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Preamble

Act No.1 of 1956
[18th January, 1956]

An Act to consolidate and amend the law relating to companies and certain other associations.
Comment: This is the basic law which governs the creation, continuation, the winding up of companies and also the relationships between the shareholders, the company, the public and the government. Coupled with other statutes dealing with corporate entities, this is an extremely important piece of legislation.
Be it enacted by Parliament in the Sixth Year of the Republic of India as follows :—

Part I Preliminary

Part I

Preliminary

1.Short title, commencement and extent.— (1) This Act may be called the Companies Act, 1956.

(2) It shall come into force on such date {1st April, 1956.See Gazette of India, Extraordinary, 1956, Part II, Section 3, p.413.}
as the Central Government may, by notification in the Official Gazette, appoint.

(3) It extends to the whole of India except the State of Jammu and Kashmir.

2.Definitions.— In this Act, unless the context otherwise requires, —

(1) "alter" and "alteration" shall include the making of additions and omissions;

(2) "articles" means the articles of association of a company as originally framed or as altered from time to time in pursuance of
any previous companies law or of this Act, including so far as they apply to the company, the regulations contained, as the case
may be, in Table B in the Schedule annexed to Act No.19 of 1857 or in Table A in the First Schedule annexed to the Indian
Companies Act, 1882 (6 of 1882), or in Table A in the First Schedule annexed to the Indian Companies Act, 1913 (7 of 1913),
or in Table A in Schedule I annexed to this Act;

(3) "associate", in relation to a managing agent, means any of the following, and no others:—

(a) where the managing agent is an
individual: any partner or relative of such individual; any firm in which such individual, partner or relative is a partner; any private
company of which such individual or any such partner, relative or firm is the managing agent or secretaries and treasurers or a
director or the manager; and any body corporate at any general meeting of which not less than one-third of the total voting
power in regard to any matter may be exercised or controlled by any one or more of the following, namely, such individual,
partner or partners, relative or relatives, firm or firms; and private company or companies;
(b) where the managing agent is a
firm: any member of such firm; any partner or relative of any such member; and any other firm in which any such member,
partner or relative is a partner; any private company of which the firm first mentioned, or any such member, partner, relative or
other firm is the managing agent, or secretaries and treasurers, or a director, or the manager; and any body corporate at any
general meeting of which not less than one-third of the total voting power in regard to any matter may be exercised or controlled
by any one or more of the following, namely, the firm first mentioned, any such member or members, partner or partners, relative
or relatives, other firm or firms and private company or companies;
(c) where the managing agent is a
body corporate; (i) any subsidiary or holding company of such body corporate; the managing agent or secretaries and treasurers,
or a director , the manger or an officer of the body corporate or of any subsidiary or holding company thereof; any partner or
relative of any such director or manager; any form in which such director, manager, partner or relative, is a partner; and

(ii) any other body corporate at any general meeting of which not less than one-third of the total voting power in regard to any
matter may be exercised or controlled by any one or more of the following, namely, the body corporate and the companies and
other persons specified in paragraph (i) above; and
(d) where the managing agent is a
private company or a body
corporate having not more
than fifty members; in addition to the persons mentioned in sub-clause (c), any member of the private company or body
corporate;

Explanation.— If one person is an associate in relation to another within the meaning of this clause, the latter shall also be
deemed to be an associate in relation to the former within its meaning;

(4) "associate", in relation to any secretaries and treasurers, means any of the following, and no others:—

(a) where the secretaries and treasurers
are a firm; any member of such firm; any partner or relative of any such member; and any other firm in which any such member,
partner, or relative is a partner; any private company of which the firm first-mentioned, or any such member, partner, relative or
other firm is the managing agent, or secretaries and treasurers, or a director, or the manager; and any body corporate at any
general meeting of which not less than one-third of the total voting power in regard to any matter may be exercised or controlled
by any one or more of the following, namely, the firm first-mentioned, any such member or members, partner or partners, relative
or relatives, other firm or firms, and private company or companies;

(b) where the secretaries and treasurers
are a body corporate; (i) any subsidiary or holding company of such body corporate; the managing agent or secretaries and
treasurers, or a director, the manager or an officer of the body corporate or of any subsidiary or holding company thereof; any
partner or relative of any such director or manager; any form in which such director or manger, partner, relative, is a partner;
and

