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Alternation of the MOA

A company may alter the Memorandum only with the provisions of the Companies Act, 1994 and by a special resolution.

PURPOSE OF ALTERNATION OF MEMORANDUM [SEC. 12 (1)]

On the following purpose, a company may alter its memorandum:

  1. To carry on its business more economically or more efficiency;
  2. To attain its main purpose by new or improved means; or
  3. To enlarge or change the local area of its operations; or
  4. To carry on some businesses which, under the existing circumstances, may conveniently or advantageously be combined with the business of the company; or
  5. To restrict or abandon any of the objects specified in the memorandum; or
  6. To sell or dispose of the whole or any part of the undertaking of the company; or
  7. To amalgamate with any company or body of persons.

PROCEDURE OF ALTERATION OF MEMORANDUM-

  1. Change of name

The name of a company may be changed either by passing- a special resolution; or by an ordinary resolution.

A special resolution: A company may change its name by special resolution and with the approval of the Registrar signified in writing. But in case of addition or deletion of the word ‘private,’ merely no change is required.

By ordinary resolution: It is a general rule that a company shall not be registered by a name which is incidental or identical with the name of an existing company". And if through inadvertence or otherwise a company is registered with an identical or resembling name, then it may change its name by an ordinary resolution.

Rectification and registration: Rectification of names means obeisance of the direction of the proper authority to change the name within due time so prescribed. However, when a company changes its name, it becomes the duty of the Registrar to enter the new name in the registrar book and to issue a new certificate of incorporation with necessary alteration. It is to be kept in mind that the change of name shall not affect any right or obligations of the company or render defective any legal proceedings by or against it. [Sec. 11 (8)]

To know details about name change procedure, one should go through Sec.11 thoroughly.

  1. Change of object clause

Like name change, the object clause of the Memorandum can also be changed. But reasonable restrictions have been imposed for such alteration and the restrictions are for the interest of the shareholders and the creditors of the company. Sec. 12 of the Companies Act provides the substantive as well as procedural limits on the alteration of the object clause which are discussed here.

Substantive limit: Sec. 12(1) provides the substantive limits on the alteration of the Memorandum wherein it has contained that the Memorandum of Association of the company may be altered for any of the following reasons-

  1. To conduct the business more economically or efficiently: A company may change the object clause for the purpose of conducting the business more economically or efficiently. So, when a company intents to alter its object clause, it must be kept in mind that the subsequent business which the company is going to conduct must be of the same nature as above75.
  2. To attain its main purpose by new or improved means: If the object clause is altered for the purpose of betterment of the business and to attain the main purpose, then it is allowed.
  3. To enlarge or change the local area of its operation: The alteration of object clause is also permissible when such alteration is for enlarging or changing the local area which is for the good of the company. But here, one point is to be kept in mind that the business of 76 the company must be same.
  4. To carry on business which under existing circumstances may conveniently or advantageously be combined with company business: Under this clause, the company enjoys very discretionary power to alter its object clause because what is convenient or advantageous for a company depends on facts.

In Re Cyclist Touring Club case, a company was formed for the purpose of protecting and promoting the interest of pedal cyclists on public roads. But subsequently, the company passed a special resolution so as to include all vehicles including motors in its object clause.

But the court refused such alteration on the ground that the company would find itself in the impossible position to protect one class of people (cyclists) from another (motorists).

Subsequently, in another case", it was held that the company may alter its object clause to carry on business even for a different business, but it must be capable of being conveniently and advantageously combined with it.

In Re Ambala Electric Supply Co. Ltd. case, the said company was incorporated for generating power but when it wished to alter its object clause so as to enable it to carry on cold storage and other allied business, the company was allowed to such alteration. But, the court never allows a company to alter its object clause for any such business which is not convenient or advantageous.

Apart from the above mentioned four grounds, the alteration of object clause may also be allowed on the following cases:

  1. To restrict or abandon any of the objects specified in the Memorandum;
  2. To sell or dispose of the whole or any part of the undertaking; and
  3. To amalgamate with any other company or body of persons.

Procedural limits:

  1. Passing of a special resolution: