and papers as he considers necessary.

    Explanation.—For the purposes of this sub-section, “bodies corporate” means public companies, or private companies which had become public companies by virtue of this section.

    (1A) Without prejudice to the provisions of sub-section (1), where the average annual turnover of a private company, whether in existence at the commencement of the Companies (Amendment) Act, 1974 or incorporated thereafter, is not, during the relevant period less than such amount as may be provided the private company shall, irrespective of its paid-up share capital, become, on and from the expiry of a period of three months from the last day of the relevant period during which the private company had the said average annual turnover, a public company by virtue of this sub-section:

    Provided that even after the private company has so become a public company, its articles of association may include provisions relating to the matters specified in clause (iii) of sub-section (1) of section 3 and the number of its members may be, or may at any time be reduced, below seven.

    (1B) Where not less than twenty-five per cent of the paid-up share capital of a public company, having share capital, is held by a private company, the private company shall,—

    (a) on and from the date on which the aforesaid percentage is first held by it after the commencement of the Companies (Amendment) Act, 1974, or

    (b) where the aforesaid percentage has been first so held before the commencement of the Companies (Amendment) Act, 1974 on and from the expiry of the period of three months from the date of such commencement, unless within that period the aforesaid percentage is reduced below twenty-five per cent of the paid-up share capital of the public company, become by virtue of this sub-section, a public company, and thereupon all other provisions of this section shall apply thereto:

    Provided that even after the private company has so become a public company, its articles of association may include provisions relating to the matters specified in clause (iii) of sub-section (1) of section 3 and the number of its members may be, or may at any time be reduced, below seven.

    (1C) Where, after the commencement of the Companies (Amendment) Act, 1988 a private company accepts, after an invitation is made by an advertisement, or renews, deposits from the public, other than its members, directors or their relatives, such private company shall, on and from the date on which such acceptance or renewal as the case may be, is first made after such commencement, become a public company and thereupon all the provisions of this section shall apply thereto:

    Provided that even after the private company has so become a public company, its articles of association may include provisions relating to the matters specified in clause (iii) of sub-section (1) of section 3 and the number of its members may be, or may at any time be, reduced below seven.

    (2) Within three months from the date on which a private company becomes a public company by virtue of this section, the company shall inform the Registrar that it has become a public company as aforesaid, and thereupon the Registrar shall delete the word “Private” become the word “Limited” in the name of the company upon the register and shall also make the necessary alterations in the certificate of incorporation issued to the company and in its memorandum of association.

    (2A) Where a public company referred to in sub-section (2) becomes a private company on or after the commencement of the Companies (Amendment) Act, 2000, such company shall inform the Registrar that it has become a private company and thereupon the Registrar shall substitute the word “private company” for the word “public company” in the name of the company upon the register and shall also make the necessary alterations in the certificate of incorporation issued to the company and in its memorandum of association within four weeks from the date of application made by the company.

    (3) Sub-section (3) of section 23 shall apply to a change of name under sub-section (2) as it applies to a change of name under section 21.

    (4) A private company which has become a public company by virtue of this section shall continue to be a public company until it has, with the approval of the Central Government and in accordance with the provisions of this Act, again become a private company.

    (5) If a company makes default in complying with sub-section (2), the company and every officer of the company who is in default, shall be punishable with fine which may extend to five hundred rupees for every day during which the default continues.

    (6) & (7) Omitted by Act 31 of 1988

    (8) Every private company having a share capital shall, in addition to the certificate referred to in sub-section (2) of section 161, file with the Registrar along with the annual return a second certificate signed by both the signatories of the return, stating either—

    (a) that since the date of the annual general meeting with reference to which the last return was submitted, or in the case of a first return, since the date of the incorporation of the private company, no body or bodies corporate has or have held twenty-five per cent or more of its paid-up share capital,

    (b) Omitted

    (c) that the private company, irrespective of its paid-up share capital, did not have during the relevant period, an average annual turnover of such amount as is referred to in subsection (1A) or more;

    (d) that the private company did not accept or renew deposits from the public.

    (9) Every private company, having share capital, shall file with the Registrar along with the annual return a certificate signed by both the signatories of the return, stating that since the date of the annual general meeting with reference to which the last return was submitted, or in the case of a first return, since the date of the incorporation of the private company, it did not hold twenty-five per cent. or more of the paid-up share capital of one or more public companies.