(ii) any other body corporate at any general meeting of which not less than one-third of the total voting power in regard to any
matter may be exercised or controlled by any one or more of the following, namely, the body corporate and the companies and
other persons specified in paragraph (i) above; and

(c) where the secretaries and treasurers
are a private company or a body
corporate having not more than
fifty members; in addition to the persons mentioned in sub-clause (b) any member of the private company or body corporate;

Explanation.— If one person is an associate in relation to another within the meaning of this clause, the latter shall also be
deemed to be an associate in relation to the former within its meaning;

(5) "banking company" has the same meaning as in the Banking Companies Act 1949 (10 of 1949);

(6) "Board of directors" or "Board", in relation to a company, mans the Board of directors of the company;

(7) "body corporate" or "corporation" includes a company incorporated outside India but does not include a corporation sole;

(8) "book and paper" and "book or paper" include accounts, deeds, writings, and documents;

(9) "branch office" means any establishment described as a branch by the company, not being an establishment specified in an
order passed by the Central Government in pursuance of section 8;

(10) "company" means a company as defined in section 3;

(11) "the Court" means, with respect t any matter relating to a company, the Court having jurisdiction under this Act with respect
to that matter in relation to that company, as provided in section 10;

(12) "debentures" includes debenture stock, bonds and any other securities of a company, whether constituting a charge on the
assets of the company or not;

(13) "director" includes any person occupying the position of director, by whatever name called;

(14) "District Court" means the principal Civil Court of original jurisdiction in a district, but does not include a High Court in the
exercise of its ordinary original civil jurisdiction;

(15) "document" includes summons, notice, requisition, order, other legal process, and registers, whether issued, sent or kept in
pursuance of this or any other Act or otherwise;

(16) "existing company" means an existing company as defined in section 3;

(17) "financial year" means, in relation to any body corporate, the period in respect of which any profit and loss account of the
body corporate laid before it in annual general meeting is made up, whether that period is a year or not;

Provided that, in relation to an insurance company, "financial year" shall mean the calendar year referred to in sub-section (1) of
section 11 of the Insurance Act, 1938 (4 of 1933);

(18) "Government company" means a Government company within the meaning of section 617;

(19) "holding company" means a holding company within the meaning of section 4;

(20) "India" means the territory of India excluding the State of Jammu and Kashmir;

(21) "insurance company" means a company which carries on the business of insurance wither solely or in conjunction with any
other business or businesses;

(22) "issued generally" means, in relation to a prospectus issued to persons irrespective of their being existing members or
debenture holders of the body corporate to which the prospectus relates;

(23) "limited company" means a company limited by shares or by guarantee;

(24) "manger" means an individual (not being the managing agent) who, subject to the superintendence, control and direction of
the Board of directors, has the management of the whole, or substantially the whole, of the affairs of a company and includes a
director or any other person occupying the position of a manger, by whatever name called, and whether under a contract of
service or not;

(25) "managing agent" means any individual, firm or body corporate entitled, subject to the provisions of this Act, to the
management of the whole, or substantially the whole of the affairs of a company by virtue of an agreement with the company, or
by virtue of its memorandum or articles of association and includes any individual, firm or body corporate occupying the position
of a managing agent, by whatever name called;

(26) "managing director" means a director who, by virtue of an agreement with the company or of a resolution passed by the
company in general meeting or by its Board of directors, or by virtue of its memorandum or articles of association, is entrusted
with any powers of management which would not otherwise be exercisable by him, and includes a director occupying the
position of managing director, by whatever name called;

(27) "member", in relation to a company, does not include a bearer of a share-warrant of the company issued in pursuance of
section 114;

(28) "memorandum" means the memorandum of association of a company as originally framed or as altered from time to time in
pursuance of any previous companies law or of this Act;

(29) "modify" and "modification" shall include the making of additions and omissions;

