Tag: Merger and Acquisition

The Doctrine of Lifting the Corporate Veil is a significant concept in corporate law. It refers to a legal decision to treat the rights or duties of a corporation as the rights or liabilities of its shareholders or directors. Normally, a company is regarded as a separate legal entity, distinct from its shareholders, directors, or promoters, as established in the landmark case of Salomon v. Salomon & Co. Ltd. (1897). However, in certain situations, courts may “lift” or “pierce” the corporate veil to look beyond the company’s independent existence and examine the real individuals behind it.

This doctrine is applied when the corporate form is used to perpetrate fraud, evade tax, defeat law, or engage in dishonest practices. Indian courts have also accepted this principle to ensure justice and equity prevail over rigid legal formalities.

Purpose of the Doctrine:

The doctrine aims to:

• Prevent misuse of corporate personality.

• Hold the real persons accountable in case of fraud or illegal acts.

• Maintain fairness in the application of corporate law.

• Discourage unethical use of limited liability protections.

In essence, it is used to safeguard the public interest and ensure that the concept of limited liability is not abused.

Legal Basis in India:

In India, although there is no specific statute defining this doctrine, courts have developed it through judicial precedents under the Companies Act, 2013 and earlier company laws. Section 2(20) of the Companies Act defines a company as a separate legal person. However, Indian courts have exercised their inherent powers to disregard this separateness under specific circumstances.

Instances Where the Veil is Lifted

• To Prevent Fraud or Improper Conduct

If a company is formed or used to commit fraud, cheat creditors, or deceive the public, courts can lift the veil. In Delhi Development Authority v. Skipper Constructions (1996), the Supreme Court held that the veil could be lifted if a company was used as a facade for fraud.

• Evasion of Tax

Companies cannot be used as tools to avoid taxes. In Commissioner of Income Tax v. Meenakshi Mills (1967), the court lifted the veil to investigate tax evasion and found that the company was used to divert income.

• Avoidance of Welfare Laws

If a company is set up to escape compliance with labour or social welfare laws (like PF, ESI), courts may disregard the corporate entity. This ensures that employers do not hide behind the veil to deny workers their rightful dues.

• Agency or Sham Companies

Where a company is a mere agent of another person or company, and does not function independently, the veil may be lifted. Courts will then attribute actions or liabilities of the company to the real controller.

• Protection of Public Interest

Courts lift the corporate veil when it is necessary to protect national interest, prevent illegal trade, or uphold security and law. For example, in LIC v. Escorts Ltd. (1986), the court analyzed the shareholding of foreign companies to determine control and ownership, for the sake of public policy.

Statutory Provisions Under the Companies Act, 2013:

While the Companies Act does not directly mention “lifting the veil,” certain provisions indirectly support the doctrine:

• Section 7(7): If the company is incorporated by furnishing false or incorrect information, the liability can be imposed personally on the persons responsible.

• Section 34 and 35: Penalties for misstatements in the prospectus can make directors and promoters personally liable.

• Section 339: In case of fraud during winding up, the Tribunal may hold the persons who were knowingly parties to the fraud personally liable for company debts.

Judicial Interpretation and Landmark Cases in India:

1. Salomon v. Salomon & Co. Ltd. (UK case, 1897)
   Established the principle of separate legal entity.

2. Life Insurance Corporation of India v. Escorts Ltd. (1986)
   Explained that lifting the veil depends on the facts and must be applied cautiously.

3. Gilford Motor Co. v. Horne (UK case)
   The veil was lifted to prevent an ex-employee from using a company to breach a contract.

4. Union Carbide Case (Bhopal Gas Tragedy)
   The Indian government tried to lift the veil of Union Carbide Corporation to hold it responsible for the actions of its Indian subsidiary.

Limitations of the Doctrine:

While the doctrine is important, courts use it sparingly and cautiously. It is not meant to disregard the corporate structure in every dispute. Courts generally uphold the sanctity of the corporate form unless there is strong evidence of misuse, fraud, or illegal conduct. The doctrine cannot be used merely to satisfy debts or liabilities when no wrongdoing is involved.