    (10) Subject to the other provisions of this Act, any reference in this section to accepting, after an invitation is made by an advertisement, or renewing deposits from the public shall be construed as including a reference to accepting, after an invitation is made by an advertisement, or renewing deposits from any section of the public and the provisions of section 67 shall, so far as may be, apply, as if the reference to invitation to the public to subscribe for shares or debentures occurring in that section, includes a reference to invitation from the public for acceptance of deposits.

    Explanation.—For the purpose of this section,—

    (a) “relevant period” means the period of three consecutive financial years,—

    (i) immediately preceding the commencement of the Companies (Amendment) Act, 1974, or

    (ii) a part of which immediately preceded such commencement and the other part of which immediately, followed such commencement, or

    (iii) immediately following such commencement or at any time thereafter;

    (b) “turnover”, of a company, means the aggregate value of the realisation made from the sale, supply or distribution of goods or on account of services rendered, or both, by the company during a financial year;

    (c) “deposit” has the same meaning as in section 58A.

    (11) Nothing contained in this section, except sub-section (2A), shall apply on and after the commencement of the Companies (Amendment) Act, 2000.

    44. Prospectus or statement in lieu of prospectus to be filed by private company on ceasing to be private company.—(1) If a company, being a private company, alters its articles in such a manner that they no longer include the provisions which, under clause (iii) of sub-section (1) of section 3, are required to be included in the articles of a company in order to constitute it a private company, the company—

    (a) shall, as on the date of the alteration, cease to be a private company; and

    (b) shall, within a period of thirty days after the said date, file with the Registrar either a prospectus or a statement in lieu of prospectus, as specified in sub-section (2).

    (2) (a) Every prospectus filed under sub-section (1) shall state the matters specified in Part I of Schedule II and set out the reports specified in Part II of that Schedule, and the said Parts I and II shall have effect subject to the provisions contained in Part III of that Schedule.

    (b) Every statement in lieu of prospectus filed under sub-section (1) shall be in the form and contain the particulars set out in Part I of Schedule IV, and in the cases mentioned in Part II of the Schedule, shall set out the reports specified therein, and the said Parts I and II shall have effect subject to the provisions contained in Part III of that Schedule.

    (c) Where the persons making any such report as is referred to in clause (a) or (b) have made therein, or have, without giving the reasons indicated therein, any such adjustments as are mentioned in clause 32 of Schedule II or clause 5 of Schedule IV, as the case may be, the prospectus or statement in lieu of prospectus filed as aforesaid, shall have enforced thereon or attached thereto, a written statement signed by those persons, setting out the adjustments and giving the reasons therefor.

    (3) If default is made in complying with sub-section (1) or (2), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to five thousand rupees for every day during which the default continues.

    (4) Where any prospectus or statement in lieu of prospectus filed under this section includes any untrue statement, any person who authorised the filing of such prospectus or statement shall be punishable with imprisonment for a term which may extend to two years, or with fine which may extend to fifty thousand rupees, or with both, unless he proves either that the statement was immaterial or that the had reasonable ground to believe, and did up to the time of the filing of the prospectus or statement believe, that the statement was true.

    (5) For the purposes of this section —

    (a) a statement included in a prospectus or a statement in lieu of prospectus shall be deemed to be untrue if it is misleading in the form and context in which it is included; and

    (b) where the omission from a prospectus or a statement in lieu of prospectus of any matter is calculated to mislead, the prospectus or statement in lieu of prospectus shall be deemed, in respect of such omission, to be a prospectus or a statement in lieu of prospectus in which an untrue statement is included.

    (6) For the purposes of sub-section (4) and clause (a) of sub-section (5), the expression “included” when used with reference to a prospectus or statement in lieu of prospectus, means included in the prospectus or statement in lieu of prospectus itself or contained in any report or memorandum appearing on the face thereof, or by reference incorporated therein.

