Certificate of incorporation is conclusive evidence comment.
The statement that ‘A certificate of incorporation is conclusive evidence that all the requirements of the Companies act have been complied with’ is very true.
Certificate of incorporation is the certificate granted to public as well as private company to recognise its existence in the eyes of law. The private company can immediately start its business after getting the certificate of incorporation but the public company requires the certificate of commencement along with certificate of incorporation. Certificate of incorporation is conclusive evidence that all the documents required for the incorporation or formation of the company the company have been filed in with the registrar and also examined by the registrar. The documents to be filed are:
- Memorandum of association which is a charter of company stating all the rights and obligations of company.
- Articles of Association stating the rules that will govern the activities of the company in attainment of its objectives.
- Information about the head office of the company.
- List of the directors of the company.
- Written consent of the directors of the company stating they have agreed to work in the capacity of director of company.
- Statutory declaration advocated by chartered accountant, cost accountant or company secretary in practice.
CERTIFICATE OF INCORPORATION- CONCLUSIVE EVIDENCE
Certificate of incorporation is a proof that:
- The articles and memorandum of the company conform to the provisions of the Companies Act and that all the legal formalities have been complied with. Once the certificate of incorporation has been granted, the regularity of incorporation cannot be questioned on any grounds whatsoever. In Peel’s case, the court refused to consider that any regularity had been committed prior to the registration of the company and Lord Cairns observed, “…..once the certificate of incorporation is given, nothing is to be inquired into as the regularity of the prior proceedings.”
In the case of Jubilee Cotton Mills Vs. Lewis, there was a similar verdict. The facts of the case are as under:
The necessary documents for registration were delivered to the registrar on 6 January. The Registrar issued the certificate of incorporation two days later but dated it 6 January instead of 7 January. On 6 January, some shares were allotted to Lewis. The question was whether the allotment made before the certificate was actually issued was void. It was held that the certificate of incorporation is conclusive evidence of all that it contains. Therefore, by law, the company was formed on 6 January and the allotment of shares was valid.
- The certificate of Incorporation is conclusive evidence that the company has become a body corporate from the date of issue of the certificate.
- The certificate shall be conclusive even if the signatories to the documents filed are less than seven in the case of a limited company, or the signatures are forged or those of minors.
- The certificate of incorporation is also conclusive evidence that the signatories to the documents filed have purchased and paid for the shares of the company mentioned against their names.
- The certificate testifies conclusively that the company’s incorporation is in accordance with the provisions of law. Even if an irregularity comes to light after the issuance of the certificate, the existence of the company cannot be questioned.
It was made abundantly clear in the case of Hammond Vs. Prentice Bros. that the incorporation of a company-after it has been issued the certificate of incorporation-cannot be set aside since it affects many persons who have an interest in the company, like its shareholders, creditors. employees and others. In other words, the certificate of incorporation is literally a conclusive document that testifies the existence of a company.
It needs, however, to be noted that if a company having illegal objectives has been registered, the illegal objectives do not become legal by the issuance of the certificate; but the certificate of incorporation continues to be conclusive and the legal personality of the company cannot be terminated by the cancellation of the certificate.
EFFECTS OF INCORPORATION
The effects of the incorporation are as under:
- The company becomes an incorporated body.
- The certificate of incorporation can be presented in a court of law as proof of the company’s existence.
- The company becomes a lawful’s ‘artificial person’ and its entity is deemed to be separate from its members- which is presented by its seal.
- The existence of company becomes permanent.
- After incorporation, the memorandum and articles of the company become binding on the company as well as its members in the same manner as if the company and each of its members has signed it individually.
- The company gets the power to acquire, hold and dispose of property, both movable and immovable tangible and intangible, to contract and to sue and be sued by the said name.
- A private company can start its business immediately on getting the Certificate of Incorporation.
In short, it may rightly be said that the certificate of incorporation is conclusive evidence of the company’s existence even if there are the following irregularities:
(i) Changes have been made in the memorandum of association after it has been signed but before registration.
(ii) All the signatories to the memorandum are minors.
(iii) The signatures on the memorandum of association are forged.
(iv) The objects of the company are illegal.
It is clear from what has been said above that the company, legally and conclusively, comes into existence as a corporate body after it has been issued the certificate of incorporation, even if there are irregularities in the filed documents. After the issuance of such certificate, the existence of the company cannot be challenged.