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CA Intermediate · Corporate and Other Laws · Incorporation of Company and Matters Incidental Thereto

Pragati Ltd was incorporated, and later it was found that its certificate of incorporation was obtained by furnishing false information and suppression of material facts. Which statement best describes the position under the Companies Act, 2013 on whether the incorporation can be challenged?

The certificate of incorporation is conclusive evidence of valid registration, but this does not protect incorporation obtained by fraud, false information or suppression of material facts. In that case the Tribunal can take action, including winding up, so the incorporation is not immune from challenge.

  1. AThe incorporation is conclusive evidence and can never be challenged
  2. BThe certificate is conclusive evidence of compliance with incorporation requirements, but the Tribunal may act on fraud, and the company may be wound up or have its incorporation dealt with on such groundCorrect
  3. CThe Registrar may cancel the certificate without any inquiry
  4. DOnly the shareholders of the company by special resolution can set aside the incorporation

Explanation

The certificate of incorporation is conclusive evidence that all requirements were complied with and that the company is duly registered. However, where the company was formed by furnishing false information or suppression of material facts, the Tribunal can intervene, including by ordering action such as winding up on the basis of fraudulent incorporation. Option A ignores the fraud exception, and the Registrar cannot cancel at will.

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