Companies Act Section 368

Companies Act, Section 368: Vesting of Property on Registration

Section 368 of the Companies Act, 2013 deals with the transfer and vesting of property owned by an existing entity such as a partnership firm, limited liability partnership, society, cooperative society, or other business body upon its registration as a company under the Companies Act. The purpose of this provision is to ensure that, once an entity has been successfully incorporated as a company under this Act, all the assets and rights in property that were owned or controlled by the entity prior to registration are seamlessly transferred to and vested in the newly registered company without the need for any further conveyance, transfer deed, or legal instrument.

Automatic Vesting of Property Upon Incorporation

Upon completion of the registration process under the relevant provisions of Part XXI of the Companies Act, and once the Certificate of Incorporation is issued under Section 367, all property belonging to or vested in the pre-existing entity shall, by operation of law, be transferred to the newly incorporated company. This includes:

Movable property: Such as machinery, vehicles, raw materials, furniture, inventory, securities, and other tangible assets,
Immovable property: Such as land, buildings, leases, and rights in immovable estates,
Actionable claims: This refers to enforceable rights to take legal action to recover debts or property, such as outstanding receivables, claims under contracts, or rights under litigation.
All of these are deemed to be automatically vested in the company as registered under the Companies Act, for the entire estate and interest that the unregistered entity previously held in such property.

Legal Continuity and Protection of Assets

This vesting provision is vital to ensure continuity of ownership and to avoid any legal vacuum or disruption in the rights of the newly registered company. The entity does not lose ownership or interest in its assets merely because it changes its legal structure from an unregistered form (like a firm or LLP) to a registered company under the Act.

Importantly, this vesting occurs without requiring fresh documentation, re-registration of title, or third-party consent, unless specifically required under another applicable law (for example, land title laws in some states). Thus, Section 368 provides a statutory transfer mechanism, giving legal effect to the transformation of asset ownership into the new corporate structure.

Scope of Vesting

The vesting covers:

Ownership rights: The new company assumes full legal ownership of the property.
Interests and entitlements: All benefits, rights, and obligations associated with the property also pass to the company.
Legal title and enforceability: The company becomes the lawful holder of all deeds, documents, and enforceable rights.