CA Intermediate · Corporate and Other Laws · Incorporation of Company and Matters Incidental Thereto
Nirmal Textiles Pvt. Ltd. was incorporated in Pune. Its promoters carried on business on the basis of a certificate of incorporation, which later turned out to have been obtained by fraudulent misrepresentation, though all formal requirements appeared complete. Under the Companies Act, 2013, what is the effect of the certificate of incorporation on the company's existence?
The certificate of incorporation is conclusive evidence that registration requirements were met and that the company is validly incorporated. Even if fraud was involved, the company continues to exist until the Tribunal makes an appropriate order; it does not become void automatically or open to challenge by creditors.
- AThe certificate is conclusive evidence that all requirements were complied with, and the company exists until a Tribunal or court acts on the fraudCorrect
- BThe certificate is only prima facie evidence, so any creditor may treat the company as non-existent
- CThe company is void from the beginning because fraud vitiates everything, without any order
- DThe company is valid only for the period of one year, after which the Registrar must re-verify
Explanation
The certificate of incorporation is conclusive evidence that the requirements of the Act were complied with and that the company is duly registered. Fraud does not make it void automatically; the Tribunal can act on an application on grounds such as fraudulent incorporation. Treating it as mere prima facie evidence is wrong.
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