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Formation of business firm

Act 1956
Shubham Rawal S.D.T.kalani college,, Roll no. SUB- Business Law

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1. Certificate of Commencement of Business: Procedural Analysis 2. Introduction The Companies Act, 1956 3. characteristics and distinctive features of a company form of enterprise 4. Types of Act 1956 5. Memorundum of Association 6. Articles of Association

Certificate of Commencement of Business:

Procedural Analysis

This Article is in continuation to my previous Article titled PROCEDURES FOR INCORPORATION AND REGISTRATION OF COMPANIES. Kindly excuse me if you fine any typing error. The date of incorporation of a company may not be the date of commencement of business. A private company and a public limited company not having share capital are not required to comply with any other formalities and may commence its business activities immediately after obtaining the certificate of incorporation from the concerned Registrar of Companies. A private limited company, which has converted into public limited company, is also not required to obtain certificate of commencement of business. Requirement for obtaining commencement of business certificate A public limited company having share capital cannot commence business until it has obtained the certificate to commence business (COB) from the concerned Registrar of Companies. Normally a new company will comply with the required formalities and obtain the commencement of business certificate (COB) from the Registrar as soon as possible after formation because it cannot commence any business activities or exercise its borrowing powers without it. ACTION REQUIRED ON THE PART OF THE COMPANY TO OBTAIN COB (Refer Section 149) 1. WHERE A COMPANY NOT ISSUES PROSPECTUS FOR PUBLIC SUBSCRIPTION For obtaining a certificate to commence business, the following actions are required to be taken: (i) the company shall file with the Registrar a statement in lieu of prospectus (SLP) (signed by every director) electronically at the MCA portal in the form given in Schedule III to Act together with the E-Form 62 and shall pay the prescribed fee by online or offline as per Schedule X of the Companies Act, 1956. (ii) the directors should pay the value of the shares to the extent money is payable in cash with application/allotment; (iii) a duly certified declaration shall be filed electronically at the MCA portal in the E-Form 20 and a stamped copy shall be simultaneously filed with the Registrar signed by a

director/secretary or by secretary in practice where there is no secretary, to the effect that the requirements of section 149(2) have been complied with. (iv) the company shall not allot any share or debenture at least for three days after filing of statement in lieu of prospectus with the Registrar. [Section 70(1)]; (v) the company shall pay the prescribed filing fee by online or offline under Schedule X on SLP and on e-Form 20 to the Registrar of Companies. The Registrar of Companies shall then issue the requisite certificate of commencement of business. NATURE OF ABOVE REQUIREMENTS It was decided in the case of Malabar Iron & Steel Works Ltd. v Registrar of Companies (1963) that COB cannot be issued if the company has not complied with the provisions of section 149(1), even though it has issued a SLP u/s 70. 2. WHERE A COMPANY ISSUES PROSPECTUS FOR PUBLIC SUBSCRIPTION Where a company issues a prospectus immediately after its formation, it need not file a statement in lieu of prospectus. The following points have to be ensured in this connection: (i) shares arranging the amount at least equal to the amount of minimum subscription under section 69 have been allotted. [Section 149(1)(a)] (ii) every director has paid to the company, in respect of shares taken or contracted to be taken by them subject to payment in cash, a sum equal to at least the amount payable on application and allotment on the shares offered to public for subscription. [Section 149(1)(b)]; (iii) application has to be made to the recognised stock exchange for obtaining permission for dealing in shares/debentures; (iv) filing of following documents electronically with the ROC is necessary:-(a) prospectus; (b) E-Form 19 duly certified by a director/secretary or by secretary in whole time practice where there is no secretary declaring that all the conditions as stated in ( i) to (iii), above have been duly fulfilled and stamped copy shall be physically delivered simultaneously to the Registrar. (v) payment of prescribed filing fee under Schedule X on prospectus and E-Form 19 by online or off line system. The Registrar of Companies shall thereupon issue the requisite certificate of commencement of business.

