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Conversion of companies already registered


Conversion of companies already registered

According to Section 18 of the Companies Act, 2013 , a company may convert itself in some
other class of company by altering its ,memorandum and articles of association. Following is
the law with respect to the conversion of the companies already registered.
1. By alteration of memorandum and articles: A company of any class registered under
this Act may convert itself as a company of other class under this Act by alteration of
memorandum and articles of the company in accordance with the provisions of this Chapter.
2. File an application to the Registrar :Wherever such conversion of companies is
required to be done, the company shall file an application to the Registrar, who shall after
satisfying himself that the provisions applicable for registration of companies have been
complied with, close the former registration of the company.

Conversion of companies already registered

3. Issue a certificate of incorporation: After registering the required documents, issue a
certificate of incorporation in the same manner as its first registration.
4. No effect on the debts, liabilities etc.incurred before conversion: The registration of
a company under this section shall not affect any debts, liabilities, obligations or contracts
incurred or entered into, by or on behalf of the company before conversion and such debts,
liabilities, obligations and contracts may be enforced in the manner as if such registration had
not been done.

Preliminary or Pre-Incorporation Contracts

Pre-incorporation contracts are those contracts, which are entered into, by agents or trustees
on behalf of a prospective company before it has come into existence, e.g., with the proprietor
of a business to sell it to the prospective company. Since a company comes in to existence
from the date of its incorporation, it follows that any act purporting to be performed by it prior
to that date is of no effect so far as the company is concerned. It will very likely be the
intention of the promoters or persons concerned in the company that the company should, on
its formation acquire some property or takeover the existing business, and for this purpose, a
preliminary contract for the acquisition may be entered into before the company is formed. But
as the company is non-existent before incorporation it cannot be bound, by any purported
ratification [Kelner vs. Baxter (1862) L.R. 2 C.P. 174].

Conversion of companies already registered

The rules in respect of preliminary contracts may be summarised as follows:
(a) The vendor cannot sue, or be sued by the company thereof, after its incorporation;
(b) Person who acts for the intended company remains personally liable to the vendor even
if the company purports to ratify the agreement, unless the agreement provides that:
(i) his liability shall cease if the company adopts the agreement; and
(ii) either party may rescind the agreement, if the company does not adopt it within a
specified time;

(c) After incorporation, the company may adopt the preliminary agreement. But this must be
by novation which may be implied from the circumstances. But in some cases, the
memorandum directs the directors to execute such contracts. The company can enforce
a pre-incorporation contract if it is warranted by the terms of incorporation and for
purposes of company.
A pre-incorporation contract can be enforced against the company if it is warranted by the
terms of incorporation and it is adopted by the company and communicated in acceptance.
[Sections 15 and 19 of the Specific Relief Act, 1963]. In such a case, the directors have no
discretion in the matter.

Conversion of companies already registered

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