    Reduction of number of members below legal minimum

    45. Members severally liable for debts where business carried on with fewer than seven, or in the case of a private company, two members.—If at any time the number of members of a company is reduced in the case of a public company, below seven, or in the case of a private company, below two, and the company carries on business for more than six months while the number is so reduced, every person who is a member of the company during the time that it so carries on business after those six months and is cognizant of the fact that it is carrying on business with fewer than seven members or two members, as the case may be, shall be severally liable for the payment of the whole debts of the company contracted during that time, and may be severally sued therefor.

    Contracts and deeds, investments, seal, etc.

    46. Form of contracts.—(1) Contracts on behalf of a company may be made as follows:—

    (a) a contract which, if made between private persons, would by law be required to be in writing signed by the parties to be charged therewith, may be made on behalf of the company in writing signed by any person acting under its authority, express or implied, and may in the same manner be varied or discharged;

    (b) a contract which, if made between private persons, would by law be valid although made by parole only and not reduced into writing, may be made by parole on behalf of the company by any person acting under its authority, express or implied, and may in the same manner be varied or discharged.

    (2) A contract made according to this section shall bind the company. 

    47. Bills of exchange and promissory notes.—A bill of exchange, hundi or promissory note shall be deemed to have been made, accepted, drawn or endorsed on behalf of a company if drawn, accepted, made, or endorsed in the name of, or on behalf or on account of, the company by any person acting under its authority, express or implied.

    48. Execution of deeds.—(1) A company may, by writing under its common seal, empower any person, either generally or in respect of any specified matters, as its attorney, to execute deeds on its behalf in any place either in or outside India.

    (2) A deed signed by such an attorney on behalf of the company and under his seal where sealing is required, shall bind the company and have the same effect as if it were under its common seal. 

    49. Investments of company to be held in its own name.—(1) Save as otherwise provided in sub-sections (2) to (5) or any other law for the time being in force and subject to the provisions of sub-sections (6) to (8),—

    (a) all investments made by a company on its own behalf shall be made and held by it in its own name; and

    (b) where any such investments are not so held at the commencement of this Act the company shall, within a period of one year from such commencement, either cause them to be transferred to, and hold them in, its own name, or dispose of them.

    (2) Where the company has a right to appoint any person or persons, or where any nominee or nominees of the company has or have been appointed, as a director or directors of any other body corporate, shares in such other body corporate to an amount not exceeding the nominal value of the qualification shares which are required to be held by a director thereof, may be registered or held by such company jointly in the names of itself and of each such person or nominee or in the name of each such person or nominee.

    (3) A company may hold any shares in its subsidiary in the name or names of any nominee or nominees of the company, if and insofar as it is necessary so to do, to ensure that the number of members of the subsidiary is not reduced, where it is a public company, below seven, and where it is a private company, below two.

    (4) Sub-section (1) shall not apply to investments made by a company whose principal business consists of the buying and selling of shares or securities.

    (5) Nothing in this section shall be deemed to prevent a company—

    (a) from depositing with a bank, being the bankers of the company, any shares or securities for the collection of any dividend or interest payable thereon; or

    (aa) from depositing with, or transferring to, or holding in the name of, the State Bank of India or a Scheduled Bank, being the bankers of the company, shares or securities, in order to facilitate the transfer thereof:

    Provided that if within a period of six months from the date on which the shares or securities are transferred by the company to, or are first held by the company in the name of the State Bank of India or a Scheduled Bank as aforesaid, no transfer of such shares or securities takes place, the company shall, as soon as practicable after the expiry of that period, have the shares or securities re-transferred to it from the State Bank of India or the Scheduled Bank or, as the case may be, again hold the shares or securities in its own name; or

    (b) from depositing with or transferring to, any person any shares or securities, by way of security for the repayment of any loan advanced to the company or the performance of any obligation undertaken by it;

    (c) from holding investments in the name of a depository when such investments are in the form of securities held by the company as a beneficial owner.

    (6) The certificate or letter of allotment relating to the shares or securities in which investments have been made by a company shall, except in the cases referred to in sub-sections (4) and (5), be in the custody of such company or ‘[with the State Bank of India or a Scheduled Bank], being the bankers of the company.

    (7) Where, in pursuance of sub-sections (2), (3), (4) or (5), any shares or securities in which investments have been made by a company are not held by it in its own name, the company shall forthwith enter in a register maintained by it for the purpose—

    (a) the nature, value, and such other particulars as may be necessary fully to identify the shares or securities in question; and

    (b) the bank or person in whose name or custody the shares or securities are held.

