Section 15: Companies Act- Incorporating companies and compliances in India
Rule: Section 15(1) of the Companies Act, 2013 Rule: The Memorandum of Association (MoA) of a company must contain the fundamental clauses of the company, including its name, registered office, objects, and liability.
Rule: Section 15(2) of the Companies Act, 2013 Rule: The MoA must be in a prescribed form and signed by at least two subscribers who are individuals in case of a private company, and by at least seven subscribers who are individuals in case of a public company.
Rule: Section 15(3) of the Companies Act, 2013 Rule: The MoA must be accompanied by articles of association (AoA) signed by each subscriber of the MoA, which regulates the company's internal management and governance.
Case law: Ashbury Railway Carriage and Iron Co. Ltd. v. Riche (1875) Rule: The objects clause in the MoA is essential and restricts the company from carrying out any activities outside its defined objectives.
Case law: Attorney General v. Great Eastern Railway Co. (1880) Rule: The objects clause in the MoA must be construed strictly, and any activities outside the scope of the objects clause are ultra vires and invalid.
Rule: Section 15(4) of the Companies Act, 2013 Rule: Any person who subscribes to the MoA must provide their full name, address, occupation, and the number of shares they intend to take.
Rule: Section 15(5) of the Companies Act, 2013 Rule: If a company is limited by shares, the MoA must state the amount of share capital with which the company is registered and the division thereof into shares of a fixed amount.
Rule: Section 15(6) of the Companies Act, 2013 Rule: If a company is limited by guarantee, the MoA must state the amount of guarantee provided by each member and the total amount of the guarantee.
Rule: Section 15(7) of the Companies Act, 2013 Rule: The MoA and AoA can be altered by special resolution passed by the shareholders of the company, subject to the provisions of the Companies Act.
Rule: Section 15(8) of the Companies Act, 2013 Rule: Any alteration to the MoA or AoA must be registered with the Registrar of Companies within 30 days of passing the special resolution.
Case law: National Textile Workers' Union v. P.R. Ramakrishnan (1983) Rule: The court has the power to strike down any alteration to the MoA or AoA if it is not in the company's best interest or against public policy.
Rule: Section 15(9) of the Companies Act, 2013 Rule: The company must maintain a copy of the MoA and AoA at its registered office and make them available for inspection by any member of the company without any charge.
Rule: Section 15(10) of the Companies Act, 2013 Rule: Any person who subscribes to the MoA is deemed to have agreed to become a member of the company and is bound by the terms of the MoA and AoA.
Rule: Section 15(11) of the Companies Act, 2013 Rule: If a company is registered as a company limited by guarantee, its members are liable to contribute a specified amount towards the company's debts in the event of winding up.
Rule: Section 15(12) of the Companies Act, 2013 Rule: If a company is registered as a company limited by shares, its liability is limited to the unpaid amount on the shares held by its members.
Rule: Section 15(13) of the Companies Act, 2013 Rule: If a company alters its MoA or AoA, it must file a copy of the altered documents with the Registrar of Companies within 30 days of the date of the special resolution.
Rule: Section 15(14) of the Companies Act, 2013 Rule: If a company fails to file the altered MoA or AoA with the Registrar of Companies within 30 days of passing the special resolution, it will be liable to a penalty of up to Rs. 1 lakh.
Rule: Section 15(15) of the Companies Act, 2013 Rule: Any alteration to the MoA or AoA that is made in contravention of the provisions of the Companies Act or the rules made thereunder is void.
Case law: In Re Hindustan Lever Employees' Union (1995) Rule: A company's MoA cannot be amended to remove a provision that provides protection to its employees, as it would be against public policy.
Rule: Section 15(16) of the Companies Act, 2013 Rule: A company must have its MoA and AoA printed and divided into paragraphs and numbered consecutively.
Rule: Section 15(17) of the Companies Act, 2013 Rule: A company's MoA and AoA must be signed by each subscriber to the MoA in the presence of at least one witness who must attest the signature.
Rule: Section 15(18) of the Companies Act, 2013 Rule: If a company alters its MoA or AoA, it must issue a copy of the altered documents to every member who requests it within 7 days of the request.
Rule: Section 15(19) of the Companies Act, 2013 Rule: If a company alters its MoA or AoA, it must file a notice of the alteration with the Registrar of Companies within 30 days of the alteration.
Additionally, the MoA and AoA must be signed by each subscriber to the MoA in the presence of at least one witness who must attest the signature. The documents must also be printed, divided into paragraphs, and numbered consecutively.
In the case of Hindustan Lever Employees' Union, the court held that a provision in the MoA that provides protection to employees cannot be amended to remove such protection, as it would be against public policy. This emphasizes the importance of ensuring that alterations to the MoA or AoA are made in compliance with the provisions of the Companies Act and rules made thereunder.
Furthermore, if a company fails to file the altered MoA or AoA with the Registrar of Companies within 30 days of passing the special resolution, it will be liable to a penalty of up to Rs. 1 lakh. This highlights the need for companies to be prompt in filing the altered documents to avoid penalties.
In summary, the provisions of Section 15 of the Companies Act, 2013 are crucial in ensuring that the MoA and AoA of a company are maintained and altered in compliance with the provisions of the law. Companies must ensure that they follow the rules and case laws related to the MoA and AoA to avoid penalties and ensure compliance with the law.
By Siddharth Dalmia
The StartUp Sherpa
+91-9971799250
dalmiasiddharth1994@gmail.com