(30) "officer" includes any director, managing agent, secretaries and treasurers, manager or secretary; where the managing agent
or the secretaries and treasurers are a firm, also includes any partner in the firm; and where the managing agent or the secretaries
and treasurers are a body corporate, also includes any director, managing agent, secretaries and treasurers or manager of the
body corporate; but, save in sections 477, 478, 539, 543, 545, 621, 625 and 633 does not include an auditor;

(31) "officer who is in default", in relation to any provision referred to in section 5, has the meaning specified in that section;

(32) "paid-up capital" or "capital paid up" includes capital credited as paid-up;

(33) "prescribed" means, as respects the provisions of this Act relating to the winding up of the companies except sub-section
(5) of section 503, sub-section (1) of section 549 and sub-section (3) of section 550, prescribed by rules made by the Supreme
Court in consultation with High Courts, and as respects the other provisions of this Act including sub-section (5) of section 503,
sub-section (1) of section 549 and sub-section (3) of section 550, prescribed by rules made by the Central Government;

(34) "previous companies law" means any of the laws specified in clause (ii) of sub-section (1) of section 3;

(35) "private company" means a private company as defined in section 3;

(36) "prospectus" means any prospectus, notice, circular, advertisement or other document inviting offers from the public for the
subscription on purchase of any shares in, or debentures of, a body corporate;

(37) "public company" means a public company as defined in section 3;

(38) "public holiday" means a public holiday within the meaning of the Negotiable Instruments Act, 1881 (26 of 1881);

Provided that no day declared by the Central Government to be a public holiday shall be deemed to be such a holiday, in
relation to any meeting, unless the declaration was notified before the issue of the notice convening such meeting;

(39) "recognised stock exchange" means, in relation to any provision of this Act in which it occurs, a stock exchange whether in
or outside India, which is notified by the Central Government in the Official Gazette as a recognised stock exchange for the
purposes of that provision;

(40) "Registrar" means a Registrar, or an Additional, a Joint, a Deputy or an Assistant Registrar, having the duty of registering
companies under this Act

(41) "relative" means, with reference to any person, any one who is related to such person in any of the ways specified in section
6, and no others;

(42) "Schedule" means a Schedule annexed to this Act.

(43) "Scheduled Bank" has the same meaning as in the Reserve Bank of India Act, 1934 (2 of 1934);

(44) "secretaries and treasurers" means any firm or body corporate (not being the managing agent) which, subject to the
superintendence, control and direction of the Board of directors, has the management of the whole or substantially the whole, of
the affairs of a company; and includes any firm or body corporate occupying the position of securities and treasurers, by
whatever name called, and whether under a contract of service or not;

(45) "secretary" means the person, if any, who is appointed to perform the duty which may be performed by a secretary under
this Act;

(46) "share" means share the share capital of a company and includes stock except where a distinction between stock and shares
is expressed or implied;

(47) "subsidiary company" or "subsidiary" means a subsidiary company within the meaning of section 4;

(48) "total voting power", in regard to any matter relating to a body corporate, means the total number of votes which may be
case in regard to that matter on a poll at a meeting of such body, if all the members thereof and all other persons, if any, having a
right to vote on that matter are present at the meeting and cast their votes;

(49) "trading corporation" means a trading corporation within the meaning of entries 43 and 44 in List I in the Seventy Schedule
to the Constitution.;

(50) "variation" shall include abrogation; and "vary" shall include abrogate.

Section 2A
[ 35a 2A INTERPRETATION OF CERTAIN WORDS AND EXPRESSIONS.

Words and expressions used and not defined in this Act but
defined in the Depositories Act, 1996 (22 of 1996), shall
have the same meanings respectively assigned to them in that
Act. 35a ]

3.Definitions of company, existing company, Private company and public company.— (1) In this Act, unless the context
otherwise requires, the expressions "company", "existing company", "private company" and "public company", shall, subject to
the provisions of sub-section (2), have the meanings specified below :—

(i) "company" means a company formed and registered under this Act or an existing company as defined in clause (ii):

(ii) "existing company" means a company formed and registered under any of the previous companies laws specified below:—