Book building is a price discovery mechanism that is used in the stock markets while pricing securities for the first time. When shares are being offered for sale in an IPO, it can either be done at a fixed price. However, if the company is not sure about the exact price at which to market its shares, it can decide a price range instead of an exact figure. This process of discovering the price by providing the investors with a price range and then asking them to bid on it is called the book building process. It is considered to be one of the most efficient mechanisms of pricing securities in the primary market. This is the preferred method which is recommended by all major stock exchanges and as a result is followed in all major developed countries in the world.

Book Building Process:

• Appointment of Investment Banker:

The first step starts with appointing the lead investment banker. The lead investment banker conducts due diligence. They propose the size of the capital issue that must be conducted by the company. Then they also propose a price band for the shares to be sold. If the management agrees with the propositions of the investment banker, the prospectus is issued with the price range as suggested by the investment banker. The lower end of the price range is known as the floor price whereas the higher end is known as the ceiling price. The final price at which securities are indeed offered for sale after the entire book building process is called the cut-off price.

• Collecting Bids:

Investors in the market are requested to bid to buy the shares. They are requested to bid the number of shares that they are willing to buy at varying price levels. These bids along with the application money are supposed to be submitted to the investment bankers. It must be noted that it is not a single investment banker who is engaged in the collection of bids. Rather, the lead investment banker can appoint sub-agents to tap into their network especially for receiving the bids from a larger group of individuals.

• Price Discovery:

Once all the bids have been aggregated by the lead investment banker, they begin the process of price discovery. The final price chosen in simply the weighted average of all the bids that have been received by the investment banker. This price is declared as the cut-off price. For any issue which has received substantial publicity and which is being anticipated by the public, the ceiling price is usually the cut-off price.

• Publicizing:

In the interest of transparency, stock exchanges all over the world require that companies make public the details of the bids that were received by them. It is the lead investment banker’s duty to run advertisements containing the details of the bids received for the purchase of shares for a given period of time (let’s say a week). The regulators in many markets are also entitled to physically verify the bid applications if they wish to.

• Settlement:

The application amount received from the various bidders has to be adjusted and shares have to be allotted. For instance, if a bidder has bid a lower price than the cut-off price then a call letter has to be sent asking for the balance money to be paid. On the other hand, if a bidder has bid a higher price than the cut-off, a refund cheque needs to be processed for them. The settlement process ensures that only the cut-off amount is collected from the investors in lieu of the shares sold to them.

Partial Book Building

Partial book building is another variation of the book building process. In this process, instead of inviting bids from the general population, investment bankers invite bids from certain leading institutions. Based on their bids, a weighted average of the prices is created and cut-off price is decided. This cut-off price is then offered to the retail investors as a fixed price. Therefore, the bidding only happens at an institutional level and not at a retail level.

This is also an efficient mechanism to discover prices. Also the cost and complications involved in conducting a partial book building are substantially low.

First of all, the book building process brings flexibility to the pricing of IPO’s. Prior to the introduction of book building, a lot of IPO’s were either underpriced or overpriced. This created problems because if the issue was underpriced, the company was losing possible capital. On the other hand, if the issue was overpriced it would not be fully subscribed. In fact, if it was subscribed below a given percentage, the issue of securities had to be cancelled and the substantial costs incurred over the issue would simply have to be written off. With the introduction of book building process, such events no longer happen and the primary market functions more efficiently.

Other Subtypes of Book Building

The following are subtypes of book building:

• Accelerated Book Building

The companies can use an accelerated book-building process to acquire quick capital market. That can be the case when a company cannot finance its short-term project via debt financing. So, the issuing company contacts several investment banks that can act as underwriters the evening before the intended placement. Under this process, the offer period is open only for a day or two days, and you have no time for marketing for an issue. So, instead, the underwriter overnight contacts their networks and details the current topic to institutional investors. If this investor finds this issue interesting, then allotment happens overnight.

• Partial Book Building

As the partial book building says, that issue book is built partially, where the investment banker only invites bids from the selected investors. Based on their bids, they take the weighted average of the prices to finalize the cut-off price. Then other investors, such as retail investors, take this cut-off price as a fixed price. So, the bidding happens with a selected group of investors under the partial book-building process.

Advantages of Book Building

• The most efficient way to price the share in the IPO market.
• The share price is finalized by investors’ aggregate demand, not by the fixed price set by the company management.

Disadvantages of Book Building

• High costs are involved in the book-building process compared to the fixed-price mechanism.
• The period is also more in the book booking process than the fixed-price mechanism.

Subscription of shares refers to the process where investors apply for shares issued by a company. When a company offers shares to the public through an Initial Public Offering (IPO) or other methods, investors submit applications to purchase them. Based on demand, the company may receive full, over, or under-subscription. Full subscription means the exact number of shares offered is applied for, over-subscription occurs when demand exceeds supply, and under-subscription happens when applications are fewer than the issued shares. Companies allocate shares based on predefined criteria, ensuring fair distribution among investors while adhering to regulatory guidelines.

Minimum Subscription of Shares:

The minimum subscription of shares refers to the minimum number of shares that a company must sell to raise a certain amount of capital to proceed with an issue, whether through an Initial Public Offering (IPO), Follow-on Public Offering (FPO), or any other public offering. This minimum subscription amount is typically defined in the prospectus and is a regulatory requirement, ensuring that the company has sufficient investor interest to justify proceeding with the issue.

In India, for instance, the minimum subscription requirement for public offerings is usually 90% of the total issue size. If the company fails to achieve this minimum subscription level, the issue is considered unsuccessful, and the funds collected (if any) must be refunded to the investors. This safeguard protects investors from getting involved in companies that may lack sufficient investor confidence or face difficulties in raising the required capital.

The concept of minimum subscription ensures that the company has a strong foundation of capital to fund its operations or expansion. It also prevents situations where the company might not have enough funds to cover operational or project expenses, thus providing a level of financial security.

Moreover, achieving minimum subscription enhances the credibility of the company in the eyes of investors and regulators, as it demonstrates market confidence in its business model and financial stability.

Over-Subscription of Shares:

Over-subscription occurs when the demand for shares in an initial public offering (IPO) or any other public share issue exceeds the number of shares offered by the company. This situation indicates high investor interest in the company’s shares, often due to favorable market conditions, strong company performance, or investor confidence in the business’s future prospects.

When an issue is over-subscribed, investors apply for more shares than what is available. For example, if a company issues 1,00,000 shares, and investors apply for 2,00,000 shares, the issue is considered over-subscribed by 100%. This scenario usually results in the company having to make decisions on how to allocate shares fairly among investors.

In cases of over-subscription, companies may use various methods to allocate shares, such as:

1. Pro-rata Basis: Shares are allocated in proportion to the number of shares applied for by each investor. If an investor applied for 100 shares and the issue was over-subscribed by 2:1, they would receive only 50 shares.

2. Lottery System: In some cases, especially when demand far exceeds supply, a lottery system is used to randomly allocate shares to applicants.

3. First-Come, First-Served: Shares may be allotted based on the order in which applications are received, with early applications being given priority.

The organization primarily looks after the operation of employment exchanges, industrial training institutes, vocational guidance programme and some other institutions. The activities of the directorate are essentially governed by the policies, standards and procedures set by the central directorate general, employment and training. Other activities of the organization include employment market information, vocational rehabilitation centers, and training of handicapped groups such as women and physically handicapped. The training wing of the department also looks after the implementation of the apprentices act, 1961. Generally, the directorate functions independently of the organizing of labour commissioner.

The office of the Chief Adviser of factories, which is now called Directorate General, Factory Advice Service and Labour Institutes, was setup in 1945 with the objective of advising Central and State Governments on administration of the Factories Act and coordinating the factory inspection services in the States. The Directorate General, Factory Advice and Labour Institutes (DGFASLI) comprises:

• Headquarters situated in Mumbai
• Central Labour Institute in Mumbai
• Regional Labour Institutes in Chennai, Kanpur, Kolkata and Faridabad.

The DGFASLI is an attached office of the Ministry of Labour & Employment, Government of India and serves as a technical arm to assist the Ministry in formulating national policies on occupational safety and health in factories and docks. It also advises factories on various problems concerning safety, health, efficiency and well – being of the persons at work places.

