Incorporation of Company and Matters Incidental Thereto

Companies Act, 2013 (Chapter II, Sections 3–22) read with the Companies (Incorporation) Rules, 2014, as amended — May 2026 syllabus. Section numbers refer to the Companies Act, 2013 unless stated.

How the chapter fits together

This chapter takes a company from idea to legal person and then wires up the incidental machinery. Learn it as three blocks plus the doctrines:

Formation and incorporation — Sections 3 to 9

Section 3 — formation. Minimum members: public 7, private 2, OPC 1; companies are classified by liability (an IFSC company can only be limited by shares). Section 3A bites when membership falls below the minimum and business continues for more than 6 months with the member’s knowledge — every such member becomes severally liable. Trap: liable only for debts contracted after the 6-month period elapses, not for all debts since the reduction.

The OPC nominee is named in the MOA with prior written consent (INC-4) and becomes the member on the member’s death or incapacity. A minor cannot be nominee, and a change of nominee is not an alteration of the MOA. The timeline chain: 15 days to name a new nominee after a withdrawal of consent → 15 days for the new member (ex-nominee) to nominate afresh → 30 days for the company to file the notice (INC-4) with the Registrar.

Section 7 — incorporation runs through 9 steps on SPICe+ (INC-32): the Certificate of Incorporation issues in INC-11 (PAN mentioned) and the ROC allots the CIN. The INC-9 declaration confirms no conviction or fraud in the preceding 5 years. Furnishing false or incorrect information invites fraud action under Section 447; if the incorporation itself is later found fraudulent, promoters, first directors and declarants face Section 447 and the NCLT may order unlimited liability, removal, or winding up [Sec 7(7)].

The CoI is evidence of registration — not conclusive proof of pre-incorporation compliance or of the legality of objects [Sec 7(6)/(7)] (under the old law it was conclusive proof of everything). Illegal objects leave only one remedy: winding up.

Section 9 — effect of registration. From the date of incorporation the company is a body corporate with perpetual succession, capable of contracting and suing in its own name.

Memorandum, Articles and alterations — Sections 4 to 17

The MOA [Sec 4] is the charter of the company, with 7 clauses: Name, Situation, Objects, Liability, Capital, Subscription, Nomination. Its statutory forms are Tables A–E of Schedule I (A = shares, B = guarantee without capital, C = guarantee with capital, D = unlimited without capital, E = unlimited with capital) [Sec 4(6)].

Name rules cluster inside Section 4:

The AOA [Sec 5] are the internal regulations — a contract inter se (Rules 10–11). Model Articles are Tables F–J of Schedule I, deemed included unless excluded [Sec 5(6)–(9)].

Section 6 — the Act overrides the MOA, AOA, agreements and resolutions: contrary provisions are void. The saving clause “save as otherwise provided” preserves cases where the Act itself gives the MOA/AOA superiority — e.g., Section 47 operating subject to the AOA for a private company.

Section 10 — contractual force. The MOA/AOA bind member↔company↔member — Borland’s Trustee, Wood v Odessa Waterworks, Rayfield v Hands — but create no contract with outsiders (Browne v La Trinidad, an absolute rule). Money payable by a member under them is a debt due to the company. Related trap: in a guarantee company without share capital, a provision giving profit-participation rights to a non-member is void [Sec 4(7)/13(11)].

The alteration machinery:

• Alter MOA [Sec 13] — special resolution; covers name (CG(ROC) approval via INC-24, fresh certificate INC-25), registered office, and objects (ROC certifies the objects alteration within 30 days [13(9)]). CG(ROC) approval is not needed for the mere addition/deletion of “Private” on class conversion. A name change is barred if annual returns or financial statements are unfiled, or deposits/debentures remain unpaid.
• Rectify name [Sec 16] — CG(RD) directs a change where the name is identical/resembling — suo motu, or on a trademark owner’s application within 3 years; company complies by ordinary resolution within 3 months and notifies the Registrar within 15 days.
• Alter AOA [Sec 14] — special resolution; a public↔private conversion needs RD approval — apply in RD-1 within 60 days of the special resolution; file the alteration in INC-27 within 15 days.
• Note alterations [Sec 15] — every copy issued must reflect the change; penalty ₹1,000 per copy in default.
• Copies to members [Sec 17] — send the MOA/AOA within 7 days of a member’s request.

