Incorporation of a Company - Part 2
Section 13. Alteration of Memorandum
13(1).
A company may alter the provisions of its Memorandum of Association (MOA) by passing a special resolution and following the procedure prescribed under this section.
Such alteration must comply with the provisions of the Companies Act, 2013.
However, if the alteration relates to the share capital clause, then:
The company must follow the separate procedure provided under Section 61, which specifically deals with the alteration of share capital.
13(2).
If a company proposes to change its name, the change must be made in accordance with Section 4(2) and Section 4(3) of the Act.
The new name will not take effect unless it has been approved in writing by the Central Government.
Approval for name change is generally required.
However, approval is not required in certain cases.
No approval is needed if the name change involves only adding or removing the word Private or Limited.
This applies when the change is due to a conversion from one class of company to another.
Examples include conversion from a public company to a private company, or vice versa.
13(3).
When the Central Government approves the name change, the Registrar of Companies (ROC) will:
Enter the new name in the register of companies, replacing the old name.
Issue a fresh Certificate of Incorporation bearing the new name.
The name change becomes complete and legally effective only when this new certificate is issued by the Registrar.
The effective date of the new name is the date mentioned on the fresh certificate, not the date on which the resolution was passed.
13(4).
If the company proposes to shift its registered office from one State to another then:
This requires an alteration of the Memorandum of Association.
Such an alteration does not take effect automatically.
It becomes effective only after approval is obtained from the Central Government.
The application for this approval must be made in the prescribed form and manner, along with all required documents and justifications.
13(5).
The Central Government must decide on the application for shifting the registered office within sixty days from the date of receipt.
Before granting the approval, it must ensure that:
The alteration has the consent of creditors, debenture-holders, and other persons concerned with the company.
The company has made adequate provision or security for the discharge of all its debts and obligations.
13(6).
After passing the special resolution for alteration of the memorandum, the company must file the following documents with the Registrar of Companies.
This has to be filed within the prescribed time and manner:
(a). A copy of the special resolution passed by the company.
(b). The approval of the Central Government, if the alteration involves a change in the company’s name.
13(7).
The alteration of the memorandum leads to the registered office being shifted from one State to another.
The company must obtain an order of approval from the Central Government.
A certified copy of this approval order must be prepared.
The company must file this certified copy with the Registrar of Companies of the existing State.
The same certified copy must also be filed with the Registrar of Companies of the new State.
The Registrar of the State to which the registered office is being transferred will register the change.
Thereafter the Registrar will issue a fresh Certificate of Incorporation reflecting the alteration.
The change becomes effective only upon issuance of the new certificate by the Registrar of the new State.
13(8).
If the company has raised money from the public by issuing a prospectus and:
The money raised for the stated objects is still unutilized (fully or partly).
The company cannot change its objects clause in such a situation as a general rule.
The objects clause can be changed only if a special resolution is passed by the shareholders.
The change is allowed only after complying with the prescribed conditions under the law.
The company must:
(i). Publish details of the proposed change and its justification in two newspapers.
One in English and one in the vernacular language of the area where its registered office is located.
(ii). Post the same information on its website. (If there is a website).
(iii). Give dissenting shareholders an opportunity to exit by selling their shares to the promoters or controlling shareholders.
This has to be done in accordance to the SEBI Regulations.
13(9).
The Registrar of Companies must register any alteration of the memorandum, particularly with respect to the objects clause.
The Registrar thereafter will issue a certificate of registration within thirty days from the date of filing the special resolution.
This certificate serves as official evidence that the alteration has been duly recorded and is legally valid.
13(10).
No alteration made under this section will have any legal effect until it has been registered by the Registrar of Companies.
Even after the shareholders approve the alteration through a special resolution, the change does not become effective or enforceable.
It will be effective only after it has been officially registered and certified by the ROC.
13(11).
Companies that are limited by guarantee don’t have shares or shareholders.
Their members only promise to pay a small amount if the company is closed.
If a company is limited by guarantee, and if an attempt is made to alter its memorandum in order to:
Give non-members a right to share in the company’s profits, then such an alteration will be invalid.
Section 14. Alteration of Articles
14(1).
Subject to the provisions of the Companies Act, 2013, and the conditions contained in the company’s Memorandum of Association (MOA):
A company may alter its Articles of Association (AOA) by passing a special resolution.