Objectives of DGFASLI

• To provide technical advice and service to the Central and State Governments, and workplaces including factories and ports on matters related to safety, health and welfare of workers.
• To develop legislations, standards, guidelines and codes of practices consistent with international instruments/standards on Safety, Health and Environment at workplaces.
• To conduct studies, surveys and audits in the field of Occupational Safety and Health (OSH)
• To enforce and promote Safety, Health and Environment in major ports in India.
• To become a national repository of information on OSH and to promote OSH at workplaces.
• To conduct seminars, workshops and training programmes on OSH
• To encourage and provide best practices in the field of OSH.
• To establish and develop research and development in the area of OSH and risk management.
• To operate Award Schemes such as PMSA, VRP and NSA

The share capital of a company is the number of funds that a company can raise by the allotment of shares of its company but not exceeding the maximum amount mentioned in the memorandum of the company. When a company proposes to increase its subscribed capital by further issue of shares, then it can either issue equity or preference shares through the rights issue, preferential allotment or private placement of shares.

However, Article of Association of the Company must not restrict the right to make such allotment and also the authorise capital of the company must have the limit to allot the required shares. The procedure for allotment of shares can be time-consuming with the need to meet compliance at every step. You can avail affordable plans offered by Provenience to complete the process with ease.

Pursuant to the provisions of Section 42 & section 62 of the Companies Act, 2013, and the rules made thereunder, shares can be issued on the basis of Rights Issue, Private Placement & Preferential Allotment.

Under Right Issue, with the approval of the Board, shares are issued to the existing shareholders of the Company in the proportion of their current existing shareholding by issuing a Letter of Offer in this regard. The offer shall be open for a period not less than 15 days & not exceeding 30 days along with the right of renunciation. This offer period can be reduced in case of a Private Company with the consent of ninety percent, of the members of the Company. The offer letter shall be dispatched through registered post or speed post or through electronic mode or courier or any other mode having proof of delivery to all the existing shareholders at least three days before the opening of the issue.

Private placement of shares is governed by Section 42 of the Companies Act, 2013 read with rules framed thereunder. With the approval of the members via Special Resolution, Shares are allotted to a selected group of persons by the issue of Private Placement Offer Letter (PPOL) which does not carry any right of renunciation. The subscription money must be paid either by cheque or demand draft or other banking channel and not by cash and be kept in a separate bank account in a scheduled bank. An offer or invitation to subscribe securities under private placement shall not be made to persons more than two hundred in the aggregate in a financial year. A complete record of private placement offers shall be prepared in Form PAS-5.

Whereas, Preferential allotment refers to the allotment to any person being an existing shareholder or an outsider, either for cash or for a consideration other than cash. The price of such shares shall be determined by the Valuation Report. Rest of the practical procedure for the preferential allotment of shares is more or less similar to that of private placement.

Different types of NGO Laws in India

The following laws would be applicable for NGO registration in India:

Trust: It is a public charitable institution registered under the Charity Commissioner’s office having jurisdiction over the state. Maharashtra has adopted the Bombay Public Trust Act, 1950, which has become a model for the various other states. The law that regulates trusts are the Indian Trusts Act, 1882.

Societies: According to the Societies Registration Act, 1860, states have adopted their version from the model Societies Act, 1860. A society is considered as an independent form of organization. It has broad membership, which elects a governing body periodically for managing the affairs of the society. The body is accountable to members. There are multiple types of societies that may be registered under the Act which includes:

• Charitable societies;
• Societies which are established for the promotion of science, literature, or fine arts, education; and
• Public Art Museums, and galleries, and certain other types of museums.

Company: A Company has been described under the Companies Act, 2013. The Act permits “Section 8 companies” to be formed. According to the Act, Section 8 Companies are those which are formed for the purpose of art, religion, charity, and other useful objects. Internal governance of Section 8 Company is similar to that of a society. The members of the committee or governing council are elected by the members of the Charitable Company. A section 8 company can be dissolved. The registration process takes time and requires the memorandum of association and articles of association that has to be submitted with the ROC (registrar of companies).

