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Alteration of Memorandum of Association (MoA)_ A Comprehensive Guide

Alteration of Memorandum of Association (MoA): A Comprehensive Guide

Alteration of Memorandum of Association of a company in India is a detailed process regulated by the Companies Act, 2013. The MoA is a foundational document that defines the company’s objectives, powers, and scope of operations. Modifying this document is essential for ensuring that a company’s goals and activities remain aligned with its strategic vision and comply with legal standards. This process not only ensures transparency and legality in corporate operations but also helps adapt to changing business environments and regulatory requirements.

Understanding the Memorandum of Association (Alteration of Moa)

The Memorandum of Association, as defined under Section 2(56) of the Companies Act, 2013, is a crucial document required for the incorporation of a company. It delineates the company’s name, registered office location, objectives, and the liabilities of its members. Section 4 of the Companies Act 2013 mandates that every Memorandum of Association (in India must include clauses specifying the company’s name (with “limited” or “private limited”), registered office state, objectives, territorial scope of operations, member liability type (limited by shares or guarantee), and details of share capital for companies with share capital. These clauses define the company’s identity, operational scope, and financial structure under Indian law.

Restrictions and Alteration of MoA

Alteration of MoA requires strict compliance with specific legal provisions set forth in Sections 12, 13, 17, and 21 of the Companies Act 2013. These sections establish stringent requirements for altering critical elements like company name, registered office, and object clauses. Additionally, under certain conditions such as non-filing of annual returns or financial statements, or failure to repay matured deposits or debentures, companies may be restricted from changing their name.

Procedure for Alteration of MoA

Alteration of MoA involves several procedural steps:

  1. Special Resolution: A special resolution must be passed at a general meeting of shareholders, authorizing the proposed amendment.
  2. Central Government Approval: For certain alterations like changing the registered office between states or amending the object clause, approval from the Central Government is required. This involves filing Form INC 23 or other prescribed forms along with requisite fees and documents.

Registration and Compliance

Once approvals are obtained, certified copies of resolutions and government orders must be promptly filed with the Registrar of Companies (RoC) within specified timelines. The RoC then registers the amendments and issues an updated certificate of incorporation.

Procedure for Alteration of MoA

  1. Conduct Board Meeting of Directors: Issue a notice for a board meeting to all directors at least 7 days prior to the meeting date. Include the agenda, agenda notes, and draft resolutions pertaining to the Alteration of Moa alteration. Pass resolutions during the meeting and authorize a director to send notices for the subsequent general meeting.
  2. Convene Extraordinary General Meeting (EGM): Issue notice for the Extraordinary General Meeting (EGM) at least 21 days before the meeting date, specifying venue, date, time, and agenda. Shorter notice may be permitted with consent from the majority of directors and shareholders holding at least 95% of the voting rights. Seek approval for the Alteration of MoA through a Special Resolution.
  3. File Form with RoC: Within 30 days of passing the Special Resolution at the EGM, file Form MGT-14 (Filing of Resolutions and agreements under section 117) with the Registrar. Along with the form, submit certified copies of the Special Resolution, explanatory statement, notice of the EGM, and the altered Memorandum of Association.

Alteration of Name Clause

Changing the name of a company necessitates a special resolution passed at a general meeting. If the change involves adding or removing “private,” government approval is not needed. However, for other name alterations, written consent from the Central Government is mandatory. To change the company’s name, an application must be filed using Form No. INC 24, accompanied by the requisite fees. Upon approval, the company receives a new certificate of incorporation under Form No. INC 25.

Effect of Failure to Register

Failure to register alterations within the prescribed timelines renders all such alterations and government orders void and inoperative, emphasizing the importance of timely compliance with regulatory requirements.

