PROCEDURE FOR INCORPORATION OF COMPANY LIMITED BY GUARANTEE

(i) A company limited by guarantee may or may not have a share capital. (ii) A company limited by guarantee may be a public company or a private company. (iii) According to sub-section (2) of Section 13 of the Companies Act, 1956, the memorandum of association of a company limited by guarantee must state that the liability of its members is limited. The memorandum of association of a company limited by guarantee must also state that every member of the company 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 the adjustment of the rights of the contributories among themselves, not exceeding specified amount. [Refer to Sub-section (3) of Section 13 of the Companies Act, 1956].

members may respectively undertake by the memorandum to contribute to the assets of the company in the event of its being wound up, is known as company limited by guarantee Section 12(2)(b). The procedure for incorporation of a company limited by guarantee is similar to the one required to be followed for getting a public or a private limited company incorporated. However, the following distinctive features in the case of a company limited by guarantee must be noted: (i) A company limited by guarantee may or may not have a share capital. (ii) A company limited by guarantee may be a public company or a private company. (iii) According to sub-section (2) of Section 13 of the Companies Act, 1956, the memorandum of association of a company limited by guarantee must state that the liability of its members is limited. The memorandum of association of a company limited by guarantee must also state that every member of the company 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 the adjustment of the rights of the contributories among themselves, not exceeding specified amount. [Refer to Sub-section (3) of Section 13 of the Companies Act, 1956]. (iv) Sub-section (2) of Section 27 of the Act lays down that the articles of a company limited by guarantee shall state the number of members with which the company is to be registered. (v) Section 37 (1) of the Act prohibits a company limited by guarantee and not having share capital from inserting any provision in its memorandum or articles or in any resolution purporting to give any person a right to participate in the divisible profits of the company otherwise than as a member of the company. (vi) Sub-section (2) of section 37 lays down that in the case of a company limited by guarantee, every provision in its memorandum or articles or in any resolution purporting to divide the undertaking of the company into shares or interests shall be treated as a provision for a share capital, notwithstanding that the nominal amount or number of the shares or interests is not specified thereby. In the memorandum of association of a guarantee company, however, a clause stating the amount of guarantee shall have to be inserted in addition to the other necessary conditions. Similarly, in the articles of association of such a company, an article stating the number of members with which the company is proposed to be registered must be included. The following procedural steps are required to be taken for getting a company limited by guarantee registered: (1) Paid-up Capital: In case company to be formed is a private company it must have a paid up capital of one lakh rupees and in case the company to be formed is a public company it must have a paid-up capital of five lakh rupees or such higher paid-up capital as may be prescribed. However, if the company does not propose to have a share capital then this requirement is not required to be complied with. (2) Selection of Name of the Company and Ascertaining its Availability from ROC: Make an application to the concerned Registrar of Companies in e-form 1A as prescribed in the Companies (Central Government’s) General Rules and Forms (Amendment) Rules, 2006, for the purpose and also pay the prescribed application fee of ` 1000/- along with the application. The fee payable for the purpose can be remitted either electronically (by using a Credit Card or by electronic Bank transfer) or by cash/draft through Challan generated electronically on submission of the e-Form. Not more than six names can be submitted to ascertain availability. The names of the proposed company are to be given in e-form 1A in order of the promoters’ preference so that if the first name is not available, the Registrar may consider the second name and if the second name is also not available, the Registrar may consider the third name and so on. The proposed names should not be identical with, or too closely resemble, the names by which a company in existence has been previously registered. Before selecting the names, the promoters may be well advised to refer to the Name Availability Guidelines, 2011 issued by Ministry of Corporate Affairs for making a name available for registration. It must also be ensured that the proposed names do not violate the provisions of Emblems and Names (Prevention of Improper Use) Act, 1950. (3) Drafting and Printing of Memorandum and Articles of Association: On receipt of name availability from the Registrar of Companies, get the memorandum and articles of association of the proposed company drafted by a competent professional. If the company does not propose to have a share capital and it is to be incorporated as a public company, Table C in Schedule I to the Act has to be taken into consideration while drafting the memorandum and articles of association. If the company proposes to have a share capital and it is to be incorporated as a public company, Table D in Schedule I to the Act has to be taken into consideration while drafting its memorandum and articles of association. (4) Stamping and Signing of Memorandum and Articles: Get the memorandum and articles stamped by the appropriate State authority (Collector of Stamps) under the Indian Stamp Act, 1899. After being stamped, get the memorandum and articles signed by at least two subscribers in case of a private company and by at least seven subscribers in case of a public company. Each subscriber shall write in his/her own hand, his/her name, his/her father/husband’s name, occupation, address and the number of shares subscribed for by him/her, if the company has a share capital. At least one person shall witness the signatures of all the subscribers. The witness shall also sign and write in his/her own hand, his/her name, his/her father’s name, occupation and address. Under the system of MCA21, the Stamp Duty is to be paid only through electronic mode for the States who have agreed for e-stamping. The Ministry had decided to accept payments of value upto ` 50000/-, for MCA 21 services, only in electronic mode. For the payments of value above ` 50,000, stakeholders have the option to make payment either in electronic mode, or through paper challan. A scanned copy of the duly stamped and executed MOA and the AOA is also required to be attached with e-form 1 and submitted electronically. Stamp duty on e-Form 1, Memorandum of Association (MoA) and Articles of Association (AoA) can be paid electronically through the MCA portal and in such case submission of physical copies of the uploaded e-Form 1, MoA and AoA to the office of RoC is not required. In case stamp duty is not paid electronically through MCA portal, the applicant is required to deliver simultaneously the original stamped physical copies of the uploaded e-Form 1, MoA and AoA along with a copy of challan/ receipt to the concerned office of the ROC. (5) Dating of Memorandum and Articles: Thereafter the memorandum and articles will be dated. This date must be the date of stamping or later than the date of the stamping and not, in any event, a date prior to the date of the stamping Thanks