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CS Executive · Company Law and Practice · Introduction to Company Law

Bharat Mills Ltd. was registered under the Companies Act, 1956. Its board wants to re-register it afresh under Section 366 as a company limited by guarantee. Which is correct?

The re-registration is not allowed. Under Section 366, a company already registered under the Companies Act, 1956 (or the 1882 or 1913 Acts) cannot register under this section, so member assent, membership numbers or a guarantee undertaking cannot make it eligible.

  1. AAllowed if three-fourths of members assent
  2. BAllowed if it has at least seven members
  3. CNot allowed, since a company registered under the Companies Act, 1956 shall not register under this sectionCorrect
  4. DAllowed only with a resolution declaring each member's undertaking to contribute

Explanation

Proviso (i) to Section 366(2) says a company registered under the Indian Companies Act, 1882 or 1913 or the Companies Act, 1956 shall not register under this section. Hence member assent, member count or a guarantee resolution cannot cure the bar. The guarantee resolution in proviso (vi) applies only to eligible companies.

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