Alteration of Registered Office Clause

Moving the registered office within the same city, town, or from one town to another within the state necessitates resolutions and filings with the Registrar of Companies (RoC). However, relocating inter-state involves more complexity, requiring special resolutions. Changing the registered office either within the same state or from one state to another involves specific procedural steps:

  1. Inter-state Shifts: A company may do Alteration of MoA to change the place of its registered office from one state to another through a special resolution. An application in Form No. INC 23, accompanied by fees and necessary documents, must be filed with the Central Government. Before confirming the alteration, the Central Government ensures adequate notice to debenture holders and other affected parties, and addresses objections from creditors. Upon satisfaction, the Central Government issues an order confirming the alteration, specifying any terms and conditions. The certified copy of the Central Government’s order must be filed in Form No. INC 28 with the Registrar of the State within 30 days from receipt, along with fees.
  2. Within-state Shifts: For changes within the same state, approval from the Regional Director is required. Form No. INC 23 is filed along with fees. The Regional Director communicates the confirmation within four weeks. Within two months of confirmation, the company must file a certified copy of the confirmation, along with the altered MoA, with the Registrar of Companies. The Registrar then registers the alteration and issues a certificate of registration within one month.

Alteration of Liability Clause

Amending the liability clause to make directors’ liability unlimited is permissible, but shareholders’ liability cannot be altered in this manner. Changing the liability clause requires passing a special resolution, and a copy of this resolution must be filed with the Registrar within 30 days.

Alteration of Object Clause

The object clause defines the core activities a company can engage in. Any amendment must comply with Section 17 of the Companies Act 2013, requiring a special resolution and subsequent approval from the Central Government. This ensures changes are made only for specified purposes such as enhancing business efficiency, expanding operations, amalgamating, or restructuring. Modifying the object clause for a private limited company is relatively straightforward. However, companies that have raised funds from the public must pass a special resolution, publish it in English and a local language newspaper near the registered office, and display it on their website with justifications for the changes. The company must file a certified copy of the government’s order with the Registrar of Companies (RoC) along with the altered MoA within three months from the order date. Additionally, promoters and controlling shareholders must offer dissenting shareholders an exit opportunity as per regulations set by the Securities and Exchange Board of India (SEBI).

Doctrine of Ultra Vires

The doctrine of ultra vires prohibits a company from acting beyond its stated objectives in the Alteration of MoA. This legal principle aims to protect shareholders and stakeholders by ensuring corporate activities remain within lawful bounds.

Frequently Asked Questions

1.What is the fee for amending the Alteration of MoA?

The fee varies depending on the company’s share capital. Government fees can range from Rs 100 to Rs 600 or higher. The exact amount depends on the specific changes being made and the size of the company, reflecting its share capital. Companies with higher share capital may incur higher fees due to the greater administrative effort involved in processing the amendments.

2.Which resolution is required for Alteration of MoA?

For Alteration of MoA, a Special Resolution under Section 114(2) of the Companies Act 2013 is required. This resolution must include:

  • Approval of the Alteration of MoA
  • Certified true copies of the Special Resolutions with an explanatory statement
  • Copy of the meeting notice sent to members along with all annexures
  • Printed copies of the altered MoA

Under what circumstances can a memorandum be altered? The Alteration of MoA can be done when the company intends to:

  • Change its name or registered office address
  • Modify its business activities or objectives
  • Increase or decrease its share capital.

Which clauses of a memorandum can be altered with an ordinary resolution? The Capital Clause can be altered with an ordinary resolution passed in a general meeting. Alterations may include:

  • Subdivision of shares
  • Consolidation of shares
  • Conversion of shares into stock and annulment of unsubscribed capital. The amended Memorandum must be submitted to the Registrar within thirty days of passing the resolution.

Conclusion

Alteration of Memorandum of Association is a critical process that ensures companies operate within legal frameworks and align their objectives with current business needs. It requires careful consideration of statutory provisions and diligent compliance with procedural requirements to avoid legal repercussions. While the process may seem intricate, it is designed to safeguard the interests of stakeholders and maintain corporate integrity in line with Indian corporate laws.

InstaFiling can significantly simplify this process. With their expertise in corporate filings, they can ensure all legal requirements are met accurately and efficiently. By handling the administrative burden, InstaFiling allows companies to focus on their core business activities, ensuring seamless and compliant amendments to the MoA. This helps companies maintain legal compliance and adapt swiftly to changing business landscapes.

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