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

Sunita Textiles, a partnership firm with secured loans from a bank, is seeking registration as a company under Part I of Chapter XXI. Which obligation applies to it before registration under Section 374 of the Companies Act, 2013?

Before registration, the applicant must ensure that its secured creditors have either consented to or given no objection to the registration. This is an express requirement of Section 374(a) of the Companies Act, 2013, so the bank lending to the firm must be satisfied.

  1. AIt must ensure secured creditors have consented to or given no objection to the registrationCorrect
  2. BOnly unsecured creditors need to be informed by post
  3. CIt must obtain prior approval of the Reserve Bank of India
  4. DIt must obtain the consent of the Registrar of Firms for the proposed company name

Explanation

Section 374(a) requires the company seeking registration to ensure that its secured creditors have either consented or given a no objection. The Act does not say unsecured creditors alone must be informed, and it does not require RBI approval.

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