Certificate to commence business is conclusive evidence The Registrar, on perusal of the declaration in e-Form 19 or 20 and the statement in lieu of prospectus, as may be applicable, shall certify that the company is entitled to commence business and to exercise borrowing powers. The certificate shall be the conclusive evidence that the company is entitled to commence its business. [ Refer Section 149(6)]

Status of Contracts made before or after incorporation but before obtaining the COB Only after obtaining the certificate of incorporation a public company can enter into binding contracts. After obtaining certificate of incorporation but before obtaining certificate for commencement of business, the company may, however, enter into PROVISIONAL CONTRACTS subject to the condition that they will be binding only after the company has obtained the commencement certificate. It was decided in the case of Merchants Ltd., Lahore, In re (1932) and Ambica Textiles Ltd., In re (1950) that the liabilities incurred by company before it is entitled to commence business, are not binding and shareholders cannot be asked to contribute towards them in event of winding up.

Consequences on commencing business before obtaining certificate to commence business

If any public company commences business or exercises borrowing powers without obtaining the commencement certificate, every person who is responsible for the contravention shall be punishable with fine of Rs. 5,000 for every day during which the contravention continues, under sub-sections (2A) and (6) of section 149 of the Companies Act, 1956. Also refer 433(c) which provides that a company may be wound up by the High Court (Tribunal) if it does not commence business within a year from its incorporation or suspends its business activities for a whole year. PROCEDURE FOR OBTAINING CERTIFICATE OF COMMENCEMENT OF BUSINESS In order to obtain COB, a public company shall file the following documents with the Registrar of Companies as desired by section 149: (1) A prospectus/statement in lieu of prospectus as the case may be along with following documents: (a) list of the members of the company with their shareholdings;

(b) confirmation for paid up share capital to the extent of Rs. 5,00,000 and proof thereof, viz copy of bank statement etc. (c) list of Directors, Manager, Secretary, Auditors and changes among them, if any; (d) consent of the Auditors to include their name in the Prospectus/Statement in lieu of Prospectus; (e) copy of the agreements for appointment of Managing Director, Underwriters, contracts entered into by the promoters before incorporation of the company, etc. if any; (f) printed and certified copy of the Memorandum and Articles of Association of the company; (g) details of the preliminary expenses incurred by the company; (h) power of attorney to make corrections in the Prospectus/Statement in lieu of prospectus and to obtain certificate for commencement of business from the Registrar of Companies; (i) certified copy of the resolution passed by the Board for approval of prospectus /statement in lieu of prospectus for filing with the Registrar. (2) A duly verified declaration on stamp paper that provisions of section 149 of the Act have been complied with, by one of the directors or secretary or, where there is no secretary, by a secretary in whole time practice, in e-Form 19/20 as the case may be.,


RESOLVED THAT the draft of the Statement in Lieu of Prospectus made in accordance with the provisions of Schedule III of the Companies Act, 1956, Parts I, II and III, as placed before the Board duly initialed by the Chairman for the purpose of identification be and is hereby approved and that the same be signed by all the directors of the company and delivered to the Registrar of Companies, Uttar Pradesh for obtaining the Certificate of Commencement of Business. FURTHER RESOLVED THAT Mr. Rajesh Gupta, Director of the Company be and is hereby authorised to sign and file e-Form 20 to the Registrar of Companies, Uttar Pradesh. FURTHER RESOLVED THAT the directors of the company be and is hereby authorised to give Power of Attorney in favour of Mr. Rajesh Gupta, the Director and/or Mr. Neeraj Mehra, Advocate to do all such acts, deeds and things for filing of the above said Statement in Lieu of Prospectus and to make any additions, corrections, alterations, etc. for and on behalf of the Board of directors of the company as may be required or directed by the Registrar of Companies for taking on record and to issue the certificate for Commencement of Business.

The Companies Act, 1956
The Companies Act 1956 is an Act of the Parliament of India, enacted in 1956, which enabled companies to be formed by registration, and set out the responsibilities of companies, their directors and secretaries.[1] The Companies Act 1956 is administered by the Government of India through the Ministry of Corporate Affairs and the Offices of Registrar of Companies, Official Liquidators, Public Trustee, Company Law Board, Director of Inspection, etc. The Registrar of Companies (ROC) handles incorporation of new companies and the administration of running companies. Since its commencement, it has been amended many times, in which amendment of 1988, 1990, 1996, 2000 and 2011 are notable.

