Section 4: Companies Act- Incorporating companies and compliances in India
Updated: Feb 25
Section 4 of the Companies Act, 2013 deals with the requirements for the formation of a company, specifically the requirements for the name, registered office, and objects clause.
Name of the Company: Section 4(2) of the Companies Act requires that the name of the company must be unique and should not be identical or too similar to the name of any existing company or LLP. The name should also not be inappropriate or violate any trademarks or intellectual property rights. The Companies (Incorporation) Rules, 2014 provides additional guidelines for the approval and reservation of company names.
Registered Office: Section 4(3) of the Companies Act requires that every company must have a registered office in India to which all official communication and notices can be sent. The registered office must be capable of receiving and acknowledging all communications and notices as required by the Act. The Companies (Incorporation) Rules, 2014 provides additional guidelines for the registered office of the company.
Objects Clause: Section 4(1)(c) of the Companies Act requires that every company must have an objects clause in its memorandum of association. The objects clause defines the scope of the company's business activities and the purposes for which it was formed. The Companies (Incorporation) Rules, 2014 provides additional guidelines for the objects clause.
Relevant case laws and rules related to Section 4 of the Companies Act are:
In the case of In Re: Lotus Investment Co. Ltd., the Bombay High Court held that the name of the company must not be such as to mislead the public or give a false impression of the nature of the business or the objects of the company.
Rule 8 of the Companies (Incorporation) Rules, 2014 provides guidelines for the approval and reservation of names for the company. The rule specifies the criteria for determining whether a name is identical or too similar to the name of an existing company or LLP.
Rule 25 of the Companies (Incorporation) Rules, 2014 provides guidelines for the registered office of the company. The rule specifies the documents that must be filed with the Registrar of Companies when changing the registered office of the company.
Rule 6 of the Companies (Incorporation) Rules, 2014 provides guidelines for the objects clause in the memorandum of association. The rule specifies the format and contents of the objects clause.
Section 4(5) of the Companies Act requires that the memorandum of association must be in the prescribed format as per the Companies (Incorporation) Rules, 2014. The memorandum of association is a legal document that contains the fundamental details of the company, such as its name, registered office, objects, and liability of the members.
Section 4(6) of the Companies Act requires that the articles of association of the company must also be filed along with the memorandum of association. The articles of association contain the rules and regulations for the internal management and conduct of the company.
Section 4(7) of the Companies Act provides that any provision contained in the memorandum, articles, or any contract that seeks to restrict the company's power to alter its memorandum or articles shall be void. This means that the company has the power to amend its memorandum and articles of association by following the procedures laid down in the Companies Act.
Section 4(8) of the Companies Act provides that the memorandum and articles of association of a company, once registered, bind the company and its members to the same extent as if they had been signed and sealed by each member, and contain covenants on the part of each member to observe the provisions of the memorandum and articles.
Section 4(9) of the Companies Act provides that a company may change its name by passing a special resolution and obtaining approval from the Registrar of Companies. The company must also comply with the requirements prescribed in the Companies Act and the Companies (Incorporation) Rules, 2014.
Section 4(10) of the Companies Act provides that a company may have a common seal, which shall be affixed to any documents as required by the company's memorandum and articles of association. The affixation of the common seal must be in the presence of at least two directors or one director and one company secretary.
Section 4(11) of the Companies Act provides that a company may alter its objects clause by passing a special resolution and obtaining approval from the Tribunal. The alteration must be consistent with the provisions of the Companies Act and the company's memorandum of association.
Section 4(12) of the Companies Act provides that a company may issue preference shares, which carry preferential rights with respect to dividend, repayment of capital, or voting, as specified in the company's memorandum or articles of association.
Section 4(13) of the Companies Act provides that a company may alter its articles of association by passing a special resolution. The alteration must be consistent with the provisions of the Companies Act and the company's memorandum of association.
Section 4(14) of the Companies Act provides that any alteration to the memorandum or articles of association of a company shall not have any retrospective effect. Any contract or obligation entered into by the company before the alteration shall continue to be valid and enforceable.
Section 4(15) of the Companies Act provides that a company may change its name by passing a special resolution and obtaining approval from the Registrar of Companies. The new name must not be identical or too nearly resemble the name of an existing company, and must not be undesirable or offensive.
Section 4(16) of the Companies Act provides that a company may re-register itself as a company of a different type (e.g. from a private company to a public company) by passing a special resolution and obtaining approval from the Tribunal.
Relevant case laws and rules related to Section 4(5) and 4(6) of the Companies Act are:
In the case of Ashbury Railway Carriage and Iron Co. Ltd. v. Riche, the House of Lords held that the memorandum of association defines the scope of the company's activities, and any activities beyond the scope mentioned in the memorandum would be considered ultra vires (beyond the powers) of the company.