(a) any Act or Acts relating to companies in force before the Indian Companies Act, 1866 (10 of 1866) and repealed by that
Act;
(b) the Indian Companies Act, 1866 (1006 1966);
(c) the Indian Companies Act, 1882 ( 6 of 1882);
(d) the Indian Companies Act, 1913 (7 of 1913);
(e) the Registration of Transferred Companies Ordinance, 1942 (54 of 1942); and
(f) any law corresponding to any of the Act or the Ordinance aforesaid and in force in the merged territories or in a Part B Sate,
or any part thereof, before the extension thereto of the Indian Companies Act, 1913( 7 of 1913);

(iii) "private company" means a company which, by its articles,—

(a) restricts the right to transfer its shares, if any;

(b) limits the number of its members to fifty not including —

(i) persons who are in the employment of the company, and

(ii) persons who having been formerly in the employment of the company, were members of the company while in that
employment and have continued to be members after the employment ceased; and

(c) prohibits any invitation to the public to subscribe for any shares in, or debentures of, the company;

Provided that where two or more persons hold one or more shares in a company jointly, they shall, for the purposes of this
definition, be treated as a single member;

(iv) "public company" means a company which is not a private company.

(2) Unless the context otherwise requires, the following companies shall not be included within the scope of any of the
expressions defined in clauses (i) to (iv) of sub-section (1), and such companies shall be deemed, for the purposes of this Act, to
have been formed and registered outside India:—

(a) a company the registered officer whereof is in Burma, Aden or Pakistan and which immediately before the separation of that
country from India was a company as defined in clause (i) of sub-section (1);

(b) a company the registered office whereof is in the State of Jammu and Kashmir and which immediately before the 26th day of
January, 1950, was a company as defined in clause (i) aforesaid.

Section 4.Meaning of holding company and subsidiary.— (1) For the purposes of this Act, a company shall, subject to the provisions of
sub-section (3), be deemed to be a subsidiary of another if, but only if, —

(a) that other controls the compositions of its Board of directors; or

(b) that other holds more than half in nominal value of its equity share capital; or

(c) the first-mentioned company is a subsidiary of any company which is that other's subsidiary.

Illustration

Company B is a subsidiary of Company A, and Company C is a subsidiary of Company B.Company C is a subsidiary of
Company A by virtue of clause (c) above.If Company D is a subsidiary of Company Commencement Company D will be
subsidiary of Company B and consequently also of Company A, by virtue of clause (c) above; and so on.

(2) For the purposes of sub-section (1), the composition of a company's Board of directors shall be deemed to be controlled by
another company if, but only if, that other company by the exercise of some power exercisable by it at its discretion without the
consent or concurrence of any other person, can appoint or remove the holders of all or a majority of the directorships; but for
the purposes of this provision that other company shall be deemed to have power to appoint to a directorship with respect to
which any of the following conditions is satisfied, that is to say —

(a) that a person cannot be appointed thereto without the exercise in his favour by that other company of such power as
aforesaid;

(b) that a person's appointment thereto follows necessarily from his appointment as director, managing agent, secretaries and
treasurers, or manager of, or to any other office or employment in, that other company; or

(c) that the directorship is held by that other company itself or by a subsidiary of it.

(3) In determining whether one company is a subsidiary of another—

(a) any shares held or power exercisable by that other company in a fiduciary capacity shall be treated as not held or exercisable
by it;

(b) subject to the provisions of clauses (c) and (d), any shares held or power exercisable —

(i) by any person as a nominee for that other company (except where that other is concerned only in a fiduciary capacity); or

(ii) by, or by a nominee for, a subsidiary of that other company, not being a subsidiary which is concerned only in a fiduciary
capacity;

shall be treated as held or exercisable by that other company;

(c) any shares held or power exercisable by any person by virtue of the provisions of any debentures of the first-mentioned
company or of a trust deed for securing any issue of such debentures shall be disregarded;

(d) any shares held or power exercisable by, or by a nominee for, that other or its subsidiary [not being held or exercisable as
mentioned in clause (c) ] shall be treated as not held or exercisable by that other, if the ordinary business of that other or its
subsidiary, as the case may be, includes the lending of money and the shares are held or the power is exercisable as aforesaid by
way of security only for the purposes of a transaction entered into in the ordinary course of that business.

(4) For the purposes of this Act, a company shall be deemed to be the holding company of another if, but only if, that other is its
subsidiary.

