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THE COMPANIES BILL, 1997 PART II INCORPORATION OF COMPANY AND ALLIED MATTERS CHAPTER I : SECTIONS 14-27
Articles of Association 14. Articles prescribing regulations for different classes of companies –
(3) 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. (4) 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). (5) The articles of association of a company limited by shares may adopt all or any of the form as may be prescribed for such companies. (6) Where, in a company limited by shares which is registered after the commencement of this Act, if no articles are registered or if no modifications are made of the forms prescribed under sub-section (5) such forms shall apply to the said company in the same manner and to the same extent as they were contained in duly registered articles (7) The articles of any company, not being a company limited by shares, may adopt such one of the prescribed forms as may be applicable, or in a form as near thereto as circumstances admit: Provided that nothing in this sub-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 forms prescribed under sub-section (5). (8) Articles shall- (a) be printed, either electronically or otherwise; (b) be divided into paragraphs numbered consecutively, (c) state the name of each subscriber, his address, description and occupation, if any, who shall sign in the presence of at least one witness who shall attest the signature; and (d) include the name of each such witness, his address, description and occupation, if any. 15 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 notified to the public by means of a public notice in such form and manner as may be prescribed. (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. (3) Where any alteration such as is referred to in the proviso to sub-section (1) has been made, a printed copy of the articles as altered shall be filed by the company with the Registrar within one month of the date of publication of the public notice.
Change of registration of Companies 16 Registration of unlimited company as limited, etc.-
Provided that the Registrar may refuse registration only after giving reasons for such refusal (3) The registration of an unlimited company as a limited company or registration of a limited company as an unlimited 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 such registration, and those debts, liabilities, obligations and contracts may be enforced in the manner provided in Part IX in the case of a company registered under that Part.
General provisions with respect to memorandum and articles 17 Registration of memorandum and articles.- (1) There shall be presented for registration, to the Registrar exercising jurisdiction over the area 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 a secretary, in whole-time practice in India who is engaged in the formation of a company that all the requirements of this Act and the rules thereunder have been complied with in respect of registration and matters precedent or incidental thereto, shall be filed with the Registrar; and the Registrar may accept such a declaration as sufficient evidence of such compliance. (4).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. (5) 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. (6) 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. (7) 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. (8) All money payable by any member to the company under the memorandum or articles shall be a debt due from him to the company.
18 Provision as to companies limited by guarantee.-
19 Effect of alteration in memorandum or articles and copies to be given to members of the altered memorandum and articles .- . .(1) Notwithstanding anything contained 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 sub 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. (2) 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 such fee as may be prescribed, a copy each of the following documents as in force for the time being- (a) the memorandum; (b) the articles, if any; and (c) every other agreement and every resolution referred to in section 148, if and in so far as they have not been embodied in the memorandum or articles.
(5) 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 20 Membership of holding company.-
(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 a 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) Where a subsidiary company continues to be a member of a holding company under sub-section (3), nothing in this section shall prejudice its rights to be allotted bonus shares of such holding company. (5) 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. (6) In relation to a holding company which is either a company limited by guarantee or an unlimited company, the reference in this section to shares shall, whether or not the company has a share capital, be construed as including a reference to the interest of its members as such, whatever the form of that interest.
Private companies 21 Consequences of default in complying with conditions constituting a company as a private company.- Where the articles of a company include 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 as 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 Company Law Tribunal, 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 may seem to the Company Law Tribunal just and expedient, order that the company be relieved from such consequences as aforesaid.
Reduction of number of members below legal minimum 22 Members severally liable for debts in certain cases.- 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 less than seven members or two members, as the case may be, shall be severally liable for the payment of the whole of the debts of the company contracted during that period, and may be severally sued therefor.
Contracts and deeds, investments, seal etc. 23 Contracts to be executed by company.- (1) Contracts 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 or be valid although made verbally and not reduced into writing, may be made in writing signed or, as the case may be, verbally, 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 sub-section(1) shall bind the company. (3) 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. (4) 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 any document on its behalf in any place either in or outside India. (5) A document 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.
24.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), all investments made by a company on its own behalf shall be made and held by it in its own name; (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 its name 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 its nominee or nominees, if and in so far as it is necessary so to do, to ensure that the number of members of the subsidiary is not reduced below seven or, as the case may be, below two. (4) Sub-section (1) shall not apply to investments made by a company whose principal business consists of buying and selling of 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 securities for the collection of any dividend or interest payable thereon; or (b) 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, securities, in order to facilitate the transfer thereof: Provided that if within a period of six months from the date on which the 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 securities takes place, the company shall, as soon as practicable after the expiry of that period, have the securities retransferred to it from the State Bank of India or the Scheduled Bank or, as the case may be, hold the securities in its own name; (c) from depositing with, or transferring to, any person any securities, by way of security for the repayment of any loan advanced to the company or the performance of any obligation undertaken by it; or (d) 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 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-section (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 Company Law Tribunal may, without prejudice to the provisions of sub-section (9), by order, direct an immediate inspection of the register.
25 Power of 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 mentioned, until notice of the revocation or determination of the agent's 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 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 26 Service of documents.- (1) 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 such other means as may be prescribed 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. (2) 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 such means in sub-section (1), as may be prescribed or by delivering it to, or leaving it for, him at his office. (3) A document may be served by a company on any member or a holder of any other security thereof either personally, or by sending it by post or by such other means as may be prescribed 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. (4) 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 or a holder of any other security has intimated to the company in advance that documents should be sent to him under certificate of posting or by registered post with or without acknowledgement 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 if the company obtains the stamp of the post office wherein the letter had been delivered as evidence of their posting. (5) 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 or a holder of any other security 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. (6) A document may be served by the company on the joint-holders of a share or other security by serving it on the joint-holder named first in the register in respect of the share. (7) A document may be served by the company on the persons entitled to a share or other security 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 27 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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