Lecture - 3

Associations not for profit: (Section 42)

Power to dispense with "Limited" in the name of charitable and other companies.-

(1) Where it is proved to the satisfaction of the Commission that an association capable
of being formed as a limited company has been or is about to be formed for
promoting commerce, art, science, religion, sports, social services, charity or any
other useful object, and applies or intends to apply its profits, if any, or other income
in promoting its objects, and to prohibit the payment of any dividend to its members,
the Commission may grant a licence and direct that the association be registered as a
company with limited liability, without the addition of the words "Limited",
"(Private) Limited" or "(Guarantee) Limited", as the case may be, to its and the
association may be registered accordingly.

(2) A licence under sub-section (1) may be granted on such conditions and subject to
such regulations as the Commission thinks fit and those conditions and regulations
shall be binding on the association and shall, if the Commission so directs, be
inserted in the memorandum and articles, or in one of those documents.
(3) The association shall on registration enjoy all the privileges of a limited company and
be subject to all its obligations, except those of using the word or words "Limited",
"(Private) Limited" or "(Guarantee) Limited", as
(4) A licence under this section may at any time be revoked by the Commission and upon its
revocation the registrar shall enter the word or words "Limited", "(Private) Limited", or
"(Guarantee) Limited", as the case may be, at the end of the name of the association upon
the register, and the association shall cease to enjoy the exemptions and privileges
granted by the preceding sub-sections:

Provided that, before a licence is so revoked, the Commission shall give to the association notice
in writing of its intention, and shall afford the association an opportunity of submitting a
representation in opposition to the revocation.

Conversion of public company into private and vice versa:

No public company shall, except with the prior approval of the commission in writing,
and subject to such conditions as may be imposed by the Commission in this behalf,
convert itself into a private company.

Requirements Regarding Conversion From Public to Private Company:

1. Special resolution
2. Approval of the SEC.
3. Form – 2
4. Copy of Form 26 (Special Resolution)
5. Copy of the Memorandum and Articles of Association duly amended.
6. Certified copy of existing Memorandum and Articles of Association.
7. Copy of latest audited Balance Sheet and Profit and Loss Account.
8. Minutes of the General Meeting.
9. Bank challan being application fee.
10. Affidavit.
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 Lecture - 3

Carrying On Business With Less Than The Legal Minimum Of Members

(Sec. 47)

Liability for carrying on business with less than [three] or, in the case of a private
company, two members.- If at any time the number of members of a company is reduced, in
the case of a private company [other than a single member company], below two, or in the
case of any other company, below '[three], and the company carries on business for more
than six months while the number is so reduced, every person who is a member of the
company during the time that it so carries on business after those six months and is cognizant
of the fact that it is carrying on business with fewer than two members or 2[three] members,
as the case may be, shall be severally liable for the payment of the whole debts of the
company contracted during that time, and may be used therefore without joinder in the .suit
of any other member.

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