(5) In this section, the expression "company" includes any body corporate, and the expression "equity share capital" has the same
meaning as in sub-section (2) of section 85.

(6) In the case of a body corporate which is incorporated in a country outside India, a subsidiary or holding company of the
body corporate under the law of such country shall be deemed to be a subsidiary or holding company of the body corporate
within the meaning and for the purpose of this Act also, whether the requirements of this section are fulfilled or not.

Section 4A
PUBLIC FINANCIAL INSTITUTIONS.

(1) Each of the financial institutions specified in this sub-section shall be regarded, for the purposes of this Act, as a public financial institution, namely :-

(i) The Industrial Credit and Investment Corporation of India Limited, a company formed and registered under the Indian Companies Act, 1913 (7 of 1913);

(ii) The Industrial Finance Corporation of India, established under section 3 of the Industrial Finance Corporation Act, 1948 (15 of 1948);

(iii) The Industrial Development Bank of India, established under section 3 of the Industrial Development Bank of India Act, 1964 (18 of 1964);

(iv) The Life Insurance Corporation of India, established under section 3 of the Life Insurance Corporation Act, 1956 (31 of 1956);

(v) The Unit Trust of India, established under section 3 of the Unit Trust of India Act, 1963 (52 of 1963).

(vi) The Infrastructure Development Finance Company Limited, a company formed and registered under this Act.

(2) Subject to the provisions of sub-section (1), the Central Government may, by notification in the Official Gazette, specify such other institution as it may think fit to be a public financial institution;

Provided that no institution shall be so specified unless -

(i) It has been established or constituted by or under any Central Act, or

(ii) Not less than fifty-one per cent of the paid-up share capital of such institution is held or controlled by the Central Government.

Section 5

.Meaning of officer who is in default.— For the purpose of any provision in this Act which enacts that an officer of the company
who is in default shall be liable to any punishment or penalty, whether by way of imprisonment, fine or otherwise, the expression
"officer who is in default" means any officer of the company who is knowingly guilty of the default, non-compliance, failure,
refusal or contravention mentioned in that provision, or who knowingly and wilfully authorises or permits such default,
non-compliance, failure, refusal or contravention.

Section 6.

Meaning of relative.— Two persons shall be deemed to be "relatives" if, and only if, they are husband and wife, or the one or
the spouse of the one is related to the other or the spouse of the other, whether by legitimate or illegitimate descent or by
adoption and whether by full blood or by half blood, in any of the following ways, namely:—

(i) as parent and child;
(ii) as grant-parent and grant-child;
(iii) as brothers or sisters, or as brother and sister;
(iv) as uncle or aunt, and nephew or niece;
(v) as first cousins, that is to say, as persons having a common grand-parent, provided the cousins are members of a Hindu joint
family whether governed by the Mitakshara, the Dayabagha, the Marumakhatayam, the Aliyasanthana or any other system of
law.

Section7

.Interpretation of person in accordance with whose directions or instructions directors are accustomed to act.— Except where this Act expressly provides otherwise, a person shall not be deemed to be, within the meaning of any provision in this Act, a
person in accordance with whose directions or instructions the Board of directors of a company is accustomed to act, by reason
only that the Board acts on advice given by him in a professional capacity.

Section8.

Power of Central Government.to declare the establishment not to be a branch office.— The Central Government may, by order, declare that in the case of any company, not being a banking or an insurance company, any establishment carrying on
either the same or substantially the same activity as that carried on by the head office of the company, or any production or manufacture, shall not be treated as a branch office of the company for all or any of the purposes of this Act.

Section 9.

Act to override memorandum, articles, etc.— Save as otherwise expressly provided in the Act—

(a) the provisions of these Act shall have effect notwithstanding anything to the contrary contained in the memorandum or articles
of a company, or in any agreement executed by it, or in any resolution passed by the company in general meeting or by its Board
of directors, whether the same be registered, executed or passed, as the case may be, before or after the commencement of this
Act; and

(b) any provision contained in the memorandum, articles, agreement or resolution aforesaid shall, to the extent to which it is
repugnant to the provisions of this Act, become or be void, as the case may be.

