What Is an Unregistered Company (Section 375)?

An unregistered company under section 375 of the Companies Act, 2013 is a defined thing rather than a loose description. It is the category that lets the Tribunal wind up entities that were never registered as companies at all: a partnership firm, an LLP, a society, a co-operative society, an association. The category also carries three express exclusions, and those exclusions are what stop it swallowing the rest of the Act.

What is an unregistered company under section 375, exactly?

The Explanation to the section defines the expression in two moves: an exclusion list, then an inclusion that operates on everything left over.

Clause (a), what the expression shall not include:

• (i) a railway company incorporated under any Act of Parliament or other Indian law, or any Act of Parliament of the United Kingdom;
• (ii) a company registered under this Act;
• (iii) a company registered under any previous companies law, and not being a company the registered office whereof was in Burma, Aden, Pakistan immediately before the separation of that country from India. The printed text has no conjunction in that list.

Clause (iii) is a survival from an older statute and it reads oddly today, but its structure is worth following: companies registered under a previous companies law are excluded, except those whose registered office was in one of the three named territories immediately before separation. Those remain inside the definition.

Clause (b), what it shall include: save as aforesaid, any partnership firm, limited liability partnership or society or co-operative society, association or company consisting of more than seven members at the time when the petition for winding up that entity is presented before the Tribunal.

The seven-member floor is measured at a specific moment, the presentation of the petition, not at any earlier point in the entity's life.

What winding up an unregistered company involves

Sub-section (1) does the heavy lifting. Subject to the Part, any unregistered company may be wound up under this Act, in such manner as may be prescribed, and all the provisions of this Act, with respect to winding up shall apply to an unregistered company, with the exceptions and additions in sub-sections (2) to (4).

The first exception is absolute. No unregistered company shall be wound up under this Act voluntarily. There is no members' or creditors' voluntary route. Everything goes through the Tribunal.

Sub-section (3) then sets the three circumstances:

The four tests for inability to pay debts

Sub-section (4) deems an unregistered company unable to pay its debts on any one of four alternative tests. The first is the statutory demand and it carries the only money figure in the section.

The demand under clause (a) has a service rule attached. It may be served by leaving at its principal place of business, or by delivering to the secretary, or some director, manager or principal officer of the company, or by otherwise serving in such manner as the Tribunal may approve or direct. Neglect for three weeks to pay the sum, or to secure or compound for it to the satisfaction of the creditor, completes the test.

Clause (b) works from the other direction, through a member. Where a suit or other legal proceeding has been instituted against any member for a debt due from the company, or from him in his character as a member, and written notice of it has been served on the company by the same means, the company has ten days to do one of three things:

1. have paid, secured or compounded for the debt or demand;
2. have procured the suit or other legal proceeding to be stayed; or
3. have indemnified the defendant to his satisfaction against the suit or other legal proceeding, and against all costs, damages and expenses to be incurred by him by reason of the same.

Clause (c) is the execution test: a decree or order of any Court or Tribunal in favour of a creditor, against the company or any member as such or any person authorised to be sued as nominal defendant, on which execution or other process is returned unsatisfied in whole or in part. Clause (d) is the residual one, where inability to pay is otherwise proved to the satisfaction of the Tribunal.

What sits around section 375

Three neighbouring sections complete the Part, and each does one job.

• Section 376 extends the Part to a body corporate incorporated outside India that has stopped carrying on business here, even after it was dissolved abroad. That is covered on the power to wind up a foreign company page.
• Section 377 makes the Part cumulative with the rest of the Act's winding-up provisions, and adds a proviso that an unregistered company is not deemed a company under the Act except in the event of its being wound up, and then only to the extent the Part provides.
• Section 378 saves the operation of any other enactment providing for such an entity to be wound up, with a proviso reading references to the Companies Act, 1956 as references to the corresponding provision of this Act.

Part I of the same chapter runs the other way, letting a firm or LLP become a registered company rather than be wound up as an unregistered one. See conversion of an LLP into a company.

A note on the source

Sections 375 to 378 carry no amendment markers at all in the India Code consolidation, so nothing on this page is amended text and no amending Act is cited for any of it. The nearest footnote, on printed page 200, belongs to the section 374 proviso in Part I rather than to anything in Part II.

One entry in this Part is mislabelled at source and is worth knowing about if you are reading the pages around these. Page 199's footnote reads "The proviso ins. by Act 31 of 2016, s. 255 and the Eleventh Schedule", while the marker it belongs to, on the same page, sits on an insertion in section 372 that is not a proviso. The attribution is sound; the entry's description of itself is not.

Why this matters when reading filings

An unregistered company files nothing with the Registrar under this Act, which is what makes the winding-up record distinctive: for several of the entity types the definition names, it is the first document about them to reach the Companies Act register at all. That is not the same as saying they file nothing anywhere. Section 374(c), in Part I of the same chapter, speaks of the registering or other authority with which the company was earlier registered, and clause (a)(iii) of this Explanation keeps inside the definition a company registered under a previous companies law whose registered office was in one of the three named territories. Both are entities with a registration record somewhere else.

When a Tribunal order names an entity as an unregistered company, the order is doing definitional work, and the seven-member test and the exclusion list are what it had to satisfy.

The route out for a registered company is entirely different and much more visible. See what is strike off of a company, and on the consequence side for foreign companies see the penalty for a foreign company default.

Flock reports the filings themselves, each stamped with its date and linked back to the exchange or regulator that published it. What any of it means for you is your call to make.