Learning Outcomes

 
What?- Constitutional documents of the company
Why?- Governs the relation btw Company and outsiders
How to draft?
 
2(56)-"memorandum" means the memorandum of association of a company as originally
framed or as altered from time to time in pursuance of any previous company law or of this
Act.

In the celebrated case of Ashbury Railway Carriage & Iron Co. Ltd. v. Riche, (1875)
L.R. 7 H.L. 653, Lord Cairn observed: “The memorandum of association of a
company is its charter and defines the limitations of the powers of the company... it
contains in it both that which is affirmative and that which is negative. It states
affirmatively the ambit and extent of vitality and powers which by law are given to the
corporation, and it states negatively if it is necessary to state, that nothing shall be
done beyond that ambit...”;

S. 3. Formation of company:

(1) A company may be formed for any lawful purpose by--

1. seven or more persons, where the company to be formed is to be a public
company;
1. two or more persons, where the company to be formed is to be a private
company; or
1. one person, where the company to be formed is to be One Person Company (Rule 2

3 of the Companies (Incorporation) Rules 2014. For text of the Rules, s)that is to say, a private company,

by subscribing their names or his name to a memorandum and

complying with the requirements of this Act in respect of
registration:
Provided that the memorandum of One Person Company shall indicate the
name of the other person, Rule 4(2) and Form No. INC. 2 of the Companies (Incorporation) Rules
3(

2014.)with his prior written consent in the prescribed form, Rule 4(2) and Form No. INC. 3 of
4(

the Companies (Incorporation) Rules 2014.

)who shall, in the event of the subscriber's death or his incapacity to contract
become the member of the company and
the written consent of such person shall also be filed with the
Registrar at the time of incorporation of the One Person Company
along with its memorandum and articles:
Provided further that such other person may withdraw his consent
in such manner as may be prescribed: Rule 4(3) of the Companies (Incorporation)
5(

Rules 2014.)

Provided also that the member of One Person Company may at any
time change the name of such other person by giving notice in
such manner as may be prescribed: Rule 4(5) of the Companies (Incorporation)
6(

Rules 2014.)
 Provided also that it shall be the duty of the member of One Person Company to
intimate the company the change, if any, in the name of the other person
nominated by him by indicating in the memorandum or otherwise within such
time and in such manner as may be prescribed, Rule 4(4) and Form No. INC. 4 of the Companies
7(

(Incorporation) Rules 2014.)and the company shall intimate the Registrar any such
change within such time and in such manner as may be prescribed: Rule 4(5) proviso
8(

and Form No. INC. 4 of the Companies (Incorporation) Rules 2014)

Provided also that any such change in the name of the person shall
not be deemed to be an alteration of the memorandum.

(2) A company formed under sub-section (1) may be either--

(c) a company limited by shares;S. 2(22) of the 2013 Act
2. or
2. a company limited by guarantee; S.(21) of the 2013 Act or
(c) an unlimited company. S.2(92) of the 2013

Q1- Who can be a signatory?

Any person who is competent to contract can be a subscriber. A minor cannot be a
signatory to the memorandum and articles of association of a company to be incorporated
since he is not competent to contract. The guardian of a minor who subscribes to a
memorandum on behalf of the minor will be deemed to have subscribed in his personal
capacity. See Palaniappa v. Official Liquidator, AIR 1942 Mad 470 and Notes under s. 2(55)
of the 2013 Act.
A company being a legal person can subscribe.
Incorporated company as subscriber:- An incorporated company can subscribe to the
memorandum of a company by authorising a person to sign on its behalf. Since subscription
to memorandum inevitably means investment in the shares of a company, it is necessary
that a resolution as required by Section 179(3)(c) of the 2013 Act should be passed at a
meeting of the Board authorising the investment.
A partnership not being a legal person cannot do so; an individual partner must subscribe.
Q2- Is it necessary that subscribers should have any personal beneficial interest in the
shares subscribed for by them?