Section 10.

Jurisdiction of Courts.— (1) The Court having jurisdiction under this Act shall be —

(a) the High court having jurisdiction in relation to the place at which the registered office of the company concerned is situate,
except to the extent to which jurisdiction has been conferred on any District Court or District Courts subordinate to that High
Court in pursuance of sub-section (2); and

(b) where jurisdiction has been so conferred, the District Court in regard to matters falling within the scope of the jurisdiction
conferred, in respect of companies having their registered offices in the district.

(2) The Central Government may, by notification in the Official Gazette and subject to such restrictions, limitations and conditions
as it thinks fit, empower any District Court to exercise all or any of the jurisdiction conferred by this Act upon the Court, not
being the jurisdiction conferred—

(a) in respect of companies generally, by sections 237, 391, 394, 395 and 397 to 407, both inclusive;

(b) in respect of companies with a paid-up share capital of not less than one lakh of rupees, by Part VII (sections 425 to 560)
and the other provisions of this Act relating to the winding up of companies.

(3) For the purposes of jurisdiction to wind up companies, the expression "registered office" means the place which the longest
been the registered office of the company during the six months immediately preceding the presentation of the petition for winding
up.

Section 10A
CONSTITUTION OF TRIBUNAL.

[Omitted by the Companies Tribunal (Abolition) Act, 1967, (17 of 1967), section 4 and Schedule with effect from 1-7-1967.

Section 10B
PROCEDURE OF TRIBUNAL.

[Omitted by the Companies Tribunal (Abolition) Act, 1967, (17 of 1967), section 1 and Schedule with effect from 1-7-1967.]

Section 10C
POWERS OF TRIBUNAL.

[Omitted by the Companies Tribunal (Abolition) Act, 1967, (17 of 1967), section 4 and Schedule with effect from 1-7-1967.]

Section 10D
APPEALS AGAINST DECISIONS, ETC., OF THE TRIBUNAL.

[Omitted by the Companies Tribunal (Abolition) Act, 1967, (17 of 1967), section 4 and Schedule with effect from 1-7-1967.]

Part I-A Board of Company Law administration.

Section 10E
CONSTITUTION OF BOARD OF COMPANY LAW ADMINISTRATION.

(1) As soon as may be after the commencement of the Companies (Amendment) Act, 1988, the Central Government shall, by notification in the Official Gazette, constitute a Board to be called the Board of Company Law Administration.

(1A) The Company Law Board shall exercise and discharge such powers and functions as may be conferred on it, by or under this Act or any other law, and shall also exercise and discharge such other powers and functions of the Central Government under this Act or any other law as may be conferred on it by the Central Government, by notification in the Official Gazette under the provisions of this Act or that other law.

(2) The Company Law Board shall consist of such number of members, not exceeding [nine], as the Central Government deems fit, to be appointed by that Government by notification in the Official Gazette :

Provided that the Central Government may, by notification in the Official Gazette, continue the appointment of the chairman or any other member of the Company Law Board functioning as such immediately before the commencement of the Companies (Amendment) Act, 1988, as the chairman or any other member of the Company Law Board, after such commencement for such period not exceeding three years as may be specified in the notification.

(2A) The members of the Company Law Board shall possess such qualifications and experience as may be prescribed.

(3) One of the members shall be appointed by the Central Government to be the chairman of the Company Law Board.

(4) No act done by the Company Law Board shall be called in question on the ground only of any defect in the constitution of, or the existence of any vacancy in, the Company Law Board.

(4A) [Omitted by the Companies (Amendment) Act, 1988, section 4, w.e.f. 31-5-1991. For text of omitted sub-section (4A), refer Appendix I].

(4B) The Board may, by order in writing, form one or more Benches from among its members and authorise each such Bench to exercise and discharge such of the Board's powers and functions as may be specified in the order; and every order made or act done by a Bench in exercise of such powers or discharge of such functions shall be deemed to be the order or act, as the case may be, of the Board.