The doctrines — ultra vires, constructive notice, indoor management

Ultra vires. Acts beyond the MOA’s objects are void and unratifiable — even unanimous shareholder ratification cannot validate them (Ashbury Railway Carriage & Iron Co v Riche). Altering the objects clause widens capacity prospectively only — never retrospective validation. But keep the three carve-outs straight: acts ultra vires the directors’ authority (within the objects) are ratifiable by the company; acts beyond the Articles (within the MOA) are ratifiable by shareholders; acts incidental or consequential to the objects are valid, not ultra vires at all.

Constructive notice. Because the MOA/AOA are public documents (Sec 399, inspectable electronically), outsiders are deemed aware of their contents — Ernest v Nicholls; Kotla Venkataswamy. The doctrine is criticised as “unreal”.

Indoor management (Turquand). An outsider dealing with the company may presume internal proceedings were complied with — Royal British Bank v Turquand. It is an EXCEPTION to constructive notice — not an extension or alternative (classic MCQ). Its five exceptions, mnemonic KNiFE-A:

Registered office, commencement and incidental provisions — Sections 12, 10A, 18 to 22

Registered office [Sec 12]. A physical office (not a P.O. box) capable of receiving service, established within 30 days of incorporation (60 days for IFSC companies); it determines domicile and jurisdiction. Verification goes to the Registrar [12(2)], any change is notified in INC-22 within 30 days [12(4)], and if the name changed within the last 2 years, the old name(s) must also be painted/printed alongside [12(3)]. Default: ₹1,000/day, capped at ₹1,00,000 [12(8)].

Commencement of business [Sec 10A]. Applies to post-2019-Ordinance companies with share capital. Twin conditions: Sec 12(2) verification of the registered office plus the INC-20A declaration within 180 days (certified by a CS/CA/CMA). Penalty trap: company pays a flat ₹50,000; the officer pays ₹1,000/day on actual delay days, capped at ₹1,00,000. Non-filing also triggers the Registrar’s power to strike off the name — simultaneous with the penalty.

Conversion [Sec 18]. Alter the MOA/AOA, register as the new class, obtain a fresh CoI — with no effect on pre-conversion debts. Do not confuse with Section 8 conversion, which is a specific detailed procedure (special resolution, INC-18, RD order, publication of INC-19).

Subsidiary holding shares [Sec 19]. A subsidiary cannot hold shares in its holding company (including through a nominee) — any such allotment or transfer is void. Three exceptions: (a) legal representative of a deceased member, (b) trustee, (c) a pre-existing shareholder before becoming a subsidiary — who may continue or reduce the holding but never increase it beyond the pre-subsidiary level. A court/Tribunal-sanctioned scheme of amalgamation is also permitted (Himachal Telematics). Voting rights exist only in the legal-representative/trustee capacity.

Service of documents [Sec 20].

A courier is distinguished by proof of delivery; electronic transmission means a record capable of retention, retrieval and review — and a message board posting is validly delivered upon posting. A meeting notice sent by post is deemed served 48 hours after posting; combined with 21 clear days for a general meeting notice (Sec 101), post the letter 23 days before the meeting. Nidhi modification: individual service only to members holding shares of more than ₹1,000 face value or more than 1% of paid-up capital; others are served via newspaper advertisement and the notice board.

Authentication [Sec 21]. Documents and contracts are signed by a KMP or an officer/employee authorised by the Board; for IFSC companies, “officer” reads “officer or any other person”.

Execution of bills and deeds [Sec 22]. Negotiable instruments need only the express or implied authority of a person acting on the company’s behalf; deeds are formal — common seal, or 2 directors, or a director + Company Secretary, or a power of attorney (the attorney’s seal binds the company). The section applies only where enforcement is sought against the company, not by it.

Winding-up cross-reference from the liability clause: List A contributories are members at winding up (primary liability); List B are members within the preceding 12 months — liable only if List A falls short.

Key timelines and penalties

Quick revision cards