The Companies Act 2013 in its Section 6 establishes a principle that the Act shall prevail if the internal documents of a company, such as Memorandum of Association, Articles of Association, or Board Resolutions, are contradictory to it. Simply put, the company law would precede corporate governance and its practices. This section reinforces the law's supremacy, ensuring that corporate governance practices align with legal standards. In this article, we delve into the importance of Section 6, explaining how it overrides any contradictory clauses in company documentation, safeguarding legal compliance, and protecting shareholder interests. Learn how Section 6 impacts companies and promotes a consistent framework for governance.

Section 6: Purpose and Impact

• Legal Uniformity: Section 6 aims at uniform compliance by all corporations; MOA or AOA provisions that are individualized are excluded from deviating into variations in governance or operations.

• Protection of stakeholders: Section 6 protects the interests of shareholders, creditors, and the public because it ensures that all companies will comply with provisions of the Act, and failure to comply would lead to internal company policies causing damage or conflict.

• Consistency in Regulation: This section is to assist in regulation enforcement since the process will prove to be easier for the relevant authorities to hold firms liable since firms cannot rely on internal agreements or resolutions against what the law states.

Interpretation  of Section 6 of the Companies Act

This section essentially enforces legal compliance by nullifying any provisions within a company’s internal documents or resolutions that contradict the Act.

Clause (a): Primacy of the Act

• The provisions of the Companies Act, 2013 take precedence over any contrary clauses or stipulations found within the company’s own documents.

• This includes the memorandum of association (MOA) and the articles of association (AOA), as well as any agreements the company has entered into and resolutions passed by the Board or shareholders in a general meeting.

• If any content in the memorandum, articles, agreements, or resolutions conflicts with the provisions of the Companies Act, then the Act will prevail.

• This provision applies irrespective of whether the internal document or resolution was created before or after the Act’s commencement. This means that any part of a company’s MOA, AOA, or decisions taken previously that contradict the Companies Act will be rendered ineffective to that extent.

Clause (b): Void Provisions in Contradictory Documents

• If any part of a company’s memorandum, articles, agreement, or resolution contradicts the Companies Act, it is deemed "repugnant" to the Act.

• Any such repugnant provision is automatically considered void, either entirely or partially, to the extent of the contradiction.

• This voiding effect prevents companies from acting on any internal rule or decision that conflicts with statutory law, ensuring that all companies operate within the same legal framework mandated by the Act.

Know in detail how companies are formed in India 

Key Insights: Section 6 of the Companies Act 2013

• If any of the provisions included in the Memorandum, Articles, agreement, or resolution of a company are contradictory to the Act, only that part which is contrary to the Act shall be void. The rest of the Memorandum, Articles, agreement, or resolution shall not be affected.

• This principle does not apply to situations where the Act itself grants companies the freedom to determine certain matters—whether through provisions in the Memorandum or Articles, agreements, or by passing resolutions in general or Board meetings.

• This principle holds true regardless of when the provision that contradicts the Companies Act, 2013 was incorporated—whether it was included in the Memorandum or Articles, executed in an agreement, or passed in a general or Board meeting, before or after the commencement of the Act. In other words, this section has a retrospective effect.

Illustration on Section 6 of The Companies Act 

1. Memorandum of Association: Suppose a company's MOA states that the Board can exceed certain borrowing limits without shareholder approval, even though the Companies Act requires it. Under Section 6, the Act’s requirement would override the MOA, and the borrowing limit could not be bypassed without proper approval.

2. Articles of Association (AOA): If a company’s AOA permits a certain type of share issuance contrary to the Act’s requirements, Section 6 nullifies that clause in the AOA.

3. Resolution Conflicts: If the Board passes a resolution allowing a director to remain in office despite disqualification under the Act, this resolution would be void under Section 6

Are you interested in pursuing a career in Law? The Legal School in collaboration with IndusLaw has created unique programs for a Certification in Mergers & Acquisitions, Private Equity and Venture Capital Laws & Certification in Mergers & Acquisitions for fresh law graduates as well as professionals looking to advance in their careers! Enquire now for details!

Judicial Pronouncements   related to Section 6 of the Companies Act

Cricket Club of India and Others v. Madhav L. Apte and Others (1975) Comp Case 574 (Bom)

This case established that a provision will be considered void if it contradicts not only the explicit provisions of any section of the Act but also any matters implied by the Act’s sections.

20th Century Finance Corporation Ltd v. RFB Latex Ltd. [1999] 34 CLA 267 (CLB)

This case clarified that Section 6 does not have the effect of overriding other statutes. It may be noted that this section provides for supremacy of the Act over contrary provision in any agreement, resolution or memorandum or articles but not any other statutes. Thus, where any rights conferred under the Act the same is not protected from all other statutes.

Find more about the Latest Amendments in Companies Act 2013

In a nutshell, 

Section 6 of the Companies Act, 2013 states that the Act prevails over any conflicting provisions in a company’s Memorandum, Articles, agreements, or resolutions. Therefore, it provides that all companies shall act as such and void to the extent of inconsistency are the provisions that are in contravention of the said Act. And hence, Section 6 reinforces uniformity and legal compliance across the corporate governance structure in India.

FAQs on Section 6 of the Companies Act, 2013

1. What is the purpose of Section 6 of the Companies Act, 2013?

Section 6 establishes that the provisions of the Companies Act take precedence over any conflicting terms in a company’s Memorandum, Articles, agreements, or resolutions. This ensures that all company governance follows the law's standards.

2. How does Section 6 affect a company’s Memorandum and Articles?

If any part of a company’s Memorandum or Articles contradicts the Companies Act, Section 6 renders those parts void, while the remaining parts remain valid. This promotes compliance with the Act's guidelines.

3. Can a company override the Companies Act through its agreements or resolutions?

No, Section 6 prevents companies from bypassing the Act’s requirements through agreements or board/general meeting resolutions. Any conflicting terms are automatically invalidated to ensure adherence to the Act.

4. Does Section 6 apply to other statutes or just the Companies Act?

Section 6 only applies within the scope of the Companies Act, not to other laws. It ensures that internal corporate rules don’t override the Act, but it doesn’t protect these rules against other statutes.

5. Is Section 6 applicable to provisions created before the Companies Act, 2013?

Yes, Section 6 applies to provisions made both before and after the Act’s commencement. Any conflicting company rules, regardless of their creation date, must align with the Companies Act or be voided to the extent of the conflict.