Rule 13 of the Companies (Incorporation) Rules, 2014 specifies the format and contents of the memorandum of association. The rule requires that the memorandum of association must be printed, divided into paragraphs, and signed by at least seven subscribers in the case of a public company, or two subscribers in the case of a private company.
Rule 14 of the Companies (Incorporation) Rules, 2014 specifies the format and contents of the articles of association. The rule requires that the articles of association must be printed, divided into paragraphs, and signed by each subscriber in the presence of at least one witness.
Relevant case laws and rules related to Section 4(7) and 4(8) of the Companies Act are:
In the case of Tata Engineering and Locomotive Co. Ltd. v. Registrar of Companies, the Supreme Court held that the provisions of the memorandum and articles of association of a company are the fundamental documents that govern the company's affairs, and any act that contravenes these provisions would be void.
Rule 15 of the Companies (Incorporation) Rules, 2014 provides that any alteration made to the memorandum or articles of association must be filed with the Registrar of Companies within 30 days of the alteration. Failure to do so may result in a penalty being imposed on the company.
Relevant case laws and rules related to Section 4(9) and 4(10) of the Companies Act are:
In the case of In re Shree Chamundi Mopeds Ltd., the High Court of Karnataka held that a company may change its name only if the new name is not identical or too similar to the name of any existing company or trademark.
Rule 29 of the Companies (Incorporation) Rules, 2014 prescribes the procedure for changing the name of a company. The rule requires that the company must obtain approval from the Registrar of Companies by filing Form INC-24, along with a copy of the special resolution and other prescribed documents.
Rule 36 of the Companies (Incorporation) Rules, 2014 prescribes the requirements for affixing the common seal. The rule requires that the company must have its name engraved on the common seal in legible letters, and the seal must be kept in the custody of a director or any other authorized person.
Relevant case laws and rules related to Section 4(11) and 4(12) of the Companies Act are:
In the case of M/s. Sidhpur Mills Co. Ltd. v. Commissioner of Income Tax, the Supreme Court held that the objects clause of a company's memorandum of association defines the company's capacity and powers, and any act outside the scope of the objects clause would be ultra vires the company and therefore void.
Rule 9 of the Companies (Incorporation) Rules, 2014 prescribes the procedure for altering the objects clause of a company. The rule requires that the company must file an application with the Tribunal in Form INC-23, along with the prescribed fee and other documents.
Section 55 of the Companies Act prescribes the provisions relating to preference shares. The section provides that the rights and restrictions attached to the preference shares must be specified in the memorandum or articles of association of the company.
Relevant case laws and rules related to Section 4(13) and 4(14) of the Companies Act are:
In the case of V.B. Rangarajulu v. Sahakari Sugars Ltd., the Supreme Court held that the articles of association of a company form a contract between the company and its members, and any alteration to the articles of association must be made in good faith and for the benefit of the company as a whole.
Rule 15 of the Companies (Incorporation) Rules, 2014 prescribes the procedure for altering the articles of association of a company. The rule requires that the company must file Form MGT-14 with the Registrar of Companies within 30 days of passing the special resolution for alteration of the articles.
In the case of Choksi Tube Co. Ltd. v. Mahesh Chandra Gupta, the Calcutta High Court held that any alteration to the memorandum or articles of association of a company shall not affect the rights of creditors or persons having contracts with the company entered into before the alteration.
Relevant case laws and rules related to Section 4(15) and 4(16) of the Companies Act are:
Rule 29 of the Companies (Incorporation) Rules, 2014 prescribes the procedure for changing the name of a company. The rule requires that the company must file Form INC-24 with the Registrar of Companies along with the prescribed fee and other documents.
In the case of In re: H.T. Media Limited, the Delhi High Court held that the power to approve the change of name of a company lies with the Registrar of Companies, and that the Registrar has the discretion to reject the proposed name if it does not comply with the provisions of the Companies Act.
Section 13 of the Companies Act prescribes the provisions relating to the alteration of the articles of association of a company in the case of a change in the company's name.
In summary, Section 4 of the Companies Act sets out the basic requirements for the formation of a company, including the name, registered office, and objects clause. The section also ensures that the company's name is unique, the registered office is capable of receiving official communications, and the objects clause defines the scope of the company's business activities. Companies must comply with these requirements to ensure that they are legally recognized and can operate in accordance with the law.
In conclusion, Section 4 of the Companies Act is a critical provision that governs the formation of a company in India. It lays down the requirements for the name, registered office, objects clause, memorandum of association, and articles of association of the company. Companies must ensure that they comply with these requirements and follow the procedures laid down in the Companies Act for any amendments to the memorandum or articles of association.
By Siddharth Dalmia
The StartUp Sherpa
+91-9971799250
dalmiasiddharth1994@gmail.com