Trade Union: According to the Trade Union Act, 1926, a Trade Union is defined as temporary or permanent combination formed to regulate and control the relations of employees and employers.

Multi-State Co-operative Societies: The Multi-State Co-operative Societies Act, 2002 has substituted the previous Act of 1984. The Act provides for the compliance of both primary and federal co-operatives.

Legal compliances of NGO

There are various legal compliances of the NGO are as follows:

• Permanent Account Number (PAN): This is a unique alphanumeric combination issued to all the juristic entities- identifiable under the Income Tax Act, 1961. The PAN number is used as the national identification number.
• Tax Deduction Number (TAN): It is the Tax Deduction and Collection Account Number. It is a ten digit alpha-numeric number required to be obtained by all the individuals who are responsible for deducting or collecting tax (TDS) at source. The TAN number is required to be quoted at the following places:

1. A challan depositing the tax so deducted,
2. A certificate issued against the tax deducted,
3. All returns furnished in respect of the tax deducted at source, etc.

Legal Procedure for establishment of NGO, Online & Offline

Non-Governmental Organization (NGO) is an entity that works for charitable purposes. NGO is known as a not-for-profit making organization that works towards the promotion of arts, science, sports, education, research, social welfare, religion, charity, and more. NGOs in India are of various types which are registered under Trust Act, Society Registrations Act, or the Companies Act.

NGO is registered in the form of Section 8 Company under the Companies Act, 2013. Companies registered under this act are all not-for-profit and charitable trusts. The only difference between a trust or society and NGO is that the latter is registered under the Ministry of Corporate Affairs (MCA).

Before Applying for NGO Registration

Obtain Digital Signature Certificate (DSC)

Proposed directors are supposed to provide Digital Signatures, as the registration forms are to be digitally signed before filing the form online. Certifying agencies under the Government of India issue Digital Signature Certificate (DSC). Applicants need to obtain either Class 2 or Class 3 category of DSC. The fees for obtaining DSC vary and depend on the certifying agency.

Apply for Director Identification Number (DIN)

Applicants are required to apply for a DIN for the proposed directors of the company. Filling of application Form DIR-3 helps in the allotment of DIN. Scanned documents like self-attested copies of PAN, identity, and address proof of directors are to be submitted along with the application form. The application form can be submitted online on the Ministry of Corporate Affairs (MCA) portal. The documents are required to be attested by a practicing chartered accountant, company secretary, or cost accountant.

Steps to Register as an NGO

Step 1: The applicant needs to obtain a DSC of the proposed Directors of an NGO. After a DSC is obtained, file Form DIR-3 with the ROC to get a DIN.

Documents to attach for DIN application:

    Identity and Address Proofs: Passport, Voter’s ID card, Aadhar card, electricity bill, driving license, PAN card, house tax receipt, business address proof, society’s name, etc.

Step 2: After the approval of DIR-3, the respective ROC will allot a DIN to the proposed directors.

Step 3: Next the applicant needs to file Form INC-1 with the ROC to apply for a company name. Preference of 6 names can be applied from which one would be allotted by ROC, depending on the availability.

Step 4: After the approval from ROC, file Form INC-12 to apply for a license for an NGO

Documents to attach with INC-12:

• Declaration, as per Form INC-14 (Declaration from CA)
• Declaration, as per Form INC-15
• Draft Article of Association (AOA) and Memorandum of Association (MOA) as per Form INC-13
• Estimated Income & Expenditure for next 3 years

Step 5: After the Form’s approval, the NGO license will be issued in Form INC-16.

Step 6: After the applicant has obtained the NGO license, he/she needs to file SPICE Form 32 with ROC for incorporation. After the ROC has checked and verified the documents, it issues a Certificate of Incorporation with a unique Corporate Identification Number (CIN).

