Alteration of Memorandum of Association–Object Clause

Alteration of Memorandum of Association–Object Clause

Memorandum of Association (MoA) is a charter document of a company, which governs relationship between the company and outside. It defines the name, object, capital, subscription, etc. of a company.

We define objects of the company at the time of incorporation of the company. However, company may want to modify its object clause for numerous reasons to commensurate with the changes of the business dynamics.

Companies Act, 2013 has laid provisions for alteration of object clause in Section 13 of the Act. As per the provisions, a company can alter its objects clause by passing a special resolution. We can do an alteration of objects clause for one or more following reasons:

  1. To carry on its business more economically and efficiently.
  2. To achieve the main business of the company by new and improved means.
  3. To widen or change the local area of its operations.
  4. To carry on some business, which may be conveniently or advantageously combined with the existing business.
  5. To abandon any of the objects specified in the memorandum.
  6. To sell whole or any part of the undertaking.
  7. To amalgamate with any other company.

However, Section 13 (8) restricts the change in object of a company which has raised money from public through prospectus and still has any unutilized amount out of the money so raised unless the company passed a special resolution and the details of such resolution published in one vernacular language and one English language newspaper in circulation at the place of registered office of the company and on the website of the company showing the justification for such change in the object.

It may follow following steps to alter object clause in MoA of a company.

  1. A Board meeting is convened, intending to alter the object clause in MoA as an agenda of the meeting.
  2. In the board meeting, a board resolution is being passed for the alteration of MoA subject to approval of shareholders in a meeting.
  3. A notice of Shareholder meeting is issued at least 21 days before the date of shareholder meeting.
  4. In the meeting, a special resolution to alter object clause in MoA passed.
  5. After the special resolution is being passed, Form MGT-14 is filed within 30 days from passing of the special resolution along with the Explanatory statement and altered copy of MOA.

 

Author: CA. Abraham P J

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