Memorandum of association (MOA) can be called as the Constitution of company. First clause in MOA is name clause where company is required to state its name along with private limited (in case of private limited company) or limited (in case of public limited company) or Producer Company limited (in case of Producer Company).
Legislature has mandated to use private limited or limited under Companies Act, 2013 (section 4 of the Companies Act, 2013 is pari materia (this latin maxim is used where subject matter is same in two laws or 2 provision of different law usually predecessor (e..g Companies Act, 1956) and successor law (e.g. Companies Act, 2013) with section 13 of Companies Act, 1956) as the last word of company’s name so that company can be easily identified with the name itself whether it is private company or public company. Unlimited company i.e. company with unlimited liability of members (very few companies i.e. 306 unlimited companies only, in India are unlimited companies) is not required to use any suffix like unlimited or any other word.
Use of the word private limited or limited shall not apply in case of section 8 company i.e. Non-profit companies and Since these companies are operating without any profit motive that is why Legislature has exempted it from above requirement because it will not engage in commercial activities.
Generally section 8 companies are formed as guarantee company.
Section 453 says that no person can use limited or private limited as a part of its name ending with limited or private limited unless it is incorporated. Now you will think it means companies incorporated under the Companies Act can only use the word limited but it is not true, organization i.e. co-operative society, other than company by law has been mandated to use limited at the end of its name. You can refer co-operative societies Act, 1912 and various State co-operative societies Acts.
Total number of companies registered in the country as on 28th February, 2021 stood at 2133835 and there were 1329771 active companies out of total registered companies as on 28th February, 2021. Out of 1329771 active companies only 306 are unlimited companies as on 28th February. Out of 1329771 active companies 1219949 are private companies (including OPC) i.e. 91.74% of total active companies and we will cover this topic in coming articles why there are almost 92% private companies out of total active companies.
Also refer rule 8, 8A and 8B of Companies (Incorporation) Rules, 2014 while applying for name reservation.
Section 4(1)(a) of the Companies Act, 2013
The memorandum of a company shall state—
(a) the name of the company with the last word “Limited” in the case of a public limited company, or the last words “Private Limited” in the case of a private limited company:
Provided that nothing in this clause shall apply to a company registered under section 8
Section 453 of the Companies Act, 2013
If any person or persons trade or carry on business under any name or title, of which the word “Limited” or the words “Private Limited” or any contraction or imitation thereof is or are the last word or words, that person or each of those persons shall, unless duly incorporated with limited liability, or unless duly incorporated as a private company with limited liability, as the case may be, punishable with fine which shall not be less than five hundred rupees but may extend to two thousand rupees for every day for which that name or title has been used.
Disclaimer – Author has exercised utmost care while writing this article, but still this article may contain some error or mistake and no part of this article/writing should be construed or considered as any advice or consultancy whether professional or otherwise.