Procedure of Alteration of Memorandum and Article of Association

When a company is incorporated, one of the documents that must be filed with the registrar of companies is the memorandum of association. The definition of a memorandum in Section 2(56) is “the memorandum of association of a company as initially formulated or as revised from time to time pursuant to any previous company law or of this act.” The definition, however, neither clarifies what a memorandum of association actually is nor highlights its significance in the company’s operations.

Introduction

The agreement governing a company’s relationship with the outside world is called a memorandum of association. It describes the breadth and depth of the company’s activities and is a charter for the business. As a result, a memorandum of association is crucial since it outlines how a corporation should relate to its members’ interests and rights.

Therefore, it is crucial to take into account all company members’ agreement before making any changes to the memorandum of association, especially in cases where their consent is crucial.

A company’s Memorandum of Association is a legal document that contains the basic information needed for the company’s incorporation. The Company Charter is another name for it. Changes to the company’s bylaws may be necessary, for which the memorandum of association must be altered. A company’s MOA specifies the name of the business, the physical address of the registered office, the shareholders’ names, and the allocation of shares.

The following clauses make up a MOA, which is defined in Section 4 of the Companies Act:

Name Clause: The name of the firm must be distinctive, authentic, and legal, according to the name clause of the Memorandum. The company name must be distinct from any names with a similar name that are already registered. On the MCA portal[1], the names of the companies can be verified as being available. Any such modifications to the name clause call for a change to the MOA.

Registered Office Section: This clause includes all of the information about the company’s registered office. The state or UT where the office is located is listed, along with perhaps or possibly not the precise address of the office. The state and UT of the registered office are listed. You must identify the exact location of the office within 15 days of the company’s incorporation and confirm the office address within 30 days of the incorporation. Any such change in the goal necessitates a modification of the MOA’s Registered Office clause.

The objective clause, also known as the purpose clause, specifies the reason the prospective business is being founded and the object for which it will be incorporated. The objects clause of the MOA must be changed whenever the company’s goal changes.

Liability Clause: This clause establishes the extent to which the shareholders are responsible for repaying the debts incurred prior to the company’s dissolution. Additionally, according to the condition, no member may be made to pay more than what is required of them.

Capital Provision: This clause includes the allowed capital that the company has in accordance with its registration. The number of shares of each sort and their face values are specified in the capital clause.

Changes to the Memorandum in various clauses

The Alteration of Memorandum of Association refers to any changes made to the MOA’s various clauses.

Changes to the Memorandum’s Name Clause

If the corporation intends to change its name on its own initiative, Section 13 of the Memorandum will apply to this name change.

Contrarily, any type of correction to the company’s name falls under clause section 16, which calls for clearance from the Central Government.

Contents of the Memorandum

Every company’s memorandum of association must include the following language in accordance with section 4:

  • The name of a corporation that, in the case of a public limited company, ends with “limited” and, in the case of a private limited company, ends with “private limited.”
  • The state where the company’s registered office will be located.
  • The company’s goals should be stated.
  • The states whose territory the objects extend in the event of businesses whose objects are not restricted to a single state.
  • If the company is constrained by shares or a guarantee, the liability of the members is constrained.
  • If a company has a share capital, it must specify how much of that capital it intends to register with and divide into shares, each with a defined value.

Goal of the Memorandum

The reason for having a memorandum of association is to ensure that the outsider has a clear understanding of the business:

  • The shareholder planning to make an investment should be fully informed about the industry in which he plans to take a risk.
  • Any other party considering doing business with the company is required to be certain that the contractual arrangement he is considering entering into with the company is the one that is truly related to the subject matter of the firm’s corporate objectives.

What are the Conditions for any such Alteration in the Name?

A corporation that has not filed its paperwork on time will not be permitted to alter its name.

  1. Yearly returns
  2. Accounting Statements
  3. Any document that must be filed with the registrar
  4. Payment of interest on deposits or debentures that have matured, or both

What are the steps required for Alteration in MOA?

  1. At least 7 days prior to the scheduled date of the board meeting, a notice of the meeting is published.
  2. A board resolution to change the MOA is being approved at the board meeting, subject to shareholder approval.
  3. Establish the date, time, and location for the shareholder meeting.
  4. At least 21 days before to the scheduled shareholder meeting, a notice of shareholder meeting is published.
  5. Within 30 days of the special resolution being passed by the shareholders, Form MGT-14, the Explanatory statement, and the modified copy of the MOA are filed.

Modification of the Memorandum of Association through Special Resolution and Central Government Confirmation (Section 13)

A company may, by special resolution, amend its memorandum of agreement to change the location of its registered office from one state to another or to modify the company’s objectives to the extent necessary to enable it to:

(a) To do business more profitably or effectively; or

(b) To accomplish its primary goal through new or improved techniques; or

(c) To expand or alter the region in which it operates; or

(d) To do a business that, given the current situation, could be combined with the Company’s business in a convenient or advantageous way; or

(e) To limit or give up any of the MOA-specified objects; or

(f) To sell or otherwise dispose of all or any portion of the Company’s undertakings, or of any such undertakings;

(g) Combining with another company or group of people.

  • Changes to the provisions of the MOA (Memorandum of Association) that pertain to moving the Registered Office from one State to another must first receive approval from the Central Government.
  • The application must be submitted to the Central Government in Form No. INC 23, together with the required fee and supporting paperwork.
  • The Central Government must be satisfied before approving the change.
  • that each debenture holder and any other individual or group whose interests may, in the Central Government’s judgment, be affected by the change has received adequate notice; &
  • that, with regard to each creditor who, in the Central Government’s opinion, has a right to object to the alteration and who expresses that right in the manner prescribed by the Central Government, either the creditor’s consent to the alteration has been obtained, or the creditor’s debt or claim has been discharged, determined, or secured.
  • The Central Government may issue a confirmation order for the adjustment with whatever terms and conditions, if any, it deems appropriate. It may also issue a cost-related confirmation order.
  • Within 30 days of the date on which the certified copy of the other was received, the Registrar of the State must receive the certified copy of the order of the Central Government approving the Alteration of Memorandum for transfer of the registered office from one state to another in Form No. INC 28 along with the applicable fee.

As defined by the Companies Act of 2013

According to section 2 (5), “Articles” refers to a company’s original or amended articles of association.

Article of Association’s purpose

The operating procedures of a corporation are governed by its articles of association, which also define the management’s authority, the shareholders’ and directors’ meeting procedures, and the shareholders’ and directors’ voting rights. The articles provide forth rules for the internal operations and management of the business (section 5).

Section 14: Modification of AOA by Special Resolution

Company may, by special resolution, amend its articles, including the conversion of a public company into a private company or vice versa. An application in Form No. INC 27 must be submitted along with payment for the conversion. A public corporation cannot be changed or turned into a private company without the central government’s approval.

Once an alteration has received central government approval, the printed copy of that approval must be filed with the registrar of companies in Form No. INC 27 within one month of the day the order of approval was received.

Conclusion

Any company’s memorandum of association outlines the range of its operations that are necessary for incorporation. Any such modification to a company’s MOA requires a very involved and drawn-out process that can only be completed by a special resolution at the shareholder meeting.

References

https://blog.ipleaders.in/alter-memorandum-association-article-association-company/

https://corpbiz.io/learning/alteration-of-memorandum-of-association-moa/

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