THE DOCTRINE OF ULTRA VIRES and Memorandum

Memorandum of Association or, in short, memorandum is the basic and fundamental
document which lays the foundation of a company. It is actually the constitution of a
company. Memorandum controls the business field of the company and conduct of the
business through the objects specified therein. Once it is registered it becomes a public
document and therefore persons who have been dealing with the company are deemed to
have notice of contents of the memorandum. The persons dealing with the company are
also bound by the memorandum in dealings with the company.
 The memorandum circumcises the powers of a company and exercise of powers
beyond the provisions of the memorandum would be considered ultra-vires the
memorandum and will have no validity. For instance,
1- a company cannot pursue a business unless the same in authorised in the objects
clause of the memorandum.
2- It cannot raise capital beyond the amount specified in the capital clause of the
memorandum.
As per section 10 of the Act, the MOA acts as a document which binds the company
and the members as if they have individually signed it.

Contents/Clauses of MOA- Name Clause, Situation Clause, Object Clause, Liability

clause, Capita clause, Association clause

1. NAME CLAUSE

Section. 4(1) The memorandum of a company shall state—

(a) the name of the company with the last word "Limited" 1[in the case of a public limited company, or
the last words "Private Limited" in the case of a private limited company]:
 4
[Provided that nothing in this clause shall apply to a company registered under section 8;]
(2) The name stated in the memorandum shall not—
(a) be identical with or resemble too nearly to the name of an existing company registered under this
Act or any previous company law; or
(b) be such that its use by the company—
(i) will constitute an offence under any law for the time being in force; or
(ii) is undesirable in the opinion of the Central Government.

(3) Without prejudice to the provisions of sub-section (2), a company shall not be registered with a
name which contains—
(a) any word or expression which is likely to give the impression that the company is in any way
connected with, or having the patronage of, the Central Government, any State Government, or any
local authority, corporation or body constituted by the Central Government or any State Government
under any law for the time being in force; or
(b) such word or expression, as may be prescribed,
unless the previous approval of the Central Government has been obtained for the use of any such
word or expression.
(4) A person may make an application, in such form and manner and accompanied by such fee, as
may be prescribed, to the Registrar for the reservation of a name set out in the application as—
(a) the name of the proposed company; or
(b) the name to which the company proposes to change its name.

*  [(5) (i)  Upon receipt of an application under sub-section (4), the Registrar may, on the basis of information
6

and documents furnished along with the application, reserve the name for a period of twenty days from the date
of approval or such other period as may be prescribed:
Provided that in case of an application for reservation of name or for change of its name by an existing company,
the Registrar may reserve the name for a period of sixty days from the date of approval.]

(ii) Where after reservation of name under clause (i), it is found that name was applied by furnishing
wrong or incorrect information, then,—
(a) if the company has not been incorporated, the reserved name shall be cancelled and the person
making application under sub-section (4) shall be liable to a penalty which may extend to one lakh
rupees;
(b) if the company has been incorporated, the Registrar may, after giving the company an opportunity
of being heard—
(i) either direct the company to change its name within a period of three months, after passing an
ordinary resolution;
(ii) take action for striking off the name of the company from the register of companies; or
(iii) make a petition for winding up of the company.
(6) The memorandum of a company shall be in respective forms specified in Tables A, B, C, D and E
in Schedule I as may be applicable to such company.
(7) Any provision in the memorandum or articles, in the case of a company limited by guarantee and
not having a share capital, purporting to give any person a right to participate in the divisible profits of
the company otherwise than as a member, shall be void.
Section 12 (3) Every company shall—
(a) paint or affix its name, and the address of its registered office, and keep the same painted or
affixed, on the outside of every office or place in which its business is carried on, in a conspicuous
position, in legible letters, and if the characters employed therefor are not those of the language or of
one of the languages in general use in that locality, also in the characters of that language or of one of
those languages;
1
[(b) have its name engraved in legible characters on its seal;if any:]
(c) get its name, address of its registered office and the Corporate Identity Number along with
telephone number, fax number, if any, e-mail and website addresses, if any, printed in all its business
letters, billheads, letter papers and in all its notices and other official publications; and
(d) have its name printed on hundies, promissory notes, bills of exchange and such other
documents as may be prescribed:
Provided that where a company has changed its name or names during the last two years, it shall
paint or affix or print, as the case may be, along with its name, the former name or names so changed
during the last two years as required under clauses (a) and (c):
Provided further that the words "One Person Company" shall be mentioned in brackets below the
name of such company, wherever its name is printed, affixed or engraved.

