Compliance Checklist
Op EdsOP. ED.

Memorandum of Association is charter document of a company, a proof of the company’s identity. It defines the very purpose of a company’s existence. Every company whether for business or charitable purposes has to be incorporated with memorandum of association. Every member to the memorandum is assumed to have read the contents of the memorandum. A company cannot assume any business outside the purview of its memorandum. The memorandum contains the clause relating to the name of the company, registered office, objects, liability, capital and subscription.

In the lifetime of a company, it may so happen that there is a need to change the name of the company. Change of name of the company would be required due to change in business activity or operations of the company, change association with the holding company, change in name of the holding company (in India or abroad), etc. Under the Companies Act, 2013 (the Act), there is a specific procedure for changing the name of the company. This article provides a comprehensive compliance checklist for the procedure for change of name of the company (not by conversion of public company into private company or vice versa).

In Pioneer Protective Glass Fibre (P) Ltd. v. Fibre Glass Pilkington Ltd.[1], it was held that on a change of its name of a company, it does not stand dissolved nor any new company comes into existence. It follows that after change of its name, if any legal proceeding is commenced or instituted by a company in its old name, it would be a case of mere misdescription and not a case of initiation of a proceeding by a person not in existence.

In Wasava Tyres v. Printers (Mysore) Ltd.[2], it was held that the consequences of plaintiff company becoming a public limited company was of no consequence insofar as the rights and obligations of the company were concerned, nor did it render defective any legal proceedings by or against it, by virtue of the provisions of Section 23(3) of the Companies Act, 1956.

  1. Applicable provisions with respect to the name of company.—According to Section 4 of the Act, the name of the company should be, with the last word “limited” in the case of a public limited company, or the last words “private limited” in the case of a private limited company. However, the said provisions are not applicable to a company registered under Section 8 of the Act. 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.
  2. Applicable provisions w.r.t. change of name of company.—Any change in the name of a company shall be subject to the provisions of sub-sections (2) and (3) of Section 4 of the Act and shall not have effect except with the approval of the Central Government (powers delegated to Registrar of Companies) in writing. However, 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. Application for name availability.—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. Upon receipt of the said name application, the Registrar may, on the basis of information and documents furnished along with the application, reserve the name for a period of 20 days from the date of approval or such other period as may be prescribed. 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 60 days from the date of approval.

     According to Rule 9 of the Companies (Incorporation) Rules, 2014, an application for reservation of name shall be made through the web service available at <www.mca.gov.in> by using web service SPICe+ (Simplified pro forma for incorporating company electronically plus: INC-32), and for change of name by using web service 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 resubmission of such web form within 15 days for rectification of the defects, if any.

