CS Executive · Company Law and Practice · Introduction to Company Law
Kaveri Textiles Pvt Ltd, a company registered under the Companies Act, 2013, alters its memorandum and articles to convert itself into a company of another class under the Act. Its Registrar closes the former registration and issues a fresh certificate of incorporation. A supplier asks whether the company's earlier contractual obligations are wiped out by the conversion. What is the correct position?
Pre-conversion debts, liabilities, obligations and contracts continue unaffected. Under section 18(3), they can be enforced as if the conversion registration had not happened, so closing the former registration and issuing a new certificate does not extinguish the supplier's rights against the company.
- AThe obligations lapse, because the former registration is closed and a new certificate is issued
- BThe obligations continue and may be enforced as if the conversion had not taken placeCorrect
- CThe obligations continue only if the supplier files a claim with the Registrar within six months
- DThe obligations continue only against the directors personally, not against the company
Explanation
Section 18(3) provides that registration on conversion does not affect any debts, liabilities, obligations or contracts incurred before conversion; they may be enforced as if the registration had not been done. The closing of the former registration therefore does not extinguish them, which is why the first option is wrong.
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