(4C) Every Bench referred to in sub-section (4B) shall have powers which are vested in a Court under the Code of Civil Procedure, 1908 (5 of 1908), while trying a suit, in respect of the following matters, namely :-

(a) discovery and inspection of documents or other material objects producible as evidence;

(b) enforcing the attendance of witnesses and requiring the deposit of their expenses;

(c) compelling the production of documents or other material objects producible as evidence and impounding the same;

(d) examining witnesses on oath;

(e) granting adjournments;

(f) reception of evidence on affidavits.

(4D) Every Bench shall be deemed to be a civil court for the purposes of section 195 and [Chapter XXVI of the Code of Criminal Procedure, 1973 (2 of 1974)], and every proceeding before the Bench shall be deemed to be a judicial proceeding within the meaning of sections 193 and 228 of the Indian Penal Code, 1860 (45 of 1860), and for the purpose of section 196 of that Code.]

[(5) Without prejudice to the provisions of sub-sections (4C) and (4D), the Company Law Board shall in the exercise of its powers and the discharge of its functions under this Act or any other law be guided by the principles of natural justice and shall act in its discretion.

(6) Subject to the foregoing provisions of this section, the Company Law Board shall have power to regulate its own procedure].

Section 10F
APPEALS AGAINST THE ORDERS OF THE COMPANY LAW BOARD.

Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order :

Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.

Part II Incorporation of Company and Matters Incidental thereto.

PART II

Incorporation of Company and Matters Incidental Thereto

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

Section 11.

PROHIBITION OF ASSOCIATIONS AND PARTNERSHIPS EXCEEDING CERTAIN NUMBER.— (1) 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 is 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 contravension of this section shall be
punishable with fine which may extend to one thousand rupees.

MEMORANDUM OF ASSOCIATION

Section12.

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 its 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 guarantee"); or

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

Section13.

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 words 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; and

(c) the objects of he company, and, except in the case of trading corporations, the State or 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.

Section 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 be applicable to the case of the company, or in a Form as near thereto as circumstances admit.

Section 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.

Section 15A
SPECIAL PROVISION AS TO ALTERATION OF MEMORANDUM CONSEQUENT ON ALTERATION OF NAME OF STATE OF MADRAS.

Where, in the memorandum of association of a company in existence immediately before the commencement of the Madras State (Alteration of Name) Act, 1968 (53 of 1968), it is stated that Madras is the State in which the registered office of that company is situate, then, notwithstanding anything contained in this Act, the said memorandum shall, as from such commencement, be deemed to have been altered by substitution of a reference to the State of Tamil Nadu for the reference to the State of Madras, and the Registrar of the State of Tamil Nadu shall make necessary alterations in the memorandum of association and the certificate of incorporation of the said company.

Section 15B
SPECIAL PROVISION AS TO ALTERATION OF MEMORANDUM CONSEQUENT ON ALTERATION OF NAME OF STATE OF MYSORE.

Where, in the memorandum of association of a company in existence immediately before the commencement of the Mysore State (Alteration of Name) Act, 1973 (31 of 1973), it is stated that Mysore is the State in which the registered office of that company is situate, then, notwithstanding anything contained in this Act, the said memorandum shall, as from such commencement, be deemed to have been altered by substitution of a reference to the State of Karnataka for the reference to the State of Mysore, and the Registrar of the State of Karnataka shall make necessary alterations in the memorandum of association and the certificate of incorporation of the said company.

Section 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
managing agent, secretaries and treasurers 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 constructed as including references to the other provisions
aforesaid contained in its memorandum.

Section 17

SPECIAL RESOLUTION AND CONFIRMATION BY COURT REQUIRED FOR ALTERATION OF MEMORANDUM.— (1) 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;

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

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

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

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

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

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

(2) The alteration shall not take effect until, and except in so far as, it is confirmed by the Court on petition.

(3) Before confirming the alteration, the Court 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 Court, be affected by the alteration; and

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

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

(4) Notice of the alteration shall also be given to the Registrar and he shall be given a reasonable opportunity to appear before
the Court and state his objections and suggestions, if any, with respect to the confirmation of the alteration.

(5) The Court may make an order confirming the alteration either wholly or in part, and 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 Court 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 Court may, if it thinks fit, adjourn the proceedings in order than an arrangement may be made to the satisfaction of the
Court for the purchase of the interests of dissentient members; and may given 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 in any such purchase.