RELEVANT RULES
8. Names which resemble too nearly with name of existing company.-
(1) A name applied for shall be deemed to resemble too nearly with the name of an existing company,
if, and only if, after comparing the name applied for with the name of an existing company by
disregarding the matters set out in sub-rule (2), the names are same.
(2)The following matters are to be disregarded while comparing the names under sub-rule (1):-
(a) the words like Private, Pvt, Pvt., (P), OPC Pvt. Ltd., IFSC Limited, IFSC Pvt. Limited, Producer
Limited, Limited, Unlimited, Ltd, Ltd., LLP, Limited Liability Partnership, company, and company, & co,
& co., co., co, corporation, corp, corpn, corp or group;
(b) the plural or singular form of words in one or both names;
A.   Illustrations
(i)   Green Technology Ltd. is same as Greens Technology Ltd. and Greens Technologies Ltd.
(ii)  Pratap Technology Ltd. is same as Prataps Technology Ltd. and Prataps Technologies Ltd.
(iii)  SM Computers Ltd. is not same as SMS Computers Ltd.
(c) type and case of letters, spacing between letters, punctuation marks and special characters used
in one or both names;
B. Illustrations
(i)   ABC Ltd. is same as A.B.C. Ltd. and A B C Ltd.
(ii)  TeamWork Ltd. is same as Team@Work Ltd. and Team-Work Ltd.
(d) use of different tenses in one or both names
C. Illustrations
(i)   Ascend Solutions Ltd. is same as Ascended Solutions Ltd. and Ascending Solutions Ltd.
(ii)  Speak English Solutions Limited is same as Spoken English Solutions Limited.
(e) use of different phonetic spellings including use of misspelled words of an expression;
D. Illustrations
(i)  Chemtech Ltd. is same as Chemtec Ltd., Chemtek Ltd., Cemtech Ltd., Cemtek Ltd., Kemtech Ltd.,
and Kemtek Ltd.
(ii)  Bee Kay Ltd is same as BK Ltd, Be Kay Ltd., B Kay Ltd., Bee K Ltd., B.K. Ltd. and Beee Kay Ltd. 
(f) use of host name such as ‘www’ or a domain extension such as ‘net’, ‘org’, ‘dot’ or ‘com’ in one or
both names;
E. Illustrations
(i)   Ultra Solutions Ltd. is same as Ultrasolutions.com Ltd.
(ii)  Supreme Ultra Solutions Ltd. is not the same as Ultrasolutions.com Ltd.
(g) the order of words in the names
F. Illustrations
(i)   Ravi Builders and Contractors Ltd. is same as Ravi Contractors and Builders Ltd.
(ii)  Ravi Builders and Contractors Limited is not the same as Ravi Shankar Builders and Contractors
Limited.
(h) use of the definite or indefinite article in one or both names
G. Illustrations
(i)   Congenial Tours Ltd. is same as A Congenial Tours Ltd. and The Congenial Tours Ltd.
(ii)  Isha Industries Limited is not the same as Anisha Industries Limited.
(i) a slight variation in the spelling of the two names including a grammatical variation thereof;
H. Illustrations
(i)   Color Technologies Ltd. is same as Colour Technologies Ltd.
(ii)  Disc Solutions Ltd. is same as Disk Solutions Ltd. but it is not same as Disco Solutions Ltd.
(j) complete translation or transliteration, and not part thereof, of an existing name, in Hindi or in
English;
I. Illustrations
(i)   National Electricity Corporation Ltd. is same as Rashtriya Vidyut Nigam Ltd.
(ii)  Hike Construction Ltd. is not the same as Hike Nirman Ltd.
(k) addition of the name of a place to an existing name, which does not contain the name of any
place;
J. Illustrations
(i)   If Salvage Technologies Ltd. is an existing name, it is same as Salvage Technologies Delhi Ltd
and Salvage Delhi Technologies Ltd.
(ii)  Retro Pharmaceuticals Ranchi Ltd. is not the same as Retro Pharmaceuticals Chennai Ltd.
(l) addition, deletion, or modification of numerals or expressions denoting numerals in an existing
name, unless the numeral represents any brand;
K. Illustrations
(i)   Thunder Services Ltd is same as Thunder11 Services Ltd and OneThunder Services Ltd
(ii)  Style Garments11 Ltd. is same as Style Garments Ltd and Style12 Garments Ltd.
(iii)  One 11 Power Equipment Ltd is not the same as One Power Equipment Ltd, if One 11 represents
a brand:
Provided that clauses (f) to (h) and clauses (k) and (l) shall not be disregarded while
comparing the names, if a no objection by way of a Board resolution has been provided by an
existing company.
8A. Undesirable names.- 
(1) The name shall be considered undesirable, if-
(a) it is prohibited under the provisions of section 3 of the Emblems and Names (Prevention and
Improper Use) Act, 1950 (12 of 1950), unless a previous permission has been obtained under that
Act;
(b) save as provided in section 35 of the Trade Marks Act, 1999 (47 of 1999), the name includes a
trade mark registered under the Trade Marks Act, 1999  and the rules framed thereunder in the same
class of goods or services in which the activity of the company is being carried out or is proposed to
be carried out,  unless the consent of the owner or applicant for registration, of the trade mark, as the
case may be, has been obtained and produced by the promoters;
(c) it includes any word or words which are offensive to any section of the people;
(d) the proposed name is identical with or too nearly resembles the name of a limited liability
partnership:
8B. Word or expression which can be used only after obtaining previous approval of Central
Government. In terms clause (b) of sub-section (3) of section 4, the following words and
combinations thereof shall not be used in the name of a company in English or any of the languages
depicting the same meaning unless the previous approval of the Central Government has been
obtained for the use of any such word or expression:-
(a) Board;
(b) Commission;
(c) Authority;
(d) Undertaking;
(e) National;
(f) Union;
(g) Central;
(h) Federal;
(i) Republic;
(j) President;
(k) Rashtrapati;
(l) Small Scale Industries;
(m) Khadi and Village Industries Corporation;
(n) Financial Corporation and the like;
(o) Municipal;
(p) Panchayat;
(q) Development Authority;
(r) Prime Minister or Chief Minister;
(s) Minister;
(t) Nation;
(u) Forest corporation;
(v) Development Scheme;
(w) Statute or Statutory;
(x) Court or Judiciary;
(y) Governor;
(z) the use of word Scheme with the name of Government (s),  State, India, Bharat or any
Government authority or in any manner resembling with the schemes launched by Central, State or
local Governments and authorities; and
(za) Bureau.]
9.Reservation of Name  
An application for reservation of name shall be made through the web service available at
www.mca.gov.in by using [form RUN](Reserve Unique Name) along with fee as provided in the
Companies (Registration offices and fees) Rules, 2014, which may either be approved or rejected, as
the case may be, by the Registrar, Central Registration Centre after allowing re--submission of such
application within fifteen days for rectification of the defects,if any.]