Such alteration may include changes that result in the conversion of the company’s class or status, such as:
(a). Conversion of a private company into a public company.
(b). Conversion of a public company into a private company.
The Articles of Association (AOA) define the rules, internal management, and governance structure of the company.
The AOA also defines the alterations allow flexibility to adapt to new business or legal requirements.
If a private company alters its articles in such a manner that they no longer include the mandatory restrictions and limitations required under the Act then:
The company shall cease to be a private company from the date of such alteration.
Essentially, by removing these private company features, it automatically becomes a public company.
This will happen even if no separate conversion application has been made.
Any alteration that has the effect of converting a public company into a private company shall not be valid.
It will be valid only after it is approved by an order of the Central Government.
The company must make an application for such approval in the prescribed form and manner.
Earlier, this power rested with the National Company Law Tribunal (NCLT), but after the 2019 amendment, it was transferred to the Central Government.
14(2).
Every alteration of the Articles of Association made under this section must be complied with:
A copy of the Central Government’s approval order must also be included if such approval is required.
The alteration and the approval order must be filed with the Registrar of Companies (ROC).
The filing must be done within 15 days from the date of approval.
The company must also submit a printed copy of the altered articles along with the filing.
The Registrar will then register the alteration and update the public records accordingly.
Failure to file within the prescribed period may result in penalties under the Act.
14(3).
Once the alteration of the articles has been registered by the Registrar, the alteration becomes valid and legally binding on the company and all its members.
The registered alteration holds the same force as the original Articles of Association and is enforceable in the same manner.
Section 15. Alteration of the memorandum or articles to be noted in every copy
15(1).
Every alteration made in the Memorandum of Association (MOA) or the Articles of Association (AOA) of a company must be noted in every copy of the respective document.
15(2).
If the company issues or circulates any copy of the MOA or AOA without recording such alterations, both the company and every officer in default are liable to a penalty of ₹1,000 for every such copy.
Section 16. Rectification of the name of the Company
16(1).
If, either by mistake or otherwise, a company is registered with a name that is identical with or too closely resembles:
(a). The name of an existing company.
(b). A registered trademark under the Trade Marks Act, 1999. then the Central Government may direct the company to change its name.
In case (a):
If the Central Government finds that the company’s name is identical or deceptively similar to another company’s name, it may issue such a direction.
In case (b):
If the registered proprietor of a trademark applies to the Central Government,
And if the application is made within three years of the company’s incorporation or change of name,
And if it is found that the company’s name is identical with or too similar to that trademark,
then the same direction may be issued by the Central Government.
The company must adopt an ordinary resolution to change its name within three months from the date of the government’s direction.
16(2).
When a company changes its name, it must notify the Registrar of Companies (ROC) within 15 days along with the Central Government’s order.
The Registrar will then:
Make the necessary corrections in the Certificate of Incorporation and the Memorandum of Association, and
Issue an updated certificate reflecting the new name.
16(3).
If a company fails to comply with the Central Government’s direction to change its name within the specified period then:
The Central Government itself may allot a new name to the company.
The Registrar will then enter this new name in the register of companies in place of the old name and issue a fresh Certificate of Incorporation.
The company must use this new name from that point onward.
However, this does not prevent the company from later changing its name again in accordance with Section 13 (Alteration of Memorandum).
Section 17. Copies of Memorandum, Articles to be given to members
17(1).
When any member of a company requests it, the company must send copies of certain key documents within seven days of receiving the request.
The member must pay the prescribed fee for obtaining these copies.
The documents that must be provided are:
(a). The Memorandum of Association (MOA): Which contains the company’s fundamental details like name, registered office, and objects.
(b). The Articles of Association (AOA): Which outline the internal rules and management structure.
(c). Every agreement or resolution referred to in Section 117(1), to the extent that such agreements or resolutions are not already included in MOA or AOA.
17(2).
If the company fails to provide these documents within the prescribed time or otherwise defaults in compliance then:
Both the company and every officer in default are liable for a penalty.
The penalty is ₹1,000 per day for each day during which the default continues.
A maximum of ₹1,00,000 (one lakh rupees), whichever amount is less.
Section 18 - Conversion of a Company already Registered
18(1).
A company of any class registered under the Companies Act, 2013, may convert itself into another class of company.
In order to do so it has to make the necessary alterations in its Memorandum of Association (MOA) and Articles of Association (AOA).