Section 18.

ALTERATION TO BE REGISTERED WITHIN THREE MONTHS.

(1) A certified copy of the order confirming the alteration, together with a
printed copy of the memorandum as altered, shall, within three months from the date of the order, be filled by the company with
the Registrar, and he shall register the same, and shall certify the registration under his hand.

(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 henceforth 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 Court may, at any time, by order, extend the time for the filing of documents under this section by such period as its
thinks proper.

Section 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 sub-section 18.

(2) If the registration is not effected within three months next after the date of the order of the Court confirming the alteration, or
within such further time as may be allowed by the Court under sub-section (4) of section 18, such alteration and order and all
proceedings connected therewith shall, at the expiry of such period of three months or of such further time, as the case may be,
become void;

Provided that the Court 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

Section 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, the name
by which a company in existence has been previously registered, may be deemed to be undesirable by the Central Government
within the meaning of sub-section (1).

Section21.

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.

Section 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, 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—

(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.

(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 hundred rupees for every day during which
the default continues.

Section 23.

REGISTRATION OF CHANGE OF NAME AND EFFECT THEREOF.

(1) Where a company charges its name in pursuance 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.

Section 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.

Section 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 directions, 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,

Section 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.

Section 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).

Section 28

ADOPTION AND APPLICATION OF TABLE A IN THE CASE OF COMPANIES LIMITED BY SHARES.

(1) 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, in so far 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.

Section 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 I 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.

Section 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.

Section 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 sub-section (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.

Section 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 re-register 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.

Section 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 practicing in India and who is not in full-time employment. 95 ]

(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.

Section 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.

Section 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.

Section 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 members, 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.

Section 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.

Section 38

EFFECTS 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 alternation 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.

Section 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;

(2) If a company makes default in complying with the requirement 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 fifty rupees.

Section 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 in any other agreement, 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 ten rupees for each copy so issued.

Section 41

DEFINITION OF "MEMBER".

(1) The subscribers of the memorandum of a company shall be deemed to have agreed to become members of a company, and on its registration, shall be entered as members in its register of members.

(2) Every other person who agrees in writing a become a member of a company

Section 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 holdings 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.

(5) 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.

Section 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 Company Law Board 99, 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 101 of the company or any other person interested and on such terms and conditions as seem to the Company Law Board just and expedient, order that the company be relieved from such consequences as aforesaid.

Section 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 matter 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 prescribed ,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 :

(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 :

(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" 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.

(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 the Companies (Amendment) Act, 1988, section 7, w.e.f. 15-6-1988. For sub-sections (6) and (7) as they stood prior to omission, refer Appendix I].

(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, [ 108 * * * 108 ]

(b) [Omitted by the Companies (Amendment) Act, 1988, section 7, w.e.f. 15-6-1988. For clause (b) as it stood prior to its

(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 sub-section (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 deposists 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 purposes 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 form the sale, supply or distribution of goods or on account of services rendered, or both, by the company during a financial year. 109 ]

Section 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 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 the 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 that Schedule, shall set out the report specified therein, and the said Parts I and II shall have effect subject to the provision 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 endorsed thereon or attached thereto, a written statement signed by those persons, setting out there adjustment 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 hundred rupees for every day during which the default continues.

(4) Where any prospectus or statement in lieu of prospectus filed under this action 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 five thousand rupees, or with both, unless he proves either that the statement was immaterial or that he 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 purpose 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 prospects or a statement in lieu of prospectus in which an untrue statement is included.

(6) For the purpose 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.

Section 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 public company, below seven, or in the case of private company, below two, and the company carrier 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.

Section 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 parol only and not reduced into writing, may be made by parol 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.

Section 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 the 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. Section 48

Section 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 singed 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.

Section 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 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 its in it 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 in so far 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 retransferred 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 orwith the State Bank of India or a Schedule Bank , being the bankers of the company.

(7) Where, in pursuance of sub-section (2), (3), (4) and (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 meetings, 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 five thousand rupees.

(10) If any inspection required under sub-section (8) is refused, the Company Law Board may, by order, direct an immediate inspection of the register 121 . 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.

Section 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 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 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.

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