2. Registered office clause

Section 4 (b) the State in which the registered office of the company is to be situated;

Section 12. 2&6[(1) A company shall, 10[within thirty days of its incorporation] and at all times thereafter,
have a registered office capable of receiving and acknowledging all communications and notices as
may be addressed to it.]
(2) The company shall furnish to the Registrar verification of its registered office within a period
of 3&7[thirty days] of its incorporation in such manner as may be prescribed.

(4) Notice of every change of the situation of the registered office, verified in the manner prescribed,
after the date of incorporation of the company, shall be given to the Registrar 11[within thirty days] of
the change, who shall record the same.
 [(5) Except on the authority of a special resolution passed by a company, the registered office of the
5&9

company shall not be changed,—

(a) in the case of an existing company, outside the local limits of any city, town or village where such
office is situated at the commencement of this Act or where it may be situated later by virtue of a
special resolution passed by the company; and
(b) in the case of any other company, outside the local limits of any city, town or village where such
office is first situated or where it may be situated later by virtue of a special resolution passed by the
company:
Provided that no company shall change the place of its registered office from the jurisdiction of one
Registrar to the jurisdiction of another Registrar within the same State unless such change is
confirmed by the Regional Director on an application made in this behalf by the company in the
prescribed manner.]

Relevant Rules
25 Verification of Registered Office
(1) The verification of the registered office shall be filed in Form No.INC.22 along with the fee, and
(2) There shall be attached to said Form, any of the following documents, namely :-
(a) the registered document of the title of the premises of the registered office in the name of the
company; or
(b) the notarized copy of lease or rent agreement in the name of the company along with a copy of
rent paid receipt not older than one month;
(c) the authorization from the owner or authorized occupant of the premises along with proof of
ownership or occupancy authorization, to use the premises by the company as its registered office;
and
(d) the proof of evidence of any utility service like telephone, gas, electricity, etc. depicting the address
of the premises in the name of the owner or document, as the case may be, which is not older than
two months.
27 Notice and Verification of Change of Situation of the Registered Office.-
The notice of change of the situation of the registered office and verification thereof shall be filed
in Form No.INC.22 along with the fee and shall be attached to the said form, the similar documents
and manner of verification as are specified for verification of Registered office on incorporation in
terms of sub-section (2) of section 12.

