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CS Executive · Setting Up of Business, Industrial and Labour Laws · Conversion of Business Entities

Meera Traders Private Limited alters its articles and drops the restrictions that the Act requires a private company's articles to contain. It takes no other formal step. What is the legal effect?

The company ceases to be a private company from the date of the alteration. The proviso to Section 14(1) operates automatically once the articles no longer contain the restrictions required of a private company, without any Registrar notice.

  1. AIt remains a private company until the Registrar issues a notice
  2. BIt continues as a private company but must pay a penalty
  3. CIt becomes an unlimited company
  4. DIt ceases to be a private company from the date of the alterationCorrect

Explanation

The first proviso to Section 14(1) says that where a private company alters its articles so they no longer include the required restrictions, it ceases to be a private company from the date of such alteration. The effect operates automatically, so waiting for a notice or paying a penalty is not the rule.

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