Eligibility to Start an NGO

• Minimum 2 directors required if NGO is to be incorporated as a private limited company
• Minimum of 3 directors required, in case of incorporation as a public limited company
• The maximum number of members is 200, in the case of a private limited company
• No member limit in case of a public limited company
• No fee is charged if registering as an NGO

Forms Required for NGO Registration

• DIR 12 Appointments of Directors
• DIR 2 Consent of Directors
• DIR 3 Application to ROC to get DIN
• INC 1 Business name approval
• INC 12 Applications for License
• INC 13 Memorandum of Association
• INC 14 Declaration from a practicing CA
• INC 15 Declaration from each person making the application
• INC 16 License to incorporate as NGO
• INC 22 Situation of Registered Office
• INC 7 Applications for Company’s Incorporation
• INC 8 Declarations
• INC 9 Affidavit from each director and subscriber

Procedure for Registration of Trust under the Indian Trusts Act,1882

Decide the following:

a) Name of the trust

b) Address of the trust

c) Objects of the trust (Charitable or Religious)

d) One settlor of the trust

e) Two trustees of the trust (minimum)

f) Property of the trust: Movable or immovable property (normally a small amount of cash/cheque is given to be the initial property of the trust, in order to save on the stamp duty).

Prepare a Trust Deed on stamp paper of the requisite value. The rates of stamp duty varies from state to state. Kindly check the current rate of stamp duty applicable in your state.

Requirement for registration of Trust Deed with the Local Registrar under the Indian Trusts Act, 1882:

a) Trust Deed on stamp paper of requisite value.

b) One passport size photograph & copy of the proof of identity of the settlor.

c) One passport size photograph & copy of the proof of identity of each of the two trustees.

d) One passport size photograph & copy of the proof of identity of each of the two witnesses.

e) Signature of settlor on all the pages of the Trust Deed.

t) Witness by two persons on the Trust Deed.

Go to the local Registrar and submit the Trust Deed, along with one photocopy, for registration. The photocopy of the Deed should also contain the signature of settlor on all the pages. At the time of registration, the settlor and two witnesses are required to be personally present, along with their identity proof in the original.

The Registrar retains the photocopy and returns the original registered copy of the Trust Deed.

The Societies Registration Act, 1860

The Societies Registration Act, 1860 is legislation in India which allows the registration of entities generally involved in the benefit of society education, health, employment etc.

The British Indian Empire, with a wish to encourage such activities and to promote the formal organisation of groups of likeminded people, incorporated the Act 21 of 1860, in other words, The Societies Registration Act, 1860 (21 of 1860), which came into force on 21 May 1860. The Act continues until today and being an Act of Parliament, comes under the Right to Information Act, wherein the government is legally responsible to give any information requested by any citizen of India with respect to any society.

Closing of a Registered Society

A society is legally registered under the Societies Registration Act, 1860. The Indian Societies Registration Act of 1860 was enacted under the British Raj in India, but is largely still in force in India today. It provides for the registration of literary, scientific and charitable societies. Under the Act societies may be formed, by way of a memorandum of association, by any seven or more people associated for any literary, scientific or charitable purpose. The memorandum of association has to be filed with the Registrar of Societies. The memorandum has to contain the name of the society, its objects, and the names, addresses, and occupations of the members of the governing body, by whatever name it may be called, duly signed for consent by all the members forming the society.

Provisions under the Act

Under Section 13 of the Societies Registration Act, 1860; a number of provisions relating to dissolution of a society and adjustments of its affairs are stated. It is stated that Any number not less than three-fifths of the members of any society may decide and determine that it shall be dissolved, and consequently it shall be dissolved without any delay, or at the time then agreed upon by the members, and all necessary steps are to be taken for the disposal and settlement of the property of the society, its claims and liabilities, according to the rules of the said society applicable thereto, if any were made at the time of the registration of the society and if not, then as the governing body shall find a convenient expedient, provided that, in the incident of any dispute or disagreement arising among the said governing body or the members of the society, the adjustment of its affairs shall be referred to the principal Court of original civil jurisdiction of the district in which the chief building of the society is situated and the Court shall make such order in the matter as it shall deem required by law and practically apt. The assent is necessarily required provided that no society shall be dissolved unless three-fifths of the members shall have expressed a wish for such dissolution by their votes delivered in person, or by proxy, at a general meeting convened for the purpose. There is also a concept of Government consent. It is provided in the aforesaid statute that whenever any Government is a member of, or a sponsor or contributor to, or otherwise interested in any society registered under this Act, such society shall not be dissolved without the consent of the Government of the State where the society was registered. There are also several state amendments given under this section.

