Companies Act Section 371

Companies Act, Section 371: Effect of Registration Under This Part

Section 371 of the Companies Act, 2013 outlines the legal consequences and effects that follow when an existing business entity such as a partnership firm, LLP, society, or cooperative society is successfully registered as a company under Part XXI of the Act, which deals with companies capable of being registered. This section ensures a smooth legal transition, outlines how the existing rules and obligations continue, and specifies how the provisions of the Companies Act will apply to the newly registered company and its members.

This section is central to understanding how such an entity, upon registration, attains a legal status equivalent to that of a company originally incorporated under this Act, while also safeguarding certain original contractual or statutory rights and liabilities.

1. Applicability of Provisions After Registration

Once an existing business entity completes registration under this Part, sub-sections (2) to (7) of Section 371 automatically come into effect. These sub-sections comprehensively define the status, obligations, and governance of the registered entity as a company.

2. Existing Legal Instruments and Provisions Become Company Regulations

Any Act of Parliament or other laws applicable at the time of the entity’s formation,Any legal instruments, such as deeds or constitutions, used to regulate the entity.
In case of a company limited by guarantee, the resolution declaring the guaranteed amount by members, shall now be treated as if they were part of the company's memorandum or articles of association under the Companies Act, 2013. In essence, these earlier provisions shall be legally regarded:

As if those provisions that would have been required in a memorandum (had the company been formed under this Act from the start) are now part of a registered memorandum, and The rest are deemed part of the registered articles of association.
This ensures a continuity of obligations and legal form without needing to redraft foundational documents, while still aligning the company’s governance with the Companies Act.

3. Application of the Companies Act Provisions Post-Registration

Upon registration:

All provisions of the Companies Act, 2013 apply to the company, its members, contributories, and creditors, as if the company was formed under this Act, with some exceptions:

(a) Table F of Schedule I, which contains model articles of association for companies limited by shares, does not apply automatically. It applies only if the company adopts it by special resolution.
(b) Provisions of the Act relating to numbering of shares do not apply if the company’s shares are not already numbered.
(c) In the event of winding up, individuals who were liable for debts or liabilities of the company before registration (under the earlier legal form) remain contributories. They may be called upon to contribute to:
The repayment of pre-registration debts and liabilities, The adjustment of rights among members relating to those debts, The costs and expenses of winding up in connection with pre-registration obligations.
(d) If a contributory dies or becomes insolvent, their legal representatives or assignees shall be bound to make contributions as if the company had originally been formed under this Act.
This framework ensures that historical liabilities are preserved, and those responsible under the earlier structure remain accountable.

4. Special Provisions Concerning Share Capital and Liability Structures

The Act also ensures that certain provisions relating to change in liability status and share capital are applicable to the newly registered company, even if they were governed previously by other laws or legal instruments. These include:

Conversion of unlimited companies to limited companies, Powers to increase nominal share capital, and Powers to provide that some part of the share capital may not be called up, except in the case of winding up.
These provisions will apply notwithstanding anything contrary in previous laws or instruments governing the entity.

5. Restriction on Altering Certain Provisions

Even after registration, the company cannot alter certain key provisions found in the original constitution or governing instrument, if those provisions would have been mandatory in the memorandum had the company been originally incorporated under this Act and are not permitted to be altered by this Act.

This ensures that companies do not gain new powers simply by virtue of transitioning into company form. Their governance remains subject to original constraints unless the Companies Act specifically allows changes.

6. Preservation of Pre-Existing Powers to Amend Constitution

Apart from Section 242 (which deals with powers of the Tribunal to alter a company’s constitution), nothing in the Companies Act takes away the powers that a company may already have under a previous law or instrument to alter its own constitution or regulations.

So, any existing authority vested in the company by virtue of earlier laws or documents to make constitutional changes remains valid and enforceable.

7. Meaning of "Instrument" for the Purposes of This Section

For clarity, the term “instrument” in this section refers to any deed or document which served to legally constitute or regulate the entity prior to registration. This includes:

A deed of settlement, A deed of partnership, or An agreement or document governing a limited liability partnership (LLP).
This ensures broad coverage and recognition of various forms of constitutive documents used by different business structures.