    (8) The register kept under sub-section (7) shall be open to the inspection of any member or debenture-holder of the company without charge, during business hours, subject to such reasonable restrictions as the company may, by its articles or in general meeting, impose, so that not less than two hours in each day are allowed for inspection.

    (9) If default is made in complying with any of the requirements of sub-sections (1) to (8), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to fifty thousand rupees.

    (10) If any inspection required under sub-section (8) is refused, the Central Government may, by order, direct an immediate inspection of the register.

    Nothing in this sub-section shall be construed as prejudicing in any way the operation of sub-section (9).

    (11) In this section, “securities” includes stock and debentures. 

    50. Power for company to have official seal for use outside India.—(1) A company whose objects require or comprise the transaction of business outside India may, if authorised by its articles, have for use in any territory, district or place not situate in India an official seal which shall be a facsimile of the common seal of the company, with the addition on its face of the name of the territory, district or place where it is to be used.

    (2) A company having an official seal for use in any such territory, district or place may, by writing under its common seal, authorise any person appointed for the purpose in that territory, district or place to affix the official seal to any deed or other document to which the company is a party in that territory, district or place.

    (3) The authority of any agent authorised under sub-section (2) shall, as between the company and any person dealing with the agent, continue during the period, if any, mentioned in the instrument conferring the authority, or if no period is there mentioned, until notice of the revocation or determination of the agents authority has been given to the person dealing with him.

    (4) The person affixing any such official seal shall, by writing under his hand, certify on the deed or other document to which the seal is affixed, the date on which and the place at which, it is affixed.

    (5) A deed or other document to which an official seal is duly affixed shall bind the company as if it had been sealed with the common seal of the company.

    Service of documents

    51. Service of documents on company.—A document may be served on a company or an officer thereof by sending it to the company or officer at the registered office of the company by post under a certificate of posting or by registered post, or by leaving it at its registered office:
    Provided that where the securities are held in a depository. The records of the beneficial ownership may be served by such depository on the company by means of electronic mode or by delivery of floppies or discs.

    52. Service of documents on Registrar.—A document may be served on a Registrar by sending it to him at his office by post under a certificate of posting or by registered post, or by delivering it to, or leaving it for, him at his office.

    53. Service of documents on members by company.—(1) A document may be served by a company on any member thereof either personally, or by sending it by post to him to his registered address, or if he has no registered address in India, to the address, if any, within India supplied by him to the company for the giving of notices to him.

    (2) Where a document is sent by post,—

    (a) service thereof shall be deemed to be effected by properly addressing, prepaying and posting a letter containing the document, provided that where a member has intimated to the company in advance that documents should be sent to him under a certificate of posting or by registered post with or without acknowledgment due and has deposited with the company a sum sufficient to defray the expenses of doing so, service of the document shall not be deemed to be effected unless it is sent in the manner intimated by the member; and

    (b) such service shall be deemed to have been effected—

    (i) in the case of a notice of a meeting, at the expiration of forty-eight hours after the letter containing the same is posted, and

    (ii) in any other case, at the time at which the letter would be delivered in the ordinary course of post.

    (3) A document advertised in a newspaper circulating in the neighbourhood of the registered office of the company shall be deemed to be duly served on the day on which the advertisement appears, on every member of the company who has no registered address in India and has not supplied to the company an address within India for the giving of notices to him.

    (4) A document may be served by the company on the joint-holders of a share by serving it on the joint-holder named first in the register in respect of the share.

    (5) A document may be served by the company on the persons entitled to a share in consequence of the death or insolvency of a member by sending it through the post in a prepaid letter addressed to them by name or by the title of representatives of the deceased, or assignees of the insolvent, or by any like description, at the address, if any, in India supplied for the purpose by the persons claiming to be so entitled, or until such an address has been so supplied, by serving the document in any manner in which it might have been served if the death or insolvency had not occurred. 

    Authentication of documents and proceedings

    54. Authentication of documents and proceedings.—Save as otherwise expressly provided in this Act, a document or proceeding requiring authentication by a company may be signed by a director, the manager, the secretary or other authorised officer of the company, and need not be under its common seal.

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