Such conversion must be carried out in accordance with the provisions of this Chapter.
(a). Converting a private company into a public company.
(b). Converting a public company into a private company.
(c). Converting any company into a One Person Company (OPC) and vice versa.
18(2).
Once the company has completed the required alterations and applied for conversion, the Registrar of Companies (ROC) will:
Examine the application to ensure that all applicable registration provisions have been .
Upon satisfaction, close the company’s previous registration, register the newly altered documents, and issue a fresh Certificate of Incorporation.
The new certificate confirms that the company is now registered as a new class of company, but it retains the same corporate identity and continuity.
18(3).
The conversion of a company into another class does not affect its existing obligations.
All debts, liabilities, obligations, and contracts that existed before the conversion remain valid and enforceable.
They can be enforced in the same manner as if the conversion had never taken place.
Therefore, the conversion only changes the company’s legal classification, not its legal identity or responsibilities.
Section 19. Subsidiary Company not to hold shares in its Holding Company
19(1).
A subsidiary company is prohibited from holding shares in its holding company, either directly or through its nominees.
A holding company is not allowed to allot or transfer its shares to any of its subsidiary companies.
Any such allotment or transfer of shares by a holding company to its subsidiary shall be void, meaning it has no legal effect.
The idea is to prevent circular shareholding:
Where a company indirectly holds its own shares through its subsidiary.
Such arrangements could distort ownership and control structures.
Circular shareholding happens when companies own shares in each other in a loop.
It creates a circle of ownership.
Such arrangements can give the impression that companies have more control or value than they actually possess, and can conceal the true owners.
There are, however, three exceptions where a subsidiary may legally hold shares in its holding company:
(a). When the subsidiary holds such shares as the legal representative of a deceased member of the holding company.
(b). When the subsidiary holds such shares as a trustee (on behalf of someone else).
(c). When the subsidiary was already a shareholder of the holding company before it became a subsidiary.
Even in these exceptional cases, the voting rights of the subsidiary are restricted.
The subsidiary company can vote at meetings of the holding company only in respect of shares held as a legal representative or as a trustee.
No voting rights are allowed for shares held in case of (c).
19(2).
If the holding company is a company limited by guarantee, or if it is an unlimited company without share capital then:
Any reference to shares shall be interpreted as the members’ interest, regardless of the form in which that interest exists.
Section 20. Service of Documents
20(1).
A document may be served on a company or any of its officers by sending it to the company’s registered office.
It can be sent by registered post, speed post, courier service, by hand delivery, or by electronic or any other mode as may be prescribed.
If the company’s securities are held with a depository, then:
The depository may send the records of beneficial ownership to the company electronically or through other prescribed means.
20(2).
A document may be served on the Registrar or on any member of the company by:
Post, registered post, speed post, courier, personal delivery, or by electronic or other prescribed means.
A member can also ask for documents to be delivered by a specific mode.
For this, the member must pay the fee decided by the company in its annual general meeting (AGM).
Explanation:
The term courier means a person or agency that delivers the document and provides proof of delivery.
Section 21. Authentication of documents, proceedings and contracts
21(1).
Unless the Companies Act specifically provides otherwise:
(a). Any document or proceeding that needs to be officially verified and approved (authenticated) by a company.
(b). Any contract made by or on behalf of a company can be signed by any key managerial personnel (KMP).
KMP's includes the Managing Director, Company Secretary, Chief Financial Officer or any officer or employee.
Provided these KMP’s are formally authorized by the Board of Directors.
Section 22. Execution of Bills of Exchange
22(1).
If a person signs a bill of exchange, hundi, or promissory note in the name of the company or on behalf of the company and if that person has the company’s authority to do so:
Whether the authority is expressly given or implied by their position or conduct then the instrument will be treated as having been signed by the company itself.
22(2).
A company may authorise any person (called an attorney) to execute deeds or legal documents on its behalf.
This can be done either for general purposes or specific matters.
This authorisation must be in writing:
If the company has a common seal, then the document should be sealed.
If the company does not have a common seal, then the authorisation would be given when the document is signed by:
Two directors, or by one director and the company secretary (if one exists).
22(3).
If a company gives someone (called an attorney) the legal power to act for it, that person can sign official documents (deeds) on the company’s behalf.
When the attorney signs the deed and puts their own seal on it, the deed is treated as if the company itself has signed it.
