Explain the procedure for alteration MOA.

Write a note on alteration in Memorandum of Association.

Write a short note on alteration in Memorandum of Association.

Ans.

PROCEDURE FOR ALTERATION OF MEMORANDUM

A company shall not alter the conditions contained in its Memorandum, except in the cases, in the mode, and to the extent for which expressed provision is made in the Companies Act.

(1) Alteration of Name Clause:

“(i) A Company by passing a special resolution and with the approval of Central Government in writing, may change its name.

(ii) There shall be no need of permission of Central Government if the change mere involves addition or deletion the word ‘Private’. Because it is on the conversion of public company into a private company or vice-versa.

(iii) If a company is wrongly registered by a name which in the opinion of the Central Government is identical with the name of another existing company or is undesirable, the name of the new company may be changed by passing an “Ordinary Resolution” and obtaining the approval of Central Government in writing.

The Registrar shall enter the new name on the register in place of the former name and shall issue a fresh incorporation certificate with the new name.

The above change in name will have no effect on the rights and duties of the companies.

(2) Alteration in Registered Office Clause: A company may change its registered office in the following manner under different situations:

(a) Change within the Same City – By passing Board’s resolution and notice to that effect given to Registrar within 30 days of the change.

[Section 146(1)]

(b) From One Town to Another in the Same State – The company shall make an application to the Regional Director in the prescribed form, the confirmation shall be communicated within four weeks from the date of receipt of the application.

(c) From One State to Another- It involves alteration of the Memorandum, it is for this reason that lengthy procedure has been prescribed:

(i) Passing a special resolution and file its copy to Registrar within 30 days.

(ii) Obtaining the sanction of the Central Government.

(iii) The company must file with the ROC a certified copy of the order of the Central Government within three months.

(iv) Obtaining Certificate of Registration of the transfer from both the Registrars.

(v) The registered office is shifted to its new location in the other State.

(vi) Notice of the new location is given to the Registrar within 30/ days of the shifting of the office.

(3) Alteration in Object Clause – This clause is the most significant one in the memorandum. Alteration of objects is much more complicated, because it requires alteration of the MOA. The new business (object) must not be inconsistent with or destructive of the existing business. The Central Government has a real discretion in this regard which is to be exercised judicially in the interest of the member and creditors.

Purposes of Alteration of Object Clause:

[Section 13]

Following are the purposes of alteration of object clause-

1. To carry on its business more economically or more effectively.

2. To attain its main purpose by new or improved means.

3. To enlarge or change the local area of its operations.

4. To carry on some business which under existing circumstances, may conveniently or advantageously be combined with the business.

5. To amalgamate with any other company or body of persons.

6. To sell the whole or any part of the undertaking or any of the undertakings of the company.

7. To restrict or abandon any of the objects specified in the MOA.

Procedure of Alteration of Object Clause

Following procedure shall be adopted-

(1) Special Resolution: A special resolution shall be passed at a general meeting so as to alter the objects.

(2) Copy of Special Resolution to be Filed: The company shall submit with the ROC the special resolution within 1 month from the date of the resolution with a printed copy of the MOA as altered.

(3) Certification of Registration: The Registrar of Companies shall register the special resolution and certify the registration withn 1 month from the date of the filing of the special resolution.

The application for proposed alteration is filed with the Central Government. Before confirming the alteration, the Central Government shall scrutinize the application.

A certified copy of the order of the Central Government shall be filed by the company with the ROC along with a printed copy of the altered MOA within three months.

[Section 18]

(4) Alteration of Liability Clause: Following are the rules m this-

(i) If it is a limited liability company and authorized by its Articles of Association, it can change the liability clause by passing a special resolution.

(ii) If the changes affect or increase the liability of existing members, alteration will be effective only if the prior written permission has been received from the members.

(iii) Shareholders of unlimited liability company can make their liability suited by passing a special resolution and obtaining the Court’s sanction.

(iv) Alteration is effective from the date of registration by the Registrar.

(5) Alteration of Capital Clause: The Articles of Association must contain the provisions for rights and methods to alter the capital clause of the company. If it is not given a special resolution shall be passed for these rights. A company may increase, decrease or reorganize its share capital.

Increase in Share Capital (Section 64)- If AOA authorize the company to increase its share capital, it can pass an ordinary resolution and notify the ROC within 30 days about its intention to increase the share capital.

Reduction in Share Capital [Section 66] – A company having share capital may reduce its share capital in any way, and without generality of the foregoing owner, may-

(i) reduce or extinguish the liability in relation to share capital not paid up.

(ii) cancel any paid-up share capital which is lost,

(iii) paid of any paid-up share capital which is in excess.

A special resolution is passed which is referred to as a resolution for reducing share capital.

Re-organization of Share Capital – The company can re-organize its share capital in the following ways –

(i) By converting fully paid shares into stock,

(ii) By reconverting the stock into fully paid shares,

(iii) By sub-dividing the shares,

(iv) By consolidating share capital into shares of larger amount.

An ordinary resolution will be passed and will be filed with the ROC.