Purpose of Society Registration

A society registration can be done for the development of fine arts, science, or literature or else for the diffusion of purposeful knowledge or charitable purposes of political education. According to section 20 of the Society Act, 1860, a society registration can be done for the following purposes:

• Promotion of fine arts.
• Diffusion of political education.
• Grant of charitable assistance.
• Promotion of science and literature.
• Creation of military orphan funds.
• Maintenance or foundation of galleries or public museum.
• Maintenance or foundation of reading rooms or libraries.
• Promotion or diffusion or instruction of useful knowledge.
• Collections of natural history.
• Collections of mechanical and philosophical inventions, designs, or instruments.

Registration of a Society in India

A Society can be created by a minimum of 7 or more persons. Apart from persons from India, companies, foreigners, as well as other registered societies can also register for the Memorandum of association of the society.

Similar to Partnership firms, society can also be either unregistered or registered. But, only the registered societies will be able to withstand consigned properties and/or have an ensemble filed against or by the society.

Society registration is maintained by state governments. Thus, the application for society registration must be created to the specific authority of the state, where the registered office of the society is situated.

For Society registration, the establishing members must agree with the name of society first and then prepare for the Memorandum, followed by Rules & Regulations of the society.

Selection of a Name

When selecting a name for society registration, it is vital to understand that according to Society Act, 1860, an identical or similar name of a currently registered society will not be allowed. Moreover, the proposed name shall not suggest for any patronage of the state government or the government of India or fascinate the provisions of the Emblem & Names Act, 1950.

Memorandum of Association

The Memorandum of Association of the society along with Rules & Regulations of society must be signed by every establishing member, witness by Gazetted Officer, Notary Public, Chartered Accountant, Oath Commissioner, Advocate, Magistrate first-class or Chartered Accountant with their official stamping and complete address.

The memorandum must contain the name of the society, the object of the society. Also, it consists of details of members of the society registration along with their names, addresses, designations, and occupations. The following document has to be prepared, submitted and signed for the sake of registration:

• Requesting society registration by providing covering letter, signed by all establishing members.
• Duplicate copy of Memorandum of Association of society along with certified copy.
• Duplicate copy of Rules & Regulations of society along with duplicate copy duly signed by all establishing members.
• Address proof of registered office of society as well as no-objection certificate (NOC) issued by landlord.
• Affidavit avowed by secretary or president of society declaring relationship among subscribers.
• Few minutes of meeting regarding the society registration along with providing some essential documents.

Dissolution of Society by Court

As per the provisions of this act, on the application of the Registrar under section 13A or under section 24 or on an application made by not less than one- tenth of the members of a society registered under this Act, the Court of competent jurisdiction referred to in section 13 may make an order for the dissolution of the society on any of the following grounds, viz.

(a) That the society has contravened any provision of this Act or of any other law for the time being in force and it is just and equitable that the society should be dissolved

(b) That the number of the members of the society is reduced below seven;

(c) That the society has ceased to function for more than three years preceding the date of such application;

(d) That the society is unable to pay its debts or meet its liabilities; or

(e) That the registration of the society has been cancelled under section 12D on the ground that its activities or proposed activities have been or are or will be opposed to public policy.

It has to be noted that when an order for the dissolution of a society is made under sub-section (1) or sub-section (2), all necessary steps for the disposal and the settlement of the property of the society, its claims and liabilities and any other adjustment of its affairs take place in manner as the Court may direct.

Matters of profit upon dissolution

Under section 14 of the act, upon the dissolution of the society, no member is entitled to receive any profits. If upon the dissolution of a society registered under this Act there remains, after the satisfaction of all its debts and liabilities, any property whatsoever, the same will not be paid to or disseminated and distributed among the members of the said society or any of them, but is required by law to be given to some other society which is to be determined by the votes of not less than three-fifths of the members present individually or by proxy at the time of the dissolution, or, in default thereof, by such Court as aforesaid. It is important to note here that this clause does not to apply to the Joint-Stock Companies. Provided, however, that this clause shall not apply to any society which has been founded or established by the contributions of share-holders in the nature of a Joint-Stock Company