  1. Board approval.—The agenda for change of name of the company shall be first approved or transacted by the Board of Directors of the company. A Board meeting shall be duly convened in accordance with the provisions of Section 173 of the Act after giving proper notice, ensuring presence of quorum and passing of the resolution with requisite majority. According to Rule 29 of the Companies (Incorporation) Rules, 2014, the change of name shall not be allowed to a company which has not filed annual returns or financial statements due for filing with the Registrar or which has failed to pay or repay matured deposits or debentures or interest thereon. However, the change of name shall be allowed upon filing necessary documents or payment or repayment of matured deposits or debentures or interest thereon as the case may be. Along with the application, the Board may submit the said declaration to that effect.
  2. Application for name reservation.—After confirming the above conditions and passing a Board resolution to the effect, the Board of Directors shall make an application through the reserve unique name (RUN) facility provided by the Ministry of Corporate Affairs on its portal. Depending upon the reasons for change of name of the company, the company shall submit an application for change of name, resolution passed by Board of Directors for change of name, declaration w.r.t. compliance of Rule 29 of the Companies (Incorporation) Rules, 2014, details of change of name of holding company (if applicable), revised certificate of incorporation of holding company (if applicable), resolution of joint venture company (if applicable), NOC/resolution of person own the trade mark of the new name, note for change of name of the company (e.g. change in regulations under SEBI/ IRDA), etc.
  3. Some important pointers for making name application.—(a) the name stated in memorandum shall not be identical with or resemble too nearly to the name of an existing company registered under this Act or any previous company law; (b) the chosen name shall not constitute an offence under any law for the time-being in force; (c) the name is not undesirable in the opinion of the Central Government (powers delegated to Registrar of Companies); (d) the name should not contain any words or expressions which give an impression that the company is connected with or receives patronage from 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; (e) the name should not be prohibited under the Emblems and Names (Prevention of Improper Use) Act, 1950; (f) the name should not include a registered trade mark in its name, unless the owner of the trade mark has consented to usage of the same; (g) the name should not be identical to the name of LLP; and (h) the Board of Directors shall ensure compliance of Rules 8, 8-A, 8-B of the Companies (Incorporation) Rules, 2014.
  4. Name approval from Central Government.—An application for change of its name by an existing company, the Registrar may reserve the name for a period of 60 days from the date of approval. In this period, the company shall obtain the approval of the shareholders. In closely held private companies or public companies, the shareholders’ meeting can be called by passing a circular resolution or in other cases, a Board meeting may be called and convened. The name approval letter shall be placed before the Board and the shareholders’ meeting shall be called in accordance with the provisions of the Act and articles of association of the company.
  5. Shareholder Approval.—Any alteration in the memorandum of association requires the approval of the shareholders by way of a special resolution. Such approval may be sought either at an extraordinary general meeting or an annual general meeting. The said special resolution shall be filed through e-form MGT-14 within 30 days of passing of the resolution with the Registrar of Companies. The attachments to e-form MGT-14 shall be: (i) notice and explanatory statement of the shareholders’ meeting; (ii) shorter notice consent of shareholders, if applicable; (iii) an application, highlighting the reasons for change of name; (iv) name approval letter received from the MCA; (v) declaration by chairman, where the shareholder meeting was held through video conferencing and other audio visual means (if applicable); and (vi) copy of memorandum of association.
  6. Application to Central Government.—After filing e-form MGT-14 with the MCA, the company shall then file e-form INC-24 with the MCA. The said e-form relates to “application for approval of Central Government for change of name”. The attachments to e-form MGT-14 shall be: (i) notice and explanatory statement of the shareholders’ meeting; (ii) shorter notice consent of shareholders, if applicable; (iii) name approval letter received from MCA; (iv) certified true copy of minutes of the general meeting of the members where the special resolution was passed for change of name of the company; (v) declaration with respect to the compliance of Rule 29 of the Companies (Incorporation) Rules, 2014; and (vi) copy of any approval order obtained from the authorities concerned (such as RBI, IRDA, SEBI, etc.) or the Department concerned.
  7. Registration of the new name of the company.—After perusal of the e-forms and attachments, the Registrar of Companies shall register the new name of the company and will issue a fresh certificate of incorporation in form INC-25 for the company. The change in the name of the company shall be complete and effective only on the issue of such a certificate.
  8. Compliances post change of name.—After the name change procedure is complete i.e. after receiving the certificate of incorporation with the new name, following compliances shall be conducted; (i) each and every copy of the memorandum of association should reflect the change of name as approved by the Registrar of Companies; (ii) the company should print its new name along with the old name on all letterheads, bills, documents and records; (iii) new name along with old name needs to be displayed outside the registered office; (iv) all relevant bank accounts, licences from different authorities need to be updated with the new name; and (v) in case of a listed company, the old name and the new name should be displayed for a continuous period of 1 year from the date of name change on its website.

Gaurav N Pingle, Practising Company Secretary, Pune. He can be reached at gp@csgauravpingle.com.

[This article was first published in the Practical Lawyer Magazine, March Issue 2021. Republished with the kind permission of Eastern Book Company.]

[1] 1984 SCC OnLine Cal 171

[2] 2006 SCC OnLine Kar 679.

