Section 4 of Companies Act, 2013 – Memorandum

  • Updated Till : January 17, 2017

SECTION 4. MEMORANDUM

[Effective from 1st April, 2014]

(1) The memorandum of a company shall state—

(a) the name of the company 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:

EXEMPTIONS

In case of a Government Company, the words “in the case of a public limited company, or the last words “Private Limited” in the case of a private limited company” shall be omitted vide Notifcation GSR 463 (E) dated 5th June, 2015

Provided that nothing in this clause shall apply to a company registered under section 8;

[12] [Provided further that a Specified IFSC private company shall have the suffix “International Financial Service Company” or “IFSC” as part of its name.]

(b) the State in which the registered office of the company is to be situated;

(c) the objects for which the company is proposed to be incorporated and any matter considered necessary in furtherance thereof;

[13][Provided that a Specified IFSC private company shall state its objects to do financial services activities, as permitted under the Special Economic Zones Act, 2005 read with the Special Economic Zones Rules, 2006 and any matter considered necessary in furtherance thereof, in accordance with license to operate, from International Financial Services Centre located in an approved multi services Special Economic Zone, granted by the Reserve Bank of India or the Securities and Exchange Board of India or the Insurance Regulatory and Development Authority of India.]

(d) the liability of members of the company, whether limited or unlimited, and also state,—

(i) in the case of a company limited by shares, that liability of its members is limited to the amount unpaid, if any, on the shares held by them; and

(ii) in the case of a company limited by guarantee, the amount up to which each member undertakes to contribute—

(A) to the assets of the company in the event of its being wound-up while he is a member or within one year after he ceases to be a member, for payment of the debts and liabilities of the company or of such debts and liabilities as may have been contracted before he ceases to be a member, as the case may be; and

(B) to the costs, charges and expenses of winding-up and for adjustment of the rights of the contributories among themselves;

(e) in the case of a company having a share capital,—

(i) the amount of share capital with which the company is to be registered and the division thereof into shares of a fixed amount and the number of shares which the subscribers to the memorandum agree to subscribe which shall not be less than one share; and

(ii) the number of shares each subscriber to the memorandum intends to take, indicated opposite his name;

(f) in the case of One Person Company, the name of the person who, in the event of death of the subscriber, shall become the member of the company.

(2) The name stated in the memorandum shall not—

(a) be identical with or resemble too nearly to the name of an existing company registered under this Act or any previous company law; or

(b) be such that its use by the company—

(i) will constitute an offence under any law for the time being in force; or

(ii) is undesirable in the opinion of the [Central Government][1].

(3) Without prejudice to the provisions of sub-section (2), 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.

(4) 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.

(5) (i) Upon receipt of an application under sub-section (4), the Registrar may, on the basis of information and documents furnished along with the application, reserve the name for a period of sixty days from the date of the application.

(ii) Where after reservation of name under clause (i), it is found that name was applied by furnishing wrong or incorrect information, then,—

(a) if the company has not been incorporated, the reserved name shall be cancelled and the person making application under sub-section (4) shall be liable to a penalty which may extend to one lakh rupees;

(b) if the company has been incorporated, the Registrar may, after giving the company an opportunity of being heard—

(i) either direct the company to change its name within a period of three months, after passing an ordinary resolution;

(ii) take action for striking off the name of the company from the register of companies; or

(iii) make a petition for winding up of the company.

(6) The memorandum of a company shall be in respective forms specified in Tables A, B, C, D and E in Schedule I as may be applicable to such company.

(7) Any provision in the memorandum or articles, in the case of a company limited by guarantee and not having a share capital, purporting to give any person a right to participate in the divisible profits of the company otherwise than as a member, shall be void.

Applicable Rules

Companies (Incorporation) Rules, 2014

[Effective from 1st April, 2014]

Rule 8. Undesirable names.—(1) In determining whether a proposed name is identical with another, the differences on account of the following shall be disregarded—

(a) the words like Private, Pvt, Pvt., (P), Limited, Ltd, Ltd., LLP, Limited Liability Partnership;

(b) words appearing at the end of the names – company, and company, co., co, corporation, corp, corpn, corp.;

(c) plural version of any of the words appearing in the name;

(d) type and case of letters, spacing between letters and punctuation marks;

(e) joining words together or separating the words does not make a name distinguishable from a name that uses the similar, separated or joined words;

(f) use of a different tense or number of the same word does not distinguish one name from another;

(g) using different phonetic spellings or spelling variations shall not be considered as distinguishing one name from another. Illustration (For example, P.Q. Industries limited is existing then P and Q Industries or Pee Que Industries or P n Q Industries or P & Q Industries shall not be allowed and similarly if a name contains numeric character like 3, resemblance shall be checked with ‘Three’ also;)

(h) misspelled words, whether intentionally misspelled or not, do not conflict with the similar, properly spelled words;

(i) the addition of an internet related designation, such as .com, .net, .edu, .gov, .org, .in does not make a name distinguishable from another, even where (.) is written as ‘dot’;

(j) the addition of words like New, Modern, Nav, Shri, Sri, Shree, Sree, Om, Jai, Sai, The, etc. does not make a name distinguishable from an existing name and similarly, if it is different from the name of the existing company only to the extent of adding the name of the place, the same shall not be allowed; such names may be allowed only if no objection from the existing company by way of Board resolution is submitted;

(k) different combination of the same words does not make a name distinguishable from an existing name, e.g., if there is a company in existence by the name of “Builders and Contractors Limited”, the name “Contractors and Builders Limited” shall not be allowed unless it is change of name of existing company;

(l) if the proposed name is the Hindi or English translation or transliteration of the name of an existing company or limited liability partnership in English or Hindi, as the case may be.

(2) (a) The name shall be considered undesirable, if—

(i) it attracts the provisions of section 3 of the Emblems and Names (Prevention and Improper Use) Act, 1950 (12 of 1950);

[(ii) it includes the name of a trade mark registered or a trade mark which is subject of an application for registration under the Trade Marks Act, 1999 and the rules framed thereunder unless the consent of the owner or applicant for registration, of the trade mark, as the case may be, has been obtained and produced by the promoters;][10]

(iii) it includes any word or words which are offensive to any section of the people;

(b) The name shall also be considered undesirable, if—

(i) the proposed name is identical with or too nearly resembles the name of a limited liability partnership;

(ii)[4] [***]

Provided that every name need not be necessarily indicative of the objects of the company, but when there is some indication of objects in the name, then it shall be in conformity with the objects mentioned in the memorandum;

(iii) the company’s main business is financing, leasing, chit fund, investments, securities or combination thereof, such name shall not be allowed unless the name is indicative of such related financial activities, viz., Chit Fund or Investment or Loan, etc.;

(iv) it resembles closely the popular or abbreviated description of an existing company or limited liability partnership;

(v) the proposed name is identical with or too nearly resembles the name of a company or limited liability partnership incorporated outside India and reserved by such company or limited liability partnership with the Registrar:

Provided that if a foreign company is incorporating its subsidiary company in India, then the original name of the holding company as it is may be allowed with the addition of word India or name of any Indian state or city, if otherwise available;

(vi) any part of the proposed name includes the words indicative of a separate type of business constitution or legal person or any connotation thereof e.g. co-operative, sehkari, trust, LLP, partnership, society, proprietor, HUF, firm, Inc., PLC, GmbH, SA, PTE, Sdn, AG etc.;

Explanation.—For the purposes of this sub-clause, it is hereby clarified that the name including phrase ‘Electoral Trust’ may be allowed for Registration of companies to be formed under section 8 of the Act, in accordance with the Electoral Trusts Scheme, 2013 notified by the Central Board of Direct Taxes (CBDT):

Provided that name application is accompanied with an affidavit to the effect that the name to be obtained shall be only for the purpose of registration of companies under Electoral Trust Scheme as notified by the Central Board of Direct Taxes;

(vii) the proposed name contains the words ‘British India’;

(viii) the proposed name implies association or connection with embassy or consulate or a foreign government;

(ix) the proposed name includes or implies association or connection with or patronage of a national hero or any person held in high esteem or important personages who occupied or are occupying important positions in Government;

(x) [5] [***]

Provided that existing company may use its abbreviated name as part of the name for formation of a new company as subsidiary or joint venture or associate company but such joint venture or associated company shall not have an abbreviated name only e.g. Delhi Paper Mills Limited can get a joint venture or associated company as DPM Papers Limited and not as DPM Limited:

Provided further that the companies well known in their respective field by abbreviated names are allowed to change their names to abbreviation of their existing name after following the requirements of the Act;

(xi) the proposed name is identical to the name of a company dissolved as a result of liquidation proceeding and a period of two years have not elapsed from the date of such dissolution:

Provided that if the proposed name is identical with the name of a company which is struck off in pursuance of action under section 248 of the Act, [or under section 560 of the Companies Act, 1956 (1 of 1956) ][2]then the same shall not be allowed before the expiry of twenty years from the publication in the Official Gazette being so struck off;

(xii) it is identical with or too nearly resembles the name of a limited liability partnership in liquidation or the name of a limited liability partnership which is struck off up to a period of five years;

(xiii) the proposed name include words such as ‘Insurance’, ‘Bank’, ‘Stock Exchange’, ‘Venture Capital’, ‘Asset Management’, ‘Nidhi’, ‘Mutual fund’ etc., unless a declaration is submitted by the applicant that the requirements mandated by the respective regulator, such as IRDA, RBI, SEBI, MCA etc. have been complied with by the applicant;

(xiv) the proposed name includes the word “State”, the same shall be allowed only in case the company is a government company;

(xv) the proposed name is containing only the name of a continent, country, state, city such as Asia limited, Germany Limited, Haryana Limited, Mysore Limited;

(xvi) the name is only a general one, like Cotton Textile Mills Ltd. or Silk Manufacturing Ltd., and not Lakshmi Silk Manufacturing Co. Ltd;

(xvii) [6] [***]

(xviii) the proposed name includes name of any foreign country or any city in a foreign country, the same shall be allowed if the applicant produces any proof of significance of business relations with such foreign country like Memorandum of Understanding with a company of such country:

Provided that the name combining the name of a foreign country with the use of India like India Japan or Japan India shall be allowed if, there is a government to government participation or patronage and no company shall be incorporated using the name of an enemy country.

Explanation.—For the purposes of this clause, enemy country means so declared by the Central Government from time to time.

(3) [7] [***]

(4) [8] [***]

(5) The applicant shall declare in affirmative or negative (to affirm or deny) whether they are using or have been using in the last five years, the name applied for incorporation of company or LLP in any other business constitution like Sole proprietor or Partnership or any other incorporated or unincorporated entity and if, yes details thereof and No Objection Certificate from other partners and associates for use of such name by the proposed Company or LLP, as the case may be, and also a declaration as to whether such other business shall be taken over by the proposed company or LLP or not.

(6) The following words and combinations thereof shall not be used in the name of a company in English or any of the languages depicting the same meaning unless the previous approval of the Central Government has been obtained for the use of any such word or expression—

(a) Board;

(b) Commission;

(c) Authority;

(d) Undertaking;

(e) National;

(f) Union;

(g) Central;

(h) Federal;

(i) Republic;

(j) President;

(k) Rashtrapati;

(l) Small Scale Industries;

(m) Khadi and Village Industries Corporation;

(n) Financial [***][11] Corporation and the like;

(o) Municipal;

(p) Panchayat;

(q) Development Authority;

(r) Prime Minister or Chief Minister;

(s) Minister;

(t) Nation;

(u) Forest corporation;

(v) Development Scheme;

(w) Statute or Statutory;

(x) Court or Judiciary;

(y) Governor;

(z) the use of word Scheme with the name of Government(s), State, India, Bharat or any government authority or in any manner resembling with the schemes launched by Central, state or local Governments and authorities; and

(za) Bureau.

(7) For the Companies under section 8 of the Act, the name shall include the words foundation, Forum, Association, Federation, Chambers, Confederation, council, Electoral trust and the like etc. Every company incorporated as a “Nidhi” shall have the last word ‘Nidhi Limited’ as part of its name.

(8) The names released on change of name by any company shall remain in data base and shall not be allowed to be taken by any other company including the group company of the company who has changed the name for a period of three years from the date of change subject to specific direction from the competent authority in the course of compromise, arrangement and amalgamation.

[9]Rule 9. ” Reservation of name – An application for the reservation of a name shall be made in Form No. INC.1 along with the fee as provided in the Companies (Registration offices and fees) Rules, 2014 which may be approved or rejected, as the case may be, by the Registrar, Central Registration Centre.”

[3][Rule 36. Integrated Process for Incorporation. — Refer Section 7] 

Applicable Circulars

Use of Word ‘National’ in the names of Companies or Limited Liability Partnerships (LLPs)

Circular No. 2/2014, dated 11-2-2014

It has come to the knowledge of this Ministry that Companies/Limited Liability Partnerships are being registered with the word ‘National’ in their names. It is being intimated that no company should be allowed to be registered with the word ‘National’ as part of its title unless it is a government company and the Central/State Government(s) has a stake in it. This should be stringently enforced by all Registrar of Companies (ROCs) while registering companies. Similarly, the word ‘Bank’ may be allowed in the name of an entity only when such entity produces a ‘No Objection Certificate’ from the RBI in this regard. By the same analogy the word “Stock Exchange” or “Exchange” should be allowed in name of a company only where ‘No Objection Certificate’ from SEBI in this regard is produced by the Promoters.

One time opportunity for extension of period of Reservation of Name

Circular No. 11/2014, dated 12-5-2014

Services for incorporation of companies were not available on the MCA21 portal to stakeholders from 1st April, 2014 to 28th April 2014 because of the deployment requirement for new E-forms. Many stakeholders had reserved names for the purpose of Company incorporation with 60 days prescribed validity expiring during the above mentioned period. They could not avail of the 60 days prescribed period for using the name to complete the corresponding incorporation requirements due to the non-availability of services.

2. In view of this, the validity of reservation of all such names with due date of expiry between 1st April, 2014 to 28th April, 2014 is hereby extended upto 31st May, 2014. All applicants whose cases fall in the above mentioned category may be advised to file relevant E-forms for incorporating companies under the Companies Act, 2013 well before the extended validity period.

Extension of validity period for names reserved as on 31st March, 2014

 Circular No. 13/2014, dated 235- 2014

In continuation of the General Circular No. 11/2014 dated 12th May, 2014, approval of the Competent Authority is hereby conveyed to extend the continuity of all the reserved names as on 31st March, 2014 for another fifteen days period from the date of the issue of this circular.

Clarification relating to incorporation of a company i.e. company Incorporated outside India,

Circular No. 23/2014, dated 25-6-2014

Government has received references seeking clarity about the status of subsidiaries incorporated/to be incorporated by companies incorporated outside India. Attention has, in particular, been drawn to the absence of the deeming provision of sub-section (7) of section 4 of the Companies Act, 1956 in the Companies Act, 2013 (New Act).

The matter has been examined in the Ministry in the light of sections 2(68), 2(71) and 2(87) of the New Act and it is clarified that there is no bar in the new Act for a company incorporated outside India to incorporate a subsidiary either as a public company or a private company. An existing company, being a subsidiary of a company incorporated outside India, registered under the Companies Act, 1956, either as private company or a public company by virtue of section 4(7) of that Act, will continue as a private company or public company, as the case may be, without any change in the incorporation status of such company. 

Clarification with regard to use of the words “Commodity Exchange” in a company

Circular No. 26/2014, dated 26-6-2014

In continuation of this Ministry’s circular no. 02/2014 dated 11.02.2014, it is hereby clarified the use of the word “Commodity Exchange” may be allowed only where a “No Objection Certificate” from the Forward Markets Commission (FMC) is furnished by the applicant. All other provisions of the Companies (Incorporation) Rules, 2014 will continue to be applicable.

  1. It is also clarified that the certificate from Forward Markets Commission will also be required in cases of companies registered with the words “Commodity Exchange” before the issue of this circular.

Registration of names of the Companies shall be in consonance with the provisions of the Emblems and Names (Prevention of Improper Use) Act, 1950

Circular No. 29/2014, dated 11-7-2014

In continuation of this Ministry’s circular No. 02/2014 and 26/2014 dated 11.02.2014 and 27.06.2014 respectively, it is hereby directed that while allotting names to Companies/ Limited Liability Partnerships, the Registrar of Companies concerned should exercise due care to ensure that the names are not in contravention of the provisions of the Emblems and Names (Prevention of Improper Use) Act, 1950. To this end it is necessary that Registrars are fully familiar with the provisions of the said Act.

Extension of Validity of reserved names

Circular No. 31/2014, dated 19-7-2014

The Service Provider of MCA-21 has brought to the notice of the Ministry that the letters of intimation issued in respect of 9522 cases for reservation of names (INC.1) allow the applicants to use reserved names within 60 days of date of such intimation. This is at variance with the implementation in the MCA-21. This is causing inconvenience to the stakeholders.

In view of this, the validity of 1930 of the above mentioned 9522 cases for reservations of names which have expired as on the date of this circular is hereby extended upto 18th August, 2014. Further, in case of 6864 cases where names have been reserved and are yet to be used, the time period as indicated in the letters of intimations is allowed. All applicants may accordingly be advised to file relevant e-forms for incorporation of companies under the Companies Act, 2013 well before the validity period.

Applicable Notifications

Notification w.r.t. Central Registration Centre (CRC) having territorial jurisdiction all over India

S.O. 218(E) In exercise of the powers conferred by sub-sections (1) and (2) of section 396 of the Companies Act, 2013 (18 of 2013) (herein after referred to as the Act), the Central Government hereby establishes a Central Registration Centre (CRC) having territorial jurisdiction all over India, for discharging or carrying out the function of processing and disposal of applications for reservation of names under the provisions of the said Act.

2. The CRC shall function under the administrative control of Registrar of Companies, Delhi (ROC Delhi), who shall act as the Registrar of the CRC until a separate Registrar is appointed to the CRC. The CRC shall process applications for reservation of name i.e. e-Form No. INC-1 filed along with the prescribed fee as provided in the Companies (Registration of Offices and Fees) Rules, 2014.

3. Processing and approval of name or names proposed in e-Form No.lNC-29 shall continue to be done by the respective Registrar of Companies having jurisdiction over incorporation of companies under the Companies Act,2013 as per the provisions of the Act and the rules made thereunder.

4. The CRC shall be located at Indian Institute of Corporate Affairs (llCA), PIot No. 6,7, 8, Sector 5, IMT Manesar, District Gurgaon (Haryana), Pin Code- 122050.

5. This notification shall come into force from 26th January, 2016.

[F.No. A-4201 1 /03/21{-Ad.ll]

[1] Powers of Central Government delegated to Registrar of Companies vide Notification No. S.O.1353(E) dated 21st May, 2014

[2] Inserted by the Companies (Incorporation) Amendment Rules 2015 vide Notification F. No. 01/13/2013 CL-V (Part-I) dated 1st May 2015

[3] Inserted by the Companies (Incorporation) Amendment Rules, 2015 vide GSR 349 (E) dated 1st May, 2015.

[4] Omitted by the Companies (Incorporation) Amendment Rules, 2016 vide GSR 99(E) dated 22nd Jan, 2016.Prior to omission it read as under:

(b) The name shall be considered undesirable, if-

“(ii) it is not in consonance with the principal objects of the company as set out in the memorandum of association.”

[5]Omitted by the Companies (Incorporation) Amendment Rules, 2016 vide GSR 99(E) dated 22nd Jan, 2016.Prior to omission it read as under:

“(x) the proposed name is vague or an abbreviated name such as ‘ABC limited’ or ‘23K limited’ or ‘DJMO’ Ltd: abbreviated name based on the name of the promoters will not be allowed. For example:- BMCD Limited representing first alphabet of the name of the promoter like Bharat, Mahesh, Chandan and David: Provided that existing company may use its abbreviated name as part of the name for formation of a new company as subsidiary or joint venture or associate company but such joint venture or associated company shall not have an abbreviated name only e.g. Delhi Paper Mills Limited can get a joint venture or associated company as DPM Papers Limited and not as DPM Limited.”

[6] Omitted by the Companies (Incorporation) Amendment Rules, 2016 vide GSR 99(E) dated 22nd Jan, 2016.Prior to omission it read as under:

(xvii) “it is intended or likely to produce a misleading impression regarding the scope or scale of its activities which would be beyond the resources at its disposal.”

[7] Omitted by the Companies (Incorporation) Amendment Rules, 2016 vide GSR 99(E) dated 22nd Jan, 2016.Prior to omission it read as under:

” (3) If any company 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 six months from the change of activities after complying with all the provisions as applicable to change of name. ”

[8] Omitted by the Companies (Incorporation) Amendment Rules, 2016 vide GSR 99(E) dated 22nd Jan, 2016.Prior to omission it read as under:

“(4) In case the key word used in the name proposed is the name of a person other than the name(s) of the promoters or their close blood relatives, No objection from such other person(s) shall be attached with the application for name. In case the name includes the name of relatives, the proof of relation shall be attached and it shall be mandatory to furnish the significance and proof thereof for use of coined words made out of the name of the promoters or their relatives.”

[9] Substituted by the Companies (Incorporation) Amendment Rules, 2016 vide GSR 99(E) dated 22nd Jan, 2016.Prior to substitution it read as under:

“9. Reservation of name– An application for the reservation of a name shall be made in Form No. INC.1 along with the fee as provided in the Companies (Registration offices and fees) Rules, 2014.

[10] Substituted by the Companies (Incorporation) Third Amendment Rules 2016 vide Notification 743(E) dated 27th July 2016. Prior to substitution it read as under:

“(ii) it includes the name of a registered trade mark or a trade mark which is subject of an application for registration, unless the consent of the owner or applicant for registration, of the trade mark, as the case may be, has been obtained and produced by the promoters;”

[11 Omitted “comma” by the Companies (Incorporation) Third Amendment Rules 2016 vide Notification 743(E) dated 27th July 2016.

[12] Inserted vide Notification no. G.S.R. 9(E).dated 04th January, 2017.

[13] Inserted vide Notification no. G.S.R. 9(E).dated 04th January, 2017.

Recent Articles

Recent Legal updates