Improper or wrong use of the word " Limited/ Private Limited".

What are the consequences of using the word “…..& Co Ltd” in the name without incorporating a Company?

Section 631 of the Companies Act, 1956 provides penalty for improper use of words “limited” and “Private Limited”. According to this Section, the person/s that use the above mentioned words in the name of his establishment without registering a Company, is punishable with a fine which may extend to Rs. 500 per day. It is a continuing offence.

One of the advantages of incorporating a Company is the limited liability. That is, the liability of its members is limited. The estates of the members are not liable in any way to the debts of the Company.

A sole trader is personally liable to all the third parties with whom; he has business transactions and contracts. He is under unlimited liability to pay all the business. The benefits of “Limited Liability” are available only to the Companies incorporated under the Companies Act, 1956. It is a privilege to the registered associations and not available to anyone else.

Here in the present situation, that business which using the word “…..& Co Ltd” in the name without incorporating a Company does not become a Company with limited liability and such its owner continuous to be liable to an unlimited extent for the debts of the business. And he is also liable under Section 631 of the Companies Act, 1956.