Procedure of Alteration of memorandum and articles of association

Introduction: Memorandum of association is the document that governs relationship between the company and the outside. It is a charter of the company and mentions the extent and scope of its activities. Hence, memorandum of association is an important document as it defines the relationship of the company with the interest and rights of the company member’s. Thus, it is important to consider the approval of all the members of the company where their consent is much required before making any alteration in the memorandum of association.

What is MOA and what are its different clauses?

A Memorandum of Association of any company is a legal document that consist fundamental information required for the Incorporation of the company. It is also called the Charter of the Company. Companies may need to bring changes in the clauses of the company, for which alteration of Memorandum of Association is required. The MOA of a company outlines the company’s name, the physical address of registered office, names of shareholders, and distribution of shares.

Section 4 of the Companies Act defines MOA and Memorandum of Association consists of following clauses:

Name Clause:  The name clause of the Memorandum defines that the name of the company must be unique, authentic, and legal. The name of the company must be different from those names which are already registered with a similar name. The name availability of the companies can be checked on the MCA portal for verification. Any such changes in the name clause require alteration in MOA.

Registered Office Clause: The Registered Office clause comprises of all the details of the registered office of the company. It has the name of the state or UT of the office location which may or may not contain the exact address of the office.  It includes the name of the state and UT of the registered office. After the Incorporation of the company, within 15 days you need to specify the exact location of the office and also verify the office address within 30 days from the Incorporation of the company. Any such change in the objective requires Alteration in the Registered Office clause of the MOA.

Objective Clause: This clause defines the object for which the proposed company is going to be incorporated, which means the purpose for which the company is being established. Any changes in the objective of the company require alteration in the objects clause of the MOA.

Liability Clause: This clause defines the extent to which the shareholders are liable to pay off the debt obligations during the discontinuation of the company. The clause also states that no member can be asked to pay more than the amount that is liable to be paid.

Capital Clause: This clause includes the company’s authorized capital with which the company is registered. Capital Clause specifies the number of shares of each kind and the face value of each share.

Alteration of Memorandum in different clauses

Any alterations in the different clauses of the MOA are described as the Alteration of Memorandum of Association.

Alteration in the Name clause of Memorandum

If the company itself wants to change its name, then this alteration in the name clause of Memorandum will come under clause Section 13.

Whereas for any kind of rectification in the name of the company, then the alteration will come under clause section 16 which requires approval from the Central Government.

Purpose of memorandum

The purpose of having a memorandum of association is that the person outside the company must have a clear picture about the company:

  1. The shareholder intending to invest his capitals should know the complete details about the field he is going to put his risk on.
  2. Any other person who is planning to deal with the company is obliged to know without any doubt whether the contractual relation with the company he is considering to enter with is the one actually relating to the matter within the company’s corporate objects.

A company can change its name at any time by any of the following procedures:

  • By passing a special resolution.
  • By obtaining the approval of the Central Government.

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

The change of name shall not be allowed to a company which has defaulted in filing its

  • Annual returns
  • Financial Statements
  • Any document due for filing with Registrar
  • repayment of matured deposits or debentures or interest on deposits or debentures

How to Reserve the Company name?

In Form INC.24 an application shall be filed along with the fee for a change in the name of the company and a new certificate of incorporation in Form No. INC.25 shall be issued to the company following upon the change in the name.

In RUN (Reservation of Unique Name) form an application for the reservation of a name is done along with the required fee as provided in the companies Rules, 2014.

Steps taken by ROC (Registrar of Companies) :On any change in the name of the company, the Registrar will enter the new name in the register of companies in place of the previous name. And after that, it will issue a fresh certificate of Incorporation with the new name and the change in the name shall be complete and valid only on the issue of the fresh certificate of incorporation.

Alteration in the Objective Clause of Memorandum: If the company wants to change the objective of its business, then there is a requirement of special resolution that must be passed. For example, Reliance is a telecommunication industry and wants to expand or change its service, and then it requires consent from the majority of its shareholders.

The details of the objective must be published in the newspaper that too in different languages (one in English and other in the vernacular language) where the registered office of the company is situated and also on the website of the company.

Alteration of the Registered Office Clause

In case, the company wants to change its registered office, then this alteration in the registered office clause of Memorandum will come under clause Section 12.

Here, the Registrar will register any alteration in the Memorandum with respect to the objects of the company and then certify the registration within a period of 30 days. Any such change in the Memorandum results in the transfer of the registered office of a company from one state to another.

Shifting of the registered office from one state or UT to another state –

For the change in the registered office from one state to another state, an application under sub-section (4) of section 13 is filed with the Central Government in Form No. INC.23 along with the fee. The application must be accompanied by the following documents:

  • Copy of MOA (Memorandum of Association) with proposed alterations.
  • A copy of the details of the general meeting at which the resolution authorizing such alteration was passed. These details give the number of votes cast in the favor or against the resolution.
  • A copy of Board Resolution or Power of Attorney.
  • A list of creditors and debenture holders is attached to the application, drawn up to the latest date prior to the date of filing of an application by not more than one month. It must include:
  • The name and address of the credit and debenture holder of the company.
  • The nature and amounts due to them in respect of debts, claims, or liabilities.