The following are the main characteristics and distinctive features of a company form of enterprise

1. An Association of Persons: At least two persons or seven persons must come together to form a private or a public company respectively. A single individual cannot constitute a company. This is the reason why a company is called on Association of Persons. 2. Incorporated Association: A company comes into existence only after a certificate of incorporation has been obtained from the Registrar of Joint Stock Companies. Without incorporation, it has no legal existence. 3. Artificial Legal Person: A company is an artificial person created by law to achieve the objectives for which it is formed. A company exists only in the contemplation of law. It is artificial person in the sense that it is created by a process other than natural birth and does not possess the physical attributes of a natural person. It is invisible, intangible, immortal and exists only in the eyes of law. It has no body, no soul and no conscience; it is regarded as an artificial person. 4. Distinct Legal Entity: A company is a legal person having a juristic personality entirely distinct and independent of the individual persons who are its members. It enjoys in many respects the right of a natural person in the eyes of law. It can own property, conduct a lawful business, enter into contracts with others, buy, sell and hold property, all in its own name under its own seal. It can file a suit against others and can be sued against. 5. Perpetual Succession: A company has perpetual existence i.e. its existence is not affected by the death or lunacy or insolvency or retirement of its member.

Members may come and go, but the company continues its operations so long as it fulfils the requirements of the law under which it has been formed. Thus, a company has a perpetual succession irrespective of its membership. 6. Limited Liability: Liability of members of a limited company is limited to the face value of the shares subscribed by each of them. Members cannot be asked to pay anything more than what is due or unpaid on the shares of the company held by them. In no case the personal property of the members of a company can be attached to satisfy the claims of creditors of a company. 7. Transferability of Shares: Members of a public limited company are free to transfer the shares held by them to any one members for either to purchase or sell the shares. 8. Diffused Ownership: Ownership of a company is in the hands of a large number of people. In case of Private Ltd. Company, the upper limit is up to 50. In case of a public Ltd. Company there is upper limit to the number of members. Any individual is free to acquire the share of any company and become to the owner to that extent only. As such ownership is spread among a number of share holders. 9. Separation of ownership and management: Share holders are the owners of the company. Companys share holders are widely scattered. It is physically impossible for all of them to take patty in the management of the company. Being a share holder of a company does not give him the right to manage the affairs of a company. The management is vested with the directors, who are the legal representatives of the shareholders. Thus owners of the company have no direct control over the management of the company. 10. Common Seal: A company being an artificial person cannot sign documents for itself whereas a natural person can do. The law has provided for the use of a common seal, with the name of the company engraved on it, as substitute for its signature. The common seal of the company is approved in the first Board Meeting held immediately after the incorporation. Common seal has to be affixed on all important documents and contracts.

Any document bearing the common seal of the company duly signed by at least two directors will be legally binding on the company. 11. Corporate Finance: A company generally raises large amount of funds in form of issuing shares, debentures, bonds and incurring loans and advances from financial institutions. The total share capital of a company is divided into a number of shares which are held by individual members and institutions. 12. Object clause of Business: A company can conduct only such business as stated in its first Memorandum of Association. In order to bring any charges in its activity, the object clause must be changed. 13. Publication of Accounts: A joint stock company is required to file annual audited statements with the Registrar of Companies at the end of each financial year. The annual statements are available for inspection in the office of the Registrar.

Types of Act 1956

1. "Private company" is defined in section 3(1)(iii) of the Act and it means a company
which has a minimum paid-up capital of one lakh rupees or such higher paid-up capital as may be prescribed, and by its articles, a. restricts the right to transfer its shares, if any; b. limits the number of its members to fifty (50) not including i. ii. persons who are in the employment of the company; and persons who, having been formerly in the employment of the company, were members of the company while in that employment and have continued to be members after the employment ceased; and

c. prohibits any invitation to the public to subscribe for any shares in, or debentures of, the company; and

d. prohibits any invitation or acceptance of deposits from persons other than its members, directors or their relatives ; Provided that where two or more persons hold one or more shares in a company jointly, they shall, for the purposes of this definition, be treated as a single member. 2. "Public company" is defined in section 3(1)(iv) of the Act and it means a company which a. is not a private company; b. has a minimum paid-up capital of five lakh rupees or such higher paid-up capital, as may be prescribed; c. is a private company which is a subsidiary of a company which is not a private company. 3. "Government company" is defined in section 617 of the Act and it means any company in which not less than fifty-one per cent of the paid-up share capital is held by the Central Government, or by any State Government or Governments, or partly by the Central Government and partly by one or more State Governments and includes a company which is a subsidiary of a Government company as thus defined. As provided by section 620(1) of the Act, the Central Government may, by notification in the Official Gazette, direct that any of the provisions of this Act (other than sections 618, 619 and 619A specified in the notifications: a. Shall not apply to any Government company; or Shall apply to any Government company, only with such exceptions, modifications and adaptations, as may be specified in the notification. 4. "Foreign company" is defined in section 591 of the Act and it means a company which a. is incorporated outside India and b. has established a place of business within India. Within 30 days of establishment of such place of business within India, the Foreign Company is required to submit documents/details under section 592. Alterations and changes in these documents/details are required to be notified within 30 days. The provisions of Section 108C on restrictions of transfer of shares of foreign companies, sections 118 (right to obtain copies of trust deed), 124 to 145 (registration of charges), 159 (annual returns to be made by company), 209 (books of account to be kept by company), 209A (inspection of books of account of company), 233A (power of Central Government to direct

special audits in certain cases), 233B (audit of cost accounts in certain cases), 234 to 246 (power of Registrar to call for information, etc.), 295 (loans to Directors), 297 (Boards sanction to be required in certain contracts in which Directors are interested), apply to such foreign company. 5. "Company limited by guarantee" is defined in section 12(2)(b) of the Act and it means a company having the liability of its members limited by the memorandum to such amount as the members may respectively undertake by the memorandum to contribute to the assets of the company in the event of its being wound up. Such company could be a "company limited by guarantee and not having share capital" or a "company limited by guarantee and having a share capital". The Memorandum and Articles of Association of such companies are as per Tables C and D of Schedule I of the Act, respectively. 6. "Unlimited Company" is defined in section 12(2)(c) of the Act and it means a company not having any limit on the liability of its members. The liability of a member extends to the whole amount of companys debts and liabilities but the membe r will be entitled to claim contribution from other members. The Memorandum and Articles of such company is as per Table E of Schedule I of the Act. 7. "Producer Company" is defined in section 581A of the Act and it means a body corporate having objects or activities specified in section 581B and registered as Producer Company under this Act. Section 581B 1. The objects of the producer company shall relate to all or any of the following matters, namely a. production, harvesting, procurement, grading, pooling, handling, marketing, selling, export of primary produce of the Members or import of goods or services for their benefit. Provided that Producer Company may carry on any of the activities specified in this clause either by itself or through other institution. b. processing including preserving, drying, distilling, brewing, vinting, canning and packaging of produce of its members. c. manufacture, sale or supply of machinery, equipment or consumables mainly to its members. d. providing education on the mutual assistance principles to its members and others;

e. rendering technical services, consultancy services, training, research and development and all other activities for the promotion of the interest of its members; f. generation, transmission and distribution of power, revitalisation of land and water resources, their use, conservation and communications relatable to primary produce; g. insurance of producers or their primary produce; h. promoting techniques of mutuality and mutual assistance; i. j. welfare measures or facilities for the benefit of members as may be decided by the Board; any other activity, ancillary or incidental to any of the activities referred to in clauses (a) to (i) or other activities which may promote the principles of mutuality and mutual assistance amongst the members in any other manner;

k. financing of procurement, processing, marketing or other activities specified in clauses (a) to (j) which include extending of credit facilities or any other financial services to its members. 2. Every Producer Company shall deal primarily with the produce of its active Members for carrying out any of its objects specified in this section. 8. Companies with licence under section 25 1. Where it is proved to the satisfaction of the Central Government that an association a. is about to be formed as a limited company for promoting commerce, art, science, religion, charity or any other useful object, and b. 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 Central Government may, by licence, direct that the association may be registered as a company with limited liability, without the addition to its name of the word "Limited" or the word "Private Limited". 2. The association may thereupon be registered accordingly and on registration shall enjoy all the privileges and (subject to the provisions of this section) be subject to all the obligations, of limited companies. Such companies are generally associations, clubs or chambers of commerce. The Central Government has conferred powers under section 25(6) to exempt or modify certain provisions of the Act in relations to such companies. 9. Holding & Subsidiary Company

According to Sec. 2(19) "holding company" means a holding company within the meaning of section 4 of the Act; According to Sec. 2(47) "subsidiary company" or "subsidiary" means a subsidiary company within the meaning of Section 4 of the Act. Sec. 4 of the Act states, 1. For the purposes of this Act, a company shall, subject to the provisions of sub-section (3), be deemed to be a subsidiary of another if, but only if a. that other controls the composition of its Board of directors; or b. that other i. where the first-mentioned company is an existing company in respect of which the holders of preference shares issued before the commencement of this Act have the same voting rights in all respects as the holders of equity shares, exercises or controls more than half of the total voting power of such company; where the first-mentioned company is any other company, holds more than half in nominal value of its equity share capital; or


c. the first-mentioned company is a subsidiary of any company which is that others subsidiary. Provisions affecting holding subsidiary relationship b. Holding company as shadow Director (under Sec. 7) c. Subsidiarys membership of its Holding company (Sec. 42 & 372A) d. Obligation on the part of holding company to furnish certain information to its shareholders about the subsidiary e.g.Annual Accounts of all the subsidiaries to be attached with the Annual Accounts of the holding company (Sec. 212) e. Financial year of Holding & Subsidiary Company (Sec. 213) f. Rights of Holding Companys representatives & members (Sec. 214) g. Investigation of the affairs of the Subsidiarys Holding Company (Sec. 239 & 247) 10. Limited Liability Partnership (LLP)

It may be noted that LLP is not a Company under the Companies Act, 1956 but it is defined under section 2(1)(n) of the Limited Liability Partnership Act, 2008 as a "partnership formed and registered under the Limited Liability Partnership Act, 2008". LLPs are bound to pay Income Tax under IT Act on lines similar to general partnerships. They are not required to pay dividend distribution tax or surcharge. 11. Vanishing Companies (applicable in case of Public Listed Companies) A Vanishing Company is one which has

Failed to file returns with Stock Exchange (if listed) & with ROC for 2 years. None of the Directors are traceable. Not maintaining the registered office at the address provided with ROC & Stock Exchange.

Meaning and Purpose of Memorandum An important step in the formation of a company is to prepare a document called memorandum of association. It is the charter of the company and is very important document as it contains the basic conditions on which the company is incorporated. The Memorandum contains the name, registered office, main and other objects of the company, liability of the members and the authorized capital of the company. The main purpose of the memorandum is to limit the scope of activities and powers of the company. Thus, any act outside the memorandum is ultra vires the company. Such an act is not enforceable and directors involve personal liability for it. Requirements with respect to Memorandum 1. The memorandum of every company shall state: i. the name of the company with "Limited" as the last word of the name in the case of a public limited company, and with "Private Limited" as the last words of the name in the case of a private limited company. ii. the State in which the registered office of the company is to be situated; iii. in the case of a company in existence immediately before the commencement of the Companies (Amendment) Act, 1965, (31 of 1965) the objects of the company; iv. in the case of a company formed after such commencement: the main objects of the company to be pursued by the company on its incorporation and objects incidental or ancillary to the attainment of the main objects; other objects of the company not included in sub-clause (i); and in the case of companies (other than trading corporations), with objects not confined to one State, the States to whose territories the objects extend. 2. The memorandum of a company limited by shares or by guarantee shall also state that the liability of its members is limited. 3. The memorandum of a company limited by guarantee shall also state that each member undertakes to contribute 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 of the company as may have been contracted before he ceases to be a member, as the case may be, and of the costs, charges and expenses of winding up, and for adjustment of the rights of the contributories among themselves, such amount as may be required, not exceeding a specified amount. 4. In the case of a company having a share capitalv.


vi. vii.

unless the company is an unlimited company, the memorandum shall also state the amount of share capital with which the company is to be registered and the division thereof into shares of a fixed amount; no subscriber of the memorandum shall take less than one share; and each subscriber of the memorandum shall write opposite to his name the number of shares he takes.

Obtain Registrars Guidance The company Law Board in its Circular No. 128/ HCC/64 dated 27-7-1964 has directed that the Registrars should to the extent possible offers their help and advise to those who may approach them in drawing up the Memorandum and Articles. This is specifically desirable in case where promoters have no prior experience of company promotion. Stamp duty The Memorandum of Association and Articles of Association are required to be stamped adequately in the prescribed manner and mode. Rules 10 and 39 of Schedule I of the Indian Stamp Act, prescribe the rates of stamp duty payable on the Memorandum of Association and Articles of Association. The different States prescribe different rates of stamp duty applicable to the companies incorporated in their respective territories. Stamp duty should be paid either by affixing adhesive stamps or by using non-judicial papers or otherwise as may be prescribed by the States concerned. Unless it is provided otherwise; adhesive stamps are generally used. Execution of Memorandum of Association 1. One copy of the Memorandum of Association is to be executed by the subscribers. 2. The minimum number of subscribers who can execute the memorandum is two in the case of a private company. Each one of the subscribers must take atleast one share. 3. While executing the Memorandum of Association the subscribers are required to write the following particulars in their own handwriting i. Name ii. Father's /Husbands name iii. Address iv. Description indication the occupation of the subscribers v. Number of shares subscribed by them in words as well as in figures vi. Signatures vii. Date 4. Generally speaking the memorandum should be signed by the subscribers. However, in certain cases it becomes difficult for the subscribers to sign the memorandum or any amendments thereto. This may happen where the subscribers to the memorandum are foreign parties who may be collaborating with Indian promoters.

5. The Department of company Affairs has clarified that in such cases the memorandum be signed by an agent if authorized by a power of attorney to do so. When an executant is an illiterate person, he should annexe his thump impression or mark, which should be described as such by the person writing for him. Witnesses The execution of the Memorandum of Association is required to be witnessed. One person can witness the signatures of all the subscribers. None of the subscriber can be a witness. The witness (es) is/are required to give the following particulars in his/their own hand: 1. 2. 3. 4. 5. 6. Signature Name Father's /Husband Name Descriptions indicating occupation Address Date

The date of signing should be the date on which the memorandum is stamped or any date after that. It should not be any date prior to stamping.

Articles of Association
1.Table A to Apply The regulations contained in the Table A, in Schedule 1 to the Companies Act 1956 shall apply to this Company, except in so far as the same are expressly or impliedly excluded or inapplicable to the Company by the regulations contained herein or by any special resolution of the Company or otherwise. 2. Interpretation The headings hereto shall not affect the construction thereof in these articles, even if there is something in the subject or the context inconsistent herewith. The "Act" means the Companies Act, 1956 or statutory modification or reenactment thereof for the time being in force. The "Articles" means these Articles of Association as originally framed or as altered from time to time. The "Seal" means the Common Seal for the time being of the Company. Unless the

context otherwise requires, words or expressions contained in this regulations shall bear the same meaning as in the Act or any statutory modifications thereof. Byelaws of the Company means Byelaws as framed by the Board of Directors and altered from time to time. Words importing the singular number include plurals and pronouns indicating male include female.

