Alteration of Objects Clause of Memorandum of Association of a Company

Alteration of Objects Clause of Memorandum of Association of a Company

In accordance with the provisions of Section 13(1) of the Companies Act, 2013, a company may, by a special resolution and after complying with the procedure specified in this section, alter the provisions of its memorandum.

Key Considerations:

  • Object Clause of Memorandum of Association of a Company can be altered by passing special resolution and complying with other prescribed conditions.
  • Following companies are required to pass special resolution for alteration of Object clause of Memorandum of Association by means of Postal Ballot only:
  • All Companies having more than 200 members. [Section 110 read with Rule 22 of Companies (Management and Administration) Rules, 2014
  • Company which has raised money from public through prospectus and still has any unutilized amount out of the money so raised. [Section 13(8)];

The following procedure is to be followed for alteration of objects clause of memorandum of association of a company under Section 13 read with Rule No.32 of Companies (Incorporation) Rules, 2014 and Rule No 22 (Postal Ballot, if applicable) of Companies (Management and Administration) Rules, 2014-

1. Issue not less than 7 days notice and agenda of Board meeting, or a shorter notice in case of urgent business, in writing to every director of the company at his address registered with the company and call a Board Meeting to consider the proposal of alteration of objects clause of memorandum of association of company. (Section 173(3). Also follow the procedure prescribed for issuing and signing of notice of Board Meeting.

2. Hold a meeting of Board of Directors-

  • To consider and pass the necessary Board Resolution for approving the proposed amendments to the objects clause of memorandum of association of a company subject to the approval of shareholders in General meeting (through postal ballot if the Company has more than 200 members)
  • To delegate authority to any one director of the company to sign, certify and file the requisite forms with Registrar of Companies and to do all such acts and deeds as may be necessary to give effect to the proposed alteration.
  • To fix day, date, time and venue for holding the general meeting of the Company for passing a special resolution as required by section 13 of the Companies Act, 2013.
  • To approve the draft notice of general meeting along with explanatory statement annexed to the notice as per requirement of the Section 102 of the Companies Act, 2013.
  • To authorize the Director or Company Secretary to sign and issue notice of the general meeting .

3. If the company has raised money from public through prospectus and has any unutilized amount out of the money so raised, it shall follow the following additional steps for altering the objects clause of Memorandum of Association of the Company:

a. Pass special resolution for alteration of Object clause of Memorandum of Association by means of Postal Ballot only (Pl. refer procedure for passing resolution by means of Postal Ballot)

b. Notice of the resolution for altering the objects shall contain the following particulars:

      • total money received;
      • total money utilized for the objects stated in the prospectus;
      • unutilized amount out of the money so raised through prospectus,
      • particulars of proposed alteration/ change in the objects;
      • justification for the alteration/change;
      • amount proposed to be utilized for the new objects;
      • estimated financial impact of the proposed alteration on the earnings and cash flow of the company;
      • other relevant information which is necessary for the members to take an informed decision;
      • Place from where any interested person may obtain a copy of the notice of the resolution to be passed. [Section 13(8) and Rule No. 32(1) of Companies (Incorporation) Rules, 2014 ]

c. Publish an advertisement, giving above mentioned details of special resolution to be passed, which shall be published simultaneously with the dispatch of postal ballot notices to shareholder at least once in a vernacular newspaper in the principal vernacular language and at least once in English language in an English newspaper circulating at the place where the registered office of the company is situated and place it on the website of the Company if any, along with the justification of such change. [Section 13(8) and Rule No. 32 of Companies (Incorporation) Rules, 2014]

d. Give an opportunity to the dissenting shareholders to exit by the promoters and shareholders having control in accordance with regulations to be specified by the Securities and Exchange Board.

4. Send notice of the General meeting proposing the aforementioned special resolution to all the shareholders, directors, auditors and other persons entitled to receive it, by giving not less than clear 21 days notice or shorter notice,if consent for shorter notice is given by at least 95% of members entitled to vote at such meeting, either in writing or through electronic mode in accordance with Section 101 of the Act.

5. Hold a shareholders meeting on the date for the meeting and pass the Special Resolution for altering the object clause of Memorandum of Association by 3/4th majority in accordance with Section 114 (2) of the Act. Special Resolution to be passed by means of Postal ballot if company has more than 200 members or the company has raised money from public through prospectus and still has any unutilized amount out of the money so raised.

6. Follow the procedure prescribed for preparing, signing and compiling of minutes of General Meeting.

7. After passing special resolution, file a certified copy of special resolution with the Registrar in E-Form No. MGT.14 under Section 117 of the Act within 30 days of passing Special Resolution in general meeting along with the following attachments:

a. Copy of Special Resolution passed along with Explanatory Statement.

b. Notice for convening the General Meeting of the Company

c. Altered Memorandum of Association.

d. Shorter Notice Consent Letters from the members in case the General Meeting was convened at shorter notice.

e. Any other attachment as may be applicable.

8. The Registrar shall register the alteration of objects in Memorandum and certify the registration within a period of 30 days from the date of filing of the special resolution. [Section 13(9)]

9. Every Alteration made in the memorandum of the company shall be noted in every copy of the Memorandum of Association. [Section 15(1)]

Notes:

1. No alteration of object clause of Memorandum of Association shall have any effect until it has been registered in accordance with the provisions of this section. (Section 13(10)

2. 2. Any alteration of the memorandum, in the case of a company limited by guarantee and not having a share capital, purporting to give any person a right to participate in the divisible profits of the company otherwise than as a member, shall be void. (Section 13(11)

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