The company Secretary has a certain task to look into the company’s matter. These are:

  • To make a complete inquiry into the affairs of the company and decide that the list of creditors is true.
  • No employee of the company shall be retrenched as a result of the transfer of the registered office from one state to another.
  • Authenticated copy of the list of creditors shall be kept at the registered office of the company and any person who desires to inspect the list of creditors can do so at any time during the working hours of business.

A company may alter the capital clause only if it is authorized by its articles. Alteration can be for any of the following purposes:

Alteration of the Capital Clause

  • An increase of its share capital by issue of new shares.
  • Consolidation of existing shares into shares of larger amounts.
  • Conversion of fully paid shares into stock or vice versa.
  • Cancellation of unissued shares.

Alteration of the Liability Clause

The alteration of the Liability Clause restricts the liability of the Directors. The liability clause can be unlimited by passing a special resolution which should be filed with the Registrar within a period of 30 days.

What are the steps required for Alteration in MOA?

  • A Notice of Board meeting is issued at least 7 days before the date of Board meeting.
  • In the board meeting, a board resolution is being passed for the alteration in MOA subject to approval of shareholder meeting.
  • Fix the date, time and venue for convening the shareholder meeting.
  • A notice of Shareholder meeting is issued at least 21 days before the date of shareholder meeting.
  • After the shareholder’s resolution is being passed, Form MGT-14 is filed within 30 days from passing of the special resolution along with the Explanatory statement, altered copy of MOA.

Explain the procedure of alteration of Memorandum of Association ?

Alteration in the Memorandum of Association can be made by following the procedure under section 13 of the Companies Act’2013. This section is applicable to all companies.

Hold board meeting to recommend the proposal for members’ consideration by passing a special resolution.

Give notice of the Extraordinary general meeting in which special resolution is to be passed. The notice shall specify the place, date, day and time of the meeting and contain a statement on the business to be transacted at the EGM.

Since alteration of the memorandum is a special business, therefore, an explanatory statement u/s 102 of the Companies Act’2013 shall be accompanied with the notice of the meeting in which special resolution is to be passed.

Special resolution: For alteration of any of the clauses of memorandum of association, except the capital clause, consent of members by way of special resolution is required. However, in case of alteration of authorized share capital, consent of members by way of ordinary resolution as stated in section 61 is required.

The company is required to file special resolution passed by shareholders for alteration of memorandum of association with the Registrar of Companies. Form MGT-14 has to be filed for registration of special resolution within 30 days of the passing of resolution.

A certified copy of the special resolution along with notice and an explanatory statement of the general meeting in which resolution is passed and the altered memorandum and articles are to be attached as attachments to the form MGT-14. Copy of approval from the central govt. filed with the registrar in case of a change in name and registered office clauses of the memorandum.

The alteration made under section 13 shall not have any effect until it has been registered.

Case laws: Juggilal Kamlapat Jute Mills Co. … vs Registrar Of Companies on 19 November, 1965

Resolved that the memorandum of association of the company be altered by adding a new Clause 4(A) as specified below after Clause 4 :

” 4(A) To undertake and carry on business as manufacturers of natural rubber, synthetic rubber and reclaim rubber and all kinds of rubber goods and rubber by products and allied materials and to take all steps incidental to such business including acquisition of the requisite raw materials either by cultivation, purchase, processing or otherwise. “

5. As provided in Section 17 of the Companies Act, 1956, alteration to the memorandum of association with respect to the objects of the company does not take effect until, and except in so far as, it is confirmed by the court on petition. The present petition was, therefore, made for the confirmation of the alteration to the memorandum of association.

6. The petition is apparently governed by Clause (d) of Section  17 (1) of the Companies Act, 1956, where under a company can, by special resolution, alter the provisions of its memorandum of association with respect to the objects of the company :

” to enable it to carry on some business which under existing circumstances may conveniently or advantageously be combined with the business of the company.”

7. Alteration to the memorandum of association is to enable the company to carry on “some business”, which can include a new business. Consequently, the court cannot refuse to confirm the alteration to the memorandum of association simply because the change is desired to carry on a new business, not connected with, nor having any relation to, the existing business or businesses of the company.

8. The other question which often arises, and has been raised in the instant case also, pertains to the power of the court while confirming or refusing to confirm the alteration to the memorandum of association. The court’s power can easily be deduced from the provisions of Section 17 of the Companies Act, 1956

Memorandum of association of any company defines the scope of its activities that are required for the Incorporation of the company. Any such alteration in the MOA of a company is a very complicated and lengthy procedure and carried out only by a special resolution at the shareholder meeting.

Conclusion

Memorandum of association of any company defines the scope of its activities that are required for the Incorporation of the company.Any such alteration in the MOA of a company is a very complicated and lengthy procedure and carried out only by a special resolution at the shareholder meeting. 

References:

Companies Act
https://www.mca.gov.in/MinistryV2/changecompanyinformation.html
https://indiankanoon.org/search/?formInput=alteration%20of%20memorandum 


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