3-OBJECT CLAUSE
(c) the objects for which the company is proposed to be incorporated and any matter
considered necessary in furtherance thereof

The Ashbury Railway Carriage Co. was incorporated under the Companies Act, 1862,
with a memorandum of association authorising it "to make, or sell, or lend on hire railway
carriages and wagons and all kinds of railway plant, fittings, machinery and rolling stock;
to carry on the business of mechanical engineers and general contractors; to purchase,
lease, work and sell mines, minerals, land and buildings; to purchase and sell as
merchants, timber, coal, metal or other materials and to buy and sell any such materials
on commission or as agents."
The House of Lords held ultra vires an undertaking by the company to finance the
construction of a railway line in Belgium. All fourteen judges who heard these
proceedings 8 agreed, as a matter of construction, that the term "general contractors" in
the company's objects clause had to be interpreted eiusdem generis and did not therefore
cover the transaction in question. Nor was it relevant that all the shareholders of the
company approved the transaction. A transaction that was ultra vires was incapable of
ratification.

4-LIABILITY CLAUSE
Section 4 (d) the liability of members of the company, whether limited or unlimited, and also state,—
(i) in the case of a company limited by shares, that liability of its members is limited to the amount
unpaid, if any, on the shares held by them; and
(ii) in the case of a company limited by guarantee, the amount up to which each member undertakes
to contribute—
(A) 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 as may have been contracted before he ceases to be a member, as the case
may be; and
(B) to the costs, charges and expenses of winding-up and for adjustment of the rights of the
contributories among themselves.

5-Capital Clause

Section 4 (e) in the case of a company having a share capital,—

(i) the amount of share capital with which the company is to be registered and the division thereof into
shares of a fixed amount and the number of shares which the subscribers to the memorandum agree
to subscribe which shall not be less than one share; and
(ii) the number of shares each subscriber to the memorandum intends to take, indicated opposite his
name;
(f) in the case of One Person Company, the name of the person who in the event of death of the
subscriber shall become the member of the company.

• Authorized Share Capital-

Ø Section 2(8) authorized capital" or "nominal capital" means such capital as is
authorized by the memorandum of a company to be the maximum amount of share
capital of the company.

Ø Issued Share Capital

Section 2(50)"issued capital" means such capital as the company issues from time to
time for subscription.

Ø Subscribed Capital-
"subscribed capital" means such part of the capital which is for the time being
subscribed by the members of a company
 Ø Paid up capital
• The amount of money that has actually been paid.
• If the issued share capital is equal to the paid-up share capital amount, shareholders
of the Company have fully paid for the shares.
• If the issued share capital is higher than the paid-up share capital, the shareholders
of the Company have not fully paid for the shares (the Company can request the
shareholders to make full payment as and when required)
• Example- If the subscribed share capital is Rs. 25 lakh, and price of one share is Rs.
100 and all the shareholders have only paid, Rs. 50 per share- then the paid up
capital is 12.5 lakh

………………………………………………………………………………………………………………………
What is AOA?

Section 2(5) "articles" means the articles of association of a company as originally

framed or as altered from time to time or applied in pursuance of any previous
company law or of this Act;

• They contain rules for internal management of a Company

Section 5. (1) The articles of a company shall contain the regulations for management of the
company.
(2) The articles shall also contain such matters, as may be prescribed:
• Provided that nothing prescribed in this sub-section shall be deemed to prevent a company
from including such additional matters in its articles as may be considered necessary for its
management.
• (3) The articles may contain provisions for entrenchment to the effect that specified provisions
of the articles may be altered only if conditions or procedures as that are more restrictive than
those applicable in the case of a special resolution, are met or complied with.
• (4) The provisions for entrenchment referred to in sub-section (3) shall only be made either on
formation of a company, or by an amendment in the articles agreed to by all the members of
the company in the case of a private company and by a special resolution in the case of a
public company.
• (5) Where the articles contain provisions for entrenchment, whether made on formation or by
amendment, the company shall give notice to the Registrar of such provisions in such form
and manner as may be prescribed.
• (6) The articles of a company shall be in respective forms specified in Tables F, G, H, I and J
in Schedule I as may be applicable to such company.
• (7) A company may adopt all or any of the regulations contained in the model articles
applicable to such company.
• (8) In case of any company, which is registered after the commencement of this Act, in so far
as the registered articles of such company do not exclude or modify the regulations contained
in the model articles applicable to such company, those regulations shall, so far as applicable,
be the regulations of that company in the same manner and to the extent as if they were
contained in the duly registered articles of the company.
• (9) Nothing in this section shall apply to the articles of a company registered under any
previous company law unless amended under this Act.
They establish a contract between the company and the members and between the members inter
se- Section 10

