Companies Act 2013 Section 15

Companies Act 2013 Section 15 deals with the formation and registration of companies established for charitable or non-profit purposes. This section is crucial for entities aiming to operate as companies with objectives such as charity, education, religion, or social welfare.

Understanding this section is vital for promoters, directors, and legal professionals to ensure proper compliance with registration norms and to maintain the legal status of charitable companies under Indian corporate law.

Companies Act Section 15 – Exact Provision

This section mandates that companies formed for charitable purposes must clearly state their lawful objects in the memorandum of association. It restricts such companies from engaging in business activities unrelated to their primary objectives, ensuring their operations align with their declared charitable aims.

• Requires clear statement of lawful objects in the memorandum.

• Applies specifically to charitable and non-profit companies.

• Restricts carrying on business unrelated to main objects.

• Ensures compliance with registration provisions for charitable companies.

Explanation of Companies Act Section 15

This section ensures that companies formed for charitable purposes are properly registered with clear objectives.

• States that the memorandum must specify lawful objects.

• Applies to promoters, directors, and the company itself.

• Mandates lawful and charitable objectives for registration.

• Permits business only if incidental to main charitable objects.

• Prohibits unrelated commercial activities.

Purpose and Rationale of Companies Act Section 15

The section aims to maintain the integrity of charitable companies by regulating their formation and activities.

• Strengthens governance of charitable entities.

• Protects public interest and donor trust.

• Ensures transparency in company objectives.

• Prevents misuse of corporate form for unrelated business.

When Companies Act Section 15 Applies

This section applies at the time of company incorporation and registration.

• Applicable to companies with charitable or non-profit objectives.

• Mandatory for registration under the Companies Act.

• Triggers during memorandum drafting and submission.

• Exemptions do not apply to charitable companies under this Act.

Legal Effect of Companies Act Section 15

This provision creates a mandatory requirement for companies to declare lawful and charitable objectives in their memorandum. It restricts companies from engaging in unrelated business activities, impacting their legal status and compliance.

Non-compliance can lead to rejection of registration or legal action. The section works in tandem with MCA rules governing company registration and charitable entities.

• Creates duty to specify lawful objects.

• Restricts unrelated business activities.

• Non-compliance affects registration validity.

Nature of Compliance or Obligation under Companies Act Section 15

Compliance is mandatory at the incorporation stage. The company must ensure its memorandum reflects lawful charitable objectives. Directors and promoters bear responsibility for accurate declarations.

This is a one-time obligation but impacts ongoing governance and permissible activities.

• Mandatory compliance during incorporation.

• One-time but foundational obligation.

• Responsibility lies with promoters and directors.

• Impacts internal governance and operations.

Stage of Corporate Action Where Section Applies

The section applies primarily at the incorporation and registration stage.

• During drafting of memorandum of association.

• At submission for company registration.

• Before commencement of business activities.

• Ongoing compliance with stated objects.

Penalties and Consequences under Companies Act Section 15

Failure to comply may result in refusal of registration or cancellation of company status. Directors may face penalties for misrepresentation. The company risks losing its charitable status and related benefits.

• Rejection or cancellation of registration.

• Monetary penalties on directors.

• Loss of charitable status and privileges.

Example of Companies Act Section 15 in Practical Use

Company X intends to register as a charitable company for educational purposes. During incorporation, the promoters ensure the memorandum clearly states the educational objectives and restricts activities to those incidental to education. This compliance facilitates smooth registration and maintains the company’s non-profit status.

Takeaways:

• Clear object clause is essential for registration.

• Restricting activities to main objects avoids legal issues.

Historical Background of Companies Act Section 15

Section 15 evolved from provisions in the Companies Act, 1956, which also regulated charitable companies. The 2013 Act introduced clearer guidelines to strengthen compliance and governance of non-profit companies.

• Derived from Companies Act, 1956 provisions.

• Introduced to clarify charitable company registration.

• Enhanced governance and compliance requirements.

Modern Relevance of Companies Act Section 15

In 2026, this section remains vital for digital filings and MCA portal registrations of charitable companies. It supports governance reforms and aligns with CSR and ESG compliance trends.

• Supports digital incorporation processes.

• Ensures governance in charitable sector.

• Aligns with CSR and ESG frameworks.

Related Sections

• Companies Act Section 2 – Definitions relevant to corporate entities.

• Companies Act Section 8 – Formation of companies with charitable objects.

• Companies Act Section 12 – Registered office of company.

• Companies Act Section 149 – Appointment of directors.

• IPC Section 420 – Cheating and dishonestly inducing delivery of property.

• SEBI Act Section 11 – Regulatory oversight for listed companies.

Case References under Companies Act Section 15

No landmark case directly interprets this section as of 2026.

Key Facts Summary for Companies Act Section 15

• Section: 15

• Title: Formation of Charitable Companies

• Category: Governance, Compliance

• Applies To: Companies with charitable objects, promoters, directors

• Compliance Nature: Mandatory at incorporation

• Penalties: Registration refusal, monetary fines, loss of status

• Related Filings: Memorandum of association, registration documents

Conclusion on Companies Act Section 15

Section 15 of the Companies Act, 2013, plays a crucial role in regulating the formation of companies with charitable objectives. It ensures that such companies clearly state lawful and specific objects in their memorandum, aligning their operations with their declared purposes.

Compliance with this section safeguards the company’s legal status and public trust. It prevents misuse of the corporate form for unrelated business activities, thereby promoting transparency and accountability in the charitable sector.

FAQs on Companies Act Section 15

What types of companies does Section 15 apply to?

Section 15 applies to companies formed for charitable or non-profit purposes. It ensures their objectives are lawful and clearly stated in the memorandum of association.

Can a charitable company engage in business activities?

A charitable company can engage in business only if it is incidental to the attainment of its main charitable objects. Unrelated commercial activities are prohibited.

Who is responsible for compliance with Section 15?

Promoters and directors are responsible for ensuring that the memorandum states lawful objects and that the company complies with this section during incorporation.

What happens if a company violates Section 15?

Non-compliance can lead to refusal or cancellation of registration, monetary penalties on directors, and loss of charitable status and related benefits.

Is compliance with Section 15 a one-time requirement?

Yes, compliance is mandatory at the incorporation stage but affects ongoing governance and permissible activities of the company.