OP. ED.Practical Lawyer Archives

The objects clause of the memorandum of association defines the contours of the company’s business activities. It gives powers to undertake the business activities which as indicated, whereas those activities not part of the objects, cannot be undertaken by the Company, even if all the shareholders give consent to undertake such activity.

In Bhutoria Brothers (P) Ltd., In re[1], it was noted,

“11. Stating the objects of the Company in the memorandum is not a mere legal technicality, but is a necessity of great practical import. It is essential that the public who are called upon to subscribe to the capital of the company by purchase of its share should know clearly what are the objects for which they are paying and which they want to encourage. To give this necessary information, the statement of objects should be clear. It must not be too vague and too general and too wide for in that case it will defeat its very purpose and object. That is why it is not regarded permissible in law to have one solitary clause in the memorandum of association saying, “The Company will carry on all kinds of business” without stating what the kinds of business are.”

Subject to the compliance of Companies Act, a company can change or alter its object clause. Such change in object clause of the company would be increase the scope of business activity of the company/expand business operations, include an object clause of the company (which is not there), statutory purpose (for certain Insurance Regulatory and Development Authority (IRDA)/SEBI registered intermediaries, etc.). Such alteration would also include deletion of obsolete and redundant objects included in the memorandum of association of the company. This article relates to the compliance checklist for altering the object clause of the memorandum of association of the company.

1. Applicable provisions.— Sections 4, 10 and 13 of the Companies Act, 2013 (Act) and relevant provisions of the Companies (Incorporation) Rules, 2014 relates to object clause or changes in object clauses of the memorandum of association of the company.

  1. Contents of the “object clause”.—Under Section 4 of the Act, the object clause shall contain the objects for which the company is proposed to be incorporated and any matter considered necessary in furtherance thereof. Here, the relevant provisions are Schedule I to Act which Tables A, B, C, D and E.
  2. Approval of the Board of Directors.—The directors of the company shall primarily approve the proposal for altering object clause of the company. Such approval shall be subject to the approval of the shareholders and Central Government (in case of Section 8 companies). The necessary authorities shall also be specified in the resolution. The directors shall then call for shareholders meeting and authorise the director(s) or company secretary to issue notice to the shareholders. The resolution passed shall be accordingly drafted. The notice shall be issued in accordance with the Act, Rules made there under and the provisions of the articles of association of the company. The company shall ensure compliance of Sections 101 and 102 of the Act (according to the applicability and provisions in articles of association of the company). In case of public companies or private companies that are subsidiary of public companies, if the amendment to the object clause amounts to diversification of business activity, then in such cases, such companies shall file e-Form MGT-14[2] with the Registrar of Companies.
  3. Approval of shareholders.—The resolution for amending the memorandum of association for the objects of the company shall be placed before the shareholders of the company. Such approval can be obtained in general meeting or electronic voting or both, as the case may be. The approval of shareholders by passing a resolution by postal ballot may be obtained for alteration of the object clause in the memorandum of association and in the case of the company in existence immediately before the commencement of the Act (i.e. 1-4-2014), alteration of the main objects of the memorandum of association[3].
  4. Explanatory statement.—A statement setting out the following material facts concerning each item of special business (i.e. amendment to memorandum of association) to be transacted at a general meeting, shall be annexed to the notice calling such meeting, namely: (i) Nature of concern or interest, financial or otherwise, if any, in respect of each items of every director and the manager, every other key managerial personnel; and relatives of the said persons; and (ii) Any other information and facts that may enable members to understand the meaning, scope and implications of the items of business and to take decision thereon. Where any item of business refers to any document (i.e. memorandum of association, in this case), which is to be considered at the meeting, the time and place where such document can be inspected shall be specified in the explanatory statement.
  5. Section 8 companies.—A company registered under Section 8 of the Act shall not alter the provisions of its memorandum of association or articles of association (for any clauses) of the company, except with the previous approval of the Central Government (the powers have been delegated to the Registrar of Companies). An application for such alteration for Section 8 company may be filed by e-Form GNL – 1. Such application to the Central Government (i.e. ROC) can be made by obtaining the approval of Board of Directors. After the approval of Central Government (i.e. ROC), the amendment to the memorandum of association shall be placed before shareholders for their approval. The company shall then file e-Form MGT-14 with the Registrar of Companies[4];
  6. Change of name (for listed entities).—According to Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, a listed entity shall be allowed to change its name subject to compliance with the following conditions: (i) time period of at least 1-year has elapsed from the last name change; (ii) at least 50% of the total revenue in the preceding 1-year period has been accounted for by the new activity suggested by the new name; or (iii) the amount invested in the new activity/project is atleast 50% of the assets of the listed entity. SEBI has clarified that if any listed entity has changed its activities which are not reflected in its name, it shall change its name in line with its activities within a period of 6 months from the change of activities in compliance of provisions as applicable to change of name prescribed under the Act[5].
  7. Registration of alteration.—The Registrar of Companies shall register any alteration of the memorandum with respect to the objects of the company and certify the registration within a period of 30 days from the date of filing of the special resolution. The Registrar of Companies issues a certificate for registering the alteration of the object clause of the company.
  8. Validity of registration.—The alteration made under Section 13 of the Act shall not have any effect until it has been registered in accordance with the provisions of the Act.
  9. Compliances (post-alteration of object clause.—Each and every copy of the memorandum of association shall have the revised/new object clause of the company.