Articles of Association of a company are not ‘law’ and do not have the force of law- (Section
6)
Notified Date of
Act to Override Memorandum, Articles, etc. Section: 01/04/2014
6. Save as otherwise expressly provided in this Act—
(a) the provisions of this 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 shall, to the extent
to which it is repugnant to the provisions of this Act, become or be void, as the case may be.

• if any provision of the articles or the memorandum is contrary to any provisions of any law, it
will be invalid.
• Any provision in a company’s articles will be ineffective if it is in conflict with the memorandum
or the Companies Act
• For example,
1. statutory rights of members under the Companies Act  cannot be nullified through articles.
2. right to apply for winding up, (Peveril Gold Mines Ltd., Re)
3. articles prohibiting members from proceeding against the company for enforcement of their
individual membership rights. (St. Johnson Football Club Ltd. v. Scottish Football Assn. Ltd.,)
4. right to information about the affairs of the company e.g.,  as to reserve fund and accounts
(Newton v. Birmingham Small Arms Co)

Articles in relation to Memorandum

• The articles of a company are subordinate to and controlled by the memorandum of association
• If there be any ambiguity in the memorandum, the articles may be used to explain it but not so as to
extend the objects
• The Rule of Construction- The memorandum and the articles must be read together at all events so far
as may be necessary to explain any ambiguity appearing in the terms of the memorandum, or to
supplement it upon any matter as to which it is silent
• Articles going beyond the memorandum are ultra vires
……………………………………………………………………………………………………………………………………

ALTERATION OF MEMORANDUM AND ARTICLES

Notified Date of
Alteration of Memorandum Section: 01/04/2014
13. (1) Save as provided in section 61, a company may, by a special resolution and after complying
with the procedure specified in this section, alter the provisions of its memorandum.
(2) Any change in the name of a company shall be subject to the provisions of sub-sections (2) and
(3) of section 4 and shall not have effect except with the approval of the Central Government in
writing:
Provided that no such approval shall be necessary where the only change in the name of the
company is the deletion therefrom, or addition thereto, of the word "Private", consequent on the
conversion of any one class of companies to another class in accordance with the provisions of this
Act.
(3) When any change in the name of a company is made under sub-section (2), the Registrar shall
enter the new name in the register of companies in place of the old name and issue a fresh certificate
of incorporation with the new name and the change in the name shall be complete and effective only
on the issue of such a certificate.

(4) The alteration of the memorandum relating to the place of the registered office from one State to
another shall not have any effect unless it is approved by the  #Central Government on an application
in such form and manner as may be prescribed.

(5) The  #CentralGovernment shall dispose of the application under sub-section (4)

within a period of sixty days and before passing its order may satisfy itself that the
alteration has the consent of the creditors, debenture-holders and other persons
concerned with the company or that the sufficient provision has been made by the
company either for the due discharge of all its debts and obligations or that adequate
security has been provided for such discharge.
(6) Save as provided in section 64, a company shall, in relation to any alteration of its memorandum,
file with the Registrar—
(a) the special resolution passed by the company under sub-section (1);
(b) the approval of the Central Government under sub-section (2), if the alteration involves any
change in the name of the company.
(7) Where an alteration of the memorandum results in the transfer of the registered office of a
company from one State to another, a certified copy of the order of the Central Government approving
the alteration shall be filed by the company with the Registrar of each of the States within such time
and in such manner as may be prescribed, who shall register the same, and the Registrar of the State
where the registered office is being shifted to, shall issue a fresh certificate of incorporation indicating
the alteration.

