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Right way to change the main object clause of MOA ?

HomeCompanyRight way to change the main object clause of MOA ?
  • MOA
18
Jan
Right way to change the main object clause of MOA ?
  • Author
    Rajat Khaneja
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Memorandum of Association (MOA) is the charter document of a company, or we can say a document which governs a company. A company is authorised to do only those activities which are mentioned in the MOA of the company. This document, however, can be amended at any time. In order to amend the MOA, a set procedure has to be followed laid down in the Companies Act, 2013.

There are various clauses in MOA of a company. These clauses comprises of location of the company, objectives of the company, capital of a company . In this article, we shall talk about amending the object clause of a company in the right way.

Procedure:

 

Before discussing the procedure, we must first understand that who can amend the MOA of a company. The power to amend the MOA of a company vests with the shareholders / members of the company. An MOA can only be amended with the special permission by the shareholders. The Board of Directors cannot amend the objects of the company unless approved by the shareholders.

Therefore, for amending objects in the MOA, a general meeting shall be convened wherein amendment in the MOA shall be approved by shareholders/members of the company by passing a special resolution.

The procedure to amend MOA is as follows:



Step 1: Draft the amended MOA and get it informally approved by the Directors.

Step 2: Send notice to the Board of Directors and call a meeting of Board of Directors.

Step 3: Hold a meeting of Board of Directors and lay down the following documents for approval by the Board of Directors:

  • Amended Memorandum of Association of the company.
  • Notice to call General meeting of the company along with an explanatory statement. Also, seek authorisation from Board of Directors to send the notice to shareholders/member.

Step 4: Send Notice to shareholders/members of the company

Step 5: Convene General meeting of the company and pass a special resolution for approval of amended Memorandum of Association.

General Meeting can be Extraordinaryy General Meeting or Annual General Meeting as the case may be.

Specimen of Special Resolutions for alteration in objects clauses

 




  • For REPLACEMENT of main object Clause (say No. III(A))

RESOLVED THAT subject to the provisions of section 13 of the Companies Act, 2013 and confirmation of the Registrar of Companies, Clause III(A) of the memorandum of association of the company be and is hereby replaced and substituted by the following Clause 1.

CLAUSE III(A)

“To carry on the business of……………………………………………………………………………………………………………………………………………………..”

  • For insertion of additional object Clause No. III(A)

RESOLVED THAT pursuant to section 13 of the Companies Act, 2013 and other applicable provisions of the Act, if any, the Objects Clause IIIA (Main Objects) of the Memorandum of Association of the Company be and is hereby altered by inserting the following New Objects 3 after the existing Clause 2 and renumber accordingly:

“3. To carry on the business of …………………………………………………………………………………………………………………………..”

Explanatory Statement

In view of encouraging measures taken by the Government to liberalize the economy and in order to diversify into certain new business ventures, your directors are considering various proposals for diversifying the company’s activities into other activities like Software Technology and related activities etc.

The alteration in the Objects Clause of the memorandum of association as set out in the resolution is to facilitate diversification. This will enable the company to carry on its business economically and efficiently and the proposed activities can be, under the existing circumstances, conveniently and advantageously combined with the present activities of the company. This will also enlarge the area of operations of the company.

Pursuant to section 13 of the Act, the above said proposal requires the consent of the members by way of special resolution.

None of the directors or the Key Managerial persons of your company and their relatives are concerned or interested financially or otherwise in this resolution.





Step 6: File special resolution in form MGT 14 with the Registrar of Companies on the webisite www.mca.gov.in along with the altered copy of the memorandum of association and other relevant documents with the Registrar with the filing fee.

Thereafter, the Registrar shall, if no discrepancy is found, register alteration of the MOA with respect to the objects of the company and certify the registration within a period of thirty days from the date of filing of the special resolution with the registrar.

Things to remember

 

  1. No alteration made in the memorandum shall have any effect until it has been registered in accordance with the provisions of the Companies Act, 2013.
  2. The additional business must not be inconsistent with the existing business of the company. [Bolsom Bros (1928) Re 1935 Ch 413]
  3. The business may be wholly different but should be capable of being conveniently and advantageously continued with the existing business. [Industrial Cables (India) v Registrar of Companies (1973) 43 Comp Cas 353 (P&H)]. Otherwise, alteration may not be sanctioned for carrying on entirely new business. [Bharat Mining Corporation Ltd., In re (1967) 37 Comp Cas 430 (Cal)]
  4. A company, which is not carrying any business cannot alter objects with the object of carrying on its business more economically or more efficiently. [Section 17(1)(a), Companies Act, 1956] [Drages Ltd., Re (1942) 1 All ER 194] Nor does the question of combining conveniently with the existing business under clause (d) of section 17(1), Companies Act, 1956 arise. [Eastern Woollen Mills Ltd., In re 60 Bom LR 1121]
  5. Alteration cannot go beyond the extent required to enable the company to do any of the things specified in clauses (a) to (g) of section 17 of the Companies Act, 1956 (Now section 16 of the Companies Act, 2013). [In re: Indian Iron & Steel Co Ltd AIR 1957 Cal 234; Jayanti Lal Ranchoddas Koticha v Tata Iron & Steel Co Ltd AIR 1958 Bom 155]
  6. Alteration cannot be made for abandonment of an object of a fundamental character. In re: Jewish Colonial Trust Juedishce (1) Colonial Bank) (1908) 2 Ch 287]
  7. Alteration cannot be made so as to include unlawful objects. [Udumalhat Nidhi Ltd., in re AIR 1934 Mad 482]
  8. Alteration may not be allowed in respect of additional powers which the company, has not any reasonable intention of using in the near future except under very special circumstances. [D & DH Fraser Ltd. (1903) WN 73]
  9. The Allahabad High Court in Juggi Lal Kamlapat Jute Mills Co. Ltd. v ROC (1967) 37 Comp Cas 20 (All): AIR 1966 All 417, held that the Court cannot refuse to confirm the alteration to the Memorandum 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, provided the new business desired to be undertaken is one which can be combined with the existing business of the Company, and it is not destructive of or inconsistent with the existing business.
  10. In a later decision the High Court in New Asiatic Insurance Co. Ltd., In re (1967) 37 Comp Cas 331 (Punj): AIR 1967 Punj 15 however Khanna, J. allowed the application of a company whose original object was to carry on business of insurance and investment business and passed a special resolution to alter its objects to enable it to carry on business of engineers, metallurgists, iron, steel and brass founders, metal makers, moulders, millwrights, wheel-wrights, joiners, galvanisers, etc. and to carry on business of cotton spinners and doubters, flax-hemp and jute spinners etc., to carry on business in chemicals, petro-chemicals, drugs etc. and to undertake and execute any contracts for work involving the supply or use of any machinery and to carry out any ancillary or other works comprised in such contracts and to carry on business of importers, exporters, merchants, ship-owners, charterers of ships and transport. The learned Judge allowed the application on the grounds that the share-holders were of the view that better returns are likely to be given to the shareholders if some industrial or commercial activity is undertaken by the company, that the new business suggested is not inconsistent with or destructive of the previous business, that the special resolution was passed unanimously and none of the share-holders, who are the persons directly concerned, has appeared to oppose the petition.

 

For specimen MOA object clauses, CLICK HERE




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