3. The Company is Private Limited Company within the meaning of section 3(1)(iii) of the Companies Act, 1956. 4. Capital The authorised share capital of the Company shall be as per paragraph V of the Memorandum of Association of the Company with power to increase or reduce the share capital and to divide the shares in the capital for the time being into several classes and to attach thereto respectively such preferential, or such other rights, privileges or conditions as may be determined in accordance with the regulations of the Company and to vary, modify, abrogate any such rights, privileges of conditions in such manner as may be provided by the regulations of the Company and consolidate, sub-divide the shares and issue shares of higher or lower denomination. SHARE CAPITAL 5. Division of Capital The Authorised Share Capital of the Company shall be as per paragraph V of the Memorandum of Association of the Company with powers to increase or reduce to Share Capital and to divide the shares in the capital for the time being into several classes and to attach thereto respectively such preferential, deferred or such other rights, privileges or conditions as may be determined in accordance with the regulations of the Company and to vary, modify abrogate any such rights, privileges of conditions in such manner as may be provided by regulations of the Company and consolidate or sub-divide the shares and issue shares of higher or lower denomination. 6. General Authority Wherever in the Companies Act, 1956 it has been provided that the Company shall

have any right, privilege or authority if, or that the Company can not carry out any transaction unless, the Company is so authorised by its Articles, these Articles hereby authorise and empower the Company to have such rights, privilege or authority and to carry out such transaction as have been permitted by the Companies Act, 1956. 7. Shares at the disposal of Directors The shares shall be under the control of the Directors who may allot or otherwise dispose of the same or any of them to such persons, in such proportions and on such terms and conditions and at par at, premium or at discount [subject to the provisions of the Act] as they may from time to time think proper. 8. Calls The Directors may, from time to time, make calls upon the members in respect of any money unpaid on the shares in any manner, as they deem fit. 9. Power to issue shares at Discount With the previous authority of Company in General Meeting and the sanction of the Company Law Board and upon otherwise complying with the provisions of Section 79 of the Act, it will be lawful for the Directors to issue at a discount, shares of a class already issued. 10. How far new shares to rank with shares in the original Except as otherwise provided by the conditions of issue or by these presents, any capital raised by creation of new shares shall be considered part of the original capital and shall be subject to the provisions herein contained with reference to payment of calls and installments, transfer and transmission for future, lien, voting rights and otherwise. 11. First named person deemed sole holder If any share stands in the names of two or more persons, the person first named in the Register of Members shall as regards voting at meetings, service of notice and all or any matters connected with the Company, except the transfer of share and any other matters herein otherwise provided, be deemed to be sole holder thereof but joint holders of the shares shall be severally as well as jointly liable for the payment of all deposits, installments and calls due in respect of such shares and for all incidents thereof according to the Company's regulations.

12. Directors may allot shares for consideration other than cash The Board may issue and allot shares in the Capital of the Company as payment or part payment for any property sold or transferred, goods or machinery supplied or for service rendered to the Company in or about the conduct of the Company's business and shares to be allotted may be issued as fully paid up shares and if so issued, shall be deemed to be fully paid up shares. 13. Liability of Members Every member or his heirs, executors, administrators, assigns or other representatives shall pay to the Company the portion of the capital represented by his share or shares which may for the time being remain due and unpaid thereon in such amounts, at such time or times and in such manner as the Board shall from time to time in accordance with the Company's regulations require the payment thereof and so long as any money remain due, owing and unpaid to the Company by any member on any account, such member shall not be entitled at the option of the Board, to exercise any rights or privileges. TRANSFER AND TRANSMISSION OF SHARE 14. Restriction on transfer of share Save as herein after provided no share shall be transferred to a person who is not a member of Company so long as any Member or any person selected by the Directors as one whom it is desirable in the interest of the Company to admit to membership is willing to purchase the same at the fair value. 15. Directors discretion to decline registration of any transfer The Directors may at any time in their absolute and uncontrolled discretion and without assigning any reason whatsoever, decline or acknowledge any proposed transfer of shares and their power or discretion to refuse such transfer shall not be affected by the fact that the proposed transferee is already a registered member of the Company. Without prejudice to the generality of the aforesaid power, the Directors may in particular so decline in any case in which the Company has a lien upon the shares [or any of them] or whilst any shareholder executing the transfer is either alone or jointly with any person or persons indebted to the Company on any account whatsoever, or whilst any moneys in respect of the shares desired to be transferred [or any of them] remain unpaid or unless the transferee is approved by the Board. The registration of the Transfer shall be conclusive evidence of the approval of the transferee by the Board.

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