Gaurav N Pingle, Practising Company Secretary, Pune. He can be reached at gp@csgauravpingle.com.

[1] 1957 SCC OnLine Cal 229 : AIR 1957 Cal 593.

[2] S. 179(3)(h) read with S. 117(3)(g) of the Act.

[3] R. 22 of the Companies (Management and Administration) Rules, 2014.

[4] Under S. 117 of the Act.

[5] Regulation 45 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015.

Case BriefsTribunals/Commissions/Regulatory Bodies

Customs, Excise and Services Tax Appellate Tribunal (CESTAT): A Division Bench of Anil Choudhary (Judicial Member) and P. Anjani Kumar (Technical Member), allowed an appeal which involved the question that whether the appellant company was liable to pay service tax under the category of Business Auxiliary Service (BAS) for the period April 2007 to September 2011 or whether the activity of the appellant was not taxable under the principle of mutuality, being services provided to group/promoter companies.

The appellant company was a limited company by guarantee and not by having a share capital. The main objects of the appellant company, as per its Memorandum of Association, are to enable the members of the company to mutually avail and share common facilities and resources afforded by the company. The counsel for the appellant Ashok S. Hasija, contended that a Company limited by guarantee is an extensive mode used for organizing professionals traders, etc into an association for a general and non-business purpose; the appellant company had been incorporated to organize and share various common facilities and resources on the principle of mutuality; the transactions of the appellant were on the basis of no profit no loss basis; the appellant was an extended arm of the member companies. It was accepted principle that Service provided to one’s own self was not taxable; appellant company and the member companies being one unit, the nature of service so provided by the appellant to its members would that be a service to themselves; therefore, service tax could not be levied.

The Bench while allowing the appeal found that the companies have come together to share the resources and there was mutuality of interest of the promoters/member companies and that the show cause notice was not maintainable both on the principle of mutuality and on the fact of lack of consideration for such services alleged to have been rendered. [GMR Corporate Centre (P) Ltd. v. C.C.E. & C.S.T., 2020 SCC OnLine CESTAT 147 , decided on 29-07-2020]

Case BriefsHigh Courts

Karnataka High Court: B.V. Nagarathna, J., disposed of the petitions seeking the provisions of Sections 164(2) and 167(1)(a) and the proviso to Section 167(1)(a) of the Companies Act, 2013, to be held unconstitutional.

In the pertinent matter, the petitioner sought for declaring Section 164(2) of the Companies Act, 2013 (Act) and the press release dated 06-06-2017 vide Annexure-A as unconstitutional and in violation of the fundamental rights of the petitioner as guaranteed under the provisions of Part III of the Constitution. The petitioners further contended that there was an arbitrary exercise of power by the concerned respondent authority in disqualifying the petitioners as directors of the respective companies by giving retrospective operation to the aforesaid provisions of the Act. That the disqualification is not on account of any act/omission of the director per se, but due to the default committed by the company in which he is a director. Also, the consequence of the default so made was serious, almost penal and disproportionate to the same; therefore, it is in violation of Article 14 of the Constitution.

The respondents vehemently contended that the object of the provision is to keep away directors of defaulting companies from being reappointed as directors in the same company or other companies. It was further contended that if the said object and purpose is not given its complete effect and meaning, then it would be unviable. Moreover, holding the post of a director of a company is not pursuant to any fundamental right since it is a statutory right or one arising under the Memorandum of Association or Articles of Association of the company and thus contractual. Lastly, Section 164(2) of the Act is a reasonable restriction imposed in public interest vide Article 19(6) of the Constitution.

The Court while appreciating the assistance rendered by the respective counsels, was of the opinion that:

  1. Where the disqualification considering any financial year “prior to 01-04-2014 as well as subsequent thereto” while reckoning continuous period of three financial years under Section 164 (2)(a) of the Act, is made irrespective of whether the petitioners are directors of public companies or private companies, is bad in law.
  2. Writ petition would stand dismissed if the disqualification of the directors has occurred under the provisions of the 1956 Act in respect of the public companies.
  3. Directors would stand disqualified if the disqualification was on the basis of three continuous financial years subsequent to 01-04-2014, irrespective of whether the petitioners are directors of public companies or private companies among other things.

The Court further directed the respondents to restore the DIN of those directors whose disqualification has been quashed by the Court. And those petitioners who have challenged only the striking off of the companies in which they are directors have an alternative remedy of filing a proceeding before National Company Law Tribunal (NCLT) under Section 252 of the Companies Act, 2013.[Yashodhara Shroff v. Union of India, 2019 SCC OnLine Kar 682, decided on 12-06-2017]

Case BriefsHigh Courts

Uttaranchal High Court: A Division Bench of Ramesh Ranganathan, CJ and Manoj K. Tiwari, J. set aside in review an order passed by another Division Bench.

The Applicant contended that she was working as Principal of constituent College, which was later conferred “Deemed University” status and hence, Memorandum of Association was to be accorded with UGC Regulations, 2010. The applicant was part of the committee to deliberate on the proposed amendments. Further, she alleged that Division Bench held that she had acquiesced to the amendment; and could not, thereafter, contend that she should be continued contrary to the said amendment. The petitioner was denied relief on the ground of acquiescence.

Learned counsel for the applicant Tapan Singh, submitted that, applicant had merely participated in the meeting; she had not specifically agreed to the said amendment; even otherwise, her participation in the deliberations of the Committee meeting, was in her official capacity as a Principal of the College, who was a member of the Committee ex-officio; that cannot result in her vested right, to continue as a Principal, being deprived even without complying with the principles of natural justice; and the order under review necessitates being set aside.

Arvind Vashishta, learned Senior Counsel for respondent-University, submitted that the Division Bench was justified in its conclusion that petitioner had acquiesced to the amendment to the Memorandum of Association; and her appointment as a Coordinator, consequent on her designation as a Principal being withdrawn, was merely a consequence thereof.

The Court observed that, mere participation in a meeting convened to consider amendments doesn’t mean that the petitioner acquiesced and had waived her right to continue as a Principal. Hence, the order under review was set aside, and the writ petition was restored to file.[Dr Sangeeta Singh v. Gurukul Kangri University, Haridwar, 2019 SCC OnLine Utt 378, decided on 24-05-2019]