(8) A company, which has raised money from public through prospectus and still has any unutilised
amount out of the money so raised, shall not change its objects for which it raised the money through
prospectus unless a special resolution is passed by the company and—
(i) the details, as may be prescribed, in respect of such resolution shall also be published in the
newspapers (one in English and one in vernacular language) which is in circulation at the place where
the registered office of the company is situated and shall also be placed on the website of the
company, if any, indicating therein the justification for such change;
(ii) the dissenting shareholders shall be given an opportunity to exit by the promoters and
shareholders having control in accordance with regulations to be specified by the Securities and
Exchange Board.
(9) The Registrar shall register any alteration of the memorandum with respect to the objects of the
company and certify the registration within a period of thirty days from the date of filing of the special
resolution in accordance with clause (a) of sub-section (6) of this section.

(10) No alteration made under this section shall have any effect until it has been registered in
accordance with the provisions of this section.
(11) Any alteration of the memorandum, in the case of a company limited by guarantee and not
having a share capital, purporting to give any person a right to participate in the divisible profits of the
company otherwise than as a member, shall be void.

Notified Date of
Alteration of Articles Section: 01/04/2014
14. (1) Subject to the provisions of this Act and the conditions contained in its memorandum, if any, a
company may, by a special resolution, alter its articles including alterations having the effect of
conversion of—
(a) a private company into a public company; or
(b) a public company into a private company:
Provided that where a company being a private company alters its articles in such a manner that they
no longer include the restrictions and limitations which are required to be included in the articles of a
private company under this Act, the company shall, as from the date of such alteration, cease to be a
private company:

[ [Provided further that any alteration having the effect of conversion of a public company into a
5 4[1

private company shall not be valid unless it is approved by an order of the Central Government on an
application made in such form and manner as may be prescribed:

Provided also that any application pending before the Tribunal, as on the date of commencement of
the Companies (Amendment) Ordinance, 3[2019], shall be disposed of by the Tribunal in
accordance with the provisions applicable to it before such commencement.]]]

*(2) Every alteration of the articles under this section and a copy of the order of the  [ [Central
4 2

Government]] approving the alteration as per sub-section (1) shall be filed with the Registrar, together
with a printed copy of the altered articles, within a period of fifteen days in such manner as may be
prescribed, who shall register the same.
(3) Any alteration of the articles registered under sub-section (2) shall, subject to the provisions of this
Act, be valid as if it were originally in the articles.

Proviso to Section 14 has to be read with Section 2(68)

2(68) "private company" means a 8[company having a minimum paid-up share capital 4[Omitted] as
may be prescribed, and which by its articles],—
(i) restricts the right to transfer its shares;

(ii) except in case of One Person Company, limits the number of its members to two
hundred

(iii) prohibits any invitation to the public to subscribe for any securities of the
company
…………………………………………………………………………………………………..
Notified Date of
Effect of Memorandum and Articles Section: 01/04/2014
10. (1) Subject to the provisions of this Act, the memorandum and articles shall, when registered, bind
the company and the members thereof to the same extent as if they respectively had been signed by
the company and by each member, and contained covenants on its and his part to observe all the
provisions of the memorandum and of the articles.
(2) All monies payable by any member to the company under the memorandum or articles shall be a
debt due from him to the company.

Ø Members bound to Company-Each member must observe the provisions of the AoA
Ø The company is bound to members- Any member can restrain a company from spending its
funds of ultra vires transaction.
Memorandum and Articles have contractual effect only in respect of matters pertaining to
membership rights and not in respect of outsider rights.
Ø Members are bound to other members- Eg. Pre-emptive rights

…………………………………………………………………………………………………..
Private agreement between members as to right to transfer
V.B. Rangaraj vs V.B. Gopalakrishnan And Others ,1992
• The only permissible restrictions on transferability are those contained in the
company’s articles of association
• An additional restriction not contained in the articles but in a private
agreement between two shareholders which places further obstacles in the
way of transferability is not binding either on the company or on the
shareholders, Rangaraj (V.B.) v. V.B. Gopalakrishnan,  (1992)

World Phone India Pvt. Ltd v. WPI Group Inc USA, (2013)
• The question to be asked is whether the provisions of an agreement,
that are not inconsistent with the Act, but are also not part of the AoA,
can be said to be applicable.

• Unlike the case of V.B. Rangaraj v. V.B. Gopalakrishnan, the present case
does not involve any restriction on the transfer of shares but the existence of
an affirmative vote which cannot be recognized without a corresponding
amendment to the AoA.