Section 13 of Companies Act,1956

Section 3 of the Companies Act corresponds to section 13 of the 1956 Act and to the extend that both the provisions are similar the case law and commentary on Section 13 of the 1956 Act will be relevant to section 3 of the 2013 Act.

Name clause[Section 13(1)(a) of Companies Act,1956]

The name of every private company shall contain as its last words,the words “Private Limited”  and every public company shall contain as its last word “Limited”.The object is that the name of a company should indicate whether it is a private or a public company barring the cases covered by section 25 of the 1956 Act(now section 8 of the 2013 Act). It is an offence under Section 631 of the 1956 Act(now section 453 of the 2013 Act) to carry on any business or trade using the word “Limited” as a part of the name where the person using it is not so entitled.

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This kind of illegality does not invalidate contracts made in the ordinary course of business or trade.Approval of ROC is required for the proposed name or change of name of a company .The Registrar can refuse to register a company’s memorandum if the proposed name carries scandalous or obscene words .There are certain other words also which cannot be used without the permission of the Registrar like the word “university”.

Registered office [Section 13(1) (b) of Companies Act,1956]

Under clause (b) of sub-section (1) of section 13 of the 1956 Act,it is only necessary that the state in which the registered office is situated must be mentioned.Under Section 146 of the 1956 Act[now section 12(2) of the 2013 Act],notice of the exact place of the registered office must be given to the Registrar within 30 days after the date of incorporation.Besides the address,the name and address of the police station under whose jurisdiction the registered office is situated must also  be mentioned in the prescribed form.Once the state has been declared,the company can locate its office anywhere within the state and can then change the address from time to time within the city on giving notice  to the Registrar. The company can also shift to another city of the sane state after passing a special resolution of shareholders.

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Main and subsidiary object:Amendment by Act of 1965

in the place of clause (c) of sub-section (1),clauses (c),(d) and (e) of the section 13 of the 1956 Act have been substituted by  Section 5 of the Companies (Amendment )Act,1965.The notes on clauses stated:”This clause seeks to implement the recommendation of the  Daphtary -Sastri ) committee based on the observations contained in paragraphs 2 to 5 of the Commission’s Report.The purpose of the amendment is to provide for clear definitions of the main and subsidiary objects of a company in its Memorandum of Association”.

As an Act,which is beyond the powers of a company as specified in the memorandum,the practice has become common of making the objects in a company’s memorandum as wide as possible, in order to obviate the necessity of seeking consent of general meeting by special resolution when any new venture is contemplated.

The purpose of the amendment is to enable shareholders and others interested to have a clear idea of the main objects and other objects .This combined with the amendment of section 149 inserting a new provision therein requiring that both at the initial stage and at later stages ,whenever a  company embarks on any kind of business activity,sanction of the company by special resolution should be obtained,will affect on opportunity to shareholders to inform themselves of the actual business or business in which the company is engaged or proposes to engages.The amendment gives effect to the following recommendation in para 6 of part 2 of the report of Vivian Bose Commission of inquiry.

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1.The Act should be suitably amended to provide that every company shall clearly state it purposes and objects under two separate categories,

  • the principal and ancillary objects ,which the company intends at the time of its incorporation to pursue;and
  • all other objects which are separate from the principal and ancillary ones mentioned in item (a) above.

2.A provision should be made in the Act to the effect that the company shall not engage itself in any activities coming within the scope of Clause(b) unless such activities are sanctioned by a special resolution of the company in general meeting”.

Fully endorsing the above recommendation ,the Daphtary –  Sastri  Committee advised that “Statutory provision should be made ,therefore,whereby even at the initial stage,the shareholders have an opportunity to inform themselves of the principal industrial or business activity the company would embark upon.The promoters ,the signatories to the memorandum and first directors of a company should be required to obtain the approval of the company in a general meeting by a special resolution,of the decision of the directors recognized the company shall engage in,in the first instance.Thereafter,sanction of the company in general meeting by a special resolution should also be obtained,if the directors later on the propose to engage in new activities.Every such resolution shall be incorporated in all copies of the memorandum of the company Provision should  be made in the Capital issues(control)Act for informing the controller of the starting of a fresh business enterprise in accordance with the special resolutions.A copy of the special resolution enlarging the business of the company should be furnished to the Registrar of Companies of the state”.

Existing Companies not affected

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In giving the effects to the recommendations ,however the joint select committee  excluded existing companies from the operation of the new provisions for the following reasons -It was represented to the committee that if the existing companies were also to be required to re-draft their object clauses then that  would require the passing of special resolution under the Act,which would involve tremendous time and effect not commensurate with the results intended.The committee,therefore,feel that this clause should be amended to provide that the provisions of existing clause (c)of the section 13 of the Act should Continue to apply to Companies in existence  immediately before the commencement of the Companies (Amendment) Act,1965 and the provisions of the proposed new clause requiring the division of objects into

  • main objects and objects ancillary thereto  and;
  • other objects should apply only to new companies

Objects clause to be stated in three heads

The effect of the Amended clause (d) of sub section(1)of the section 13 of the 1956 Act is that in the case of Companies formed after the amendment of 1965 came into force,the objects clause is divided into”main objects” and ‘object incidental thereto’and ‘other objects ‘,the doing of any business pertaining to the ‘other objects’ being required to comply with the provisions of Section 149(2-A) of the 1956 Act.Under the 2013 Act,the objects clause of a company may have two categories of objects 1)the objects for which the company is proposed to be incorporated and 2)matters which are considered necessary in furtherance thereof.The objects were required to be stated under three heads under the 1956 Act.

  • main objects,
  • incidental and auxiliary objects and,
  • other objects

Department’s view

The Department of the Company affairs is of the view that having regard to the provisions of sub-section (1)(d) of section 13 of the Companies Act ,1956 the objects clauses of the Memorandum of Association of a company should be split up as follows:

  • Main objects to be pursued on its Incorporation. above
  • Objects incidental ,or ancillary to the attainment of the objects specified in (a) above;and
  • other objects not indicated in clause (a) and (b) above.

Such an arrangement,it is felt would be in a line with section 13(1)(d) of the companies Act,1956 and at the same time make clear that clause (d)(1) of the said sub-section included (1) objects other than main objects and also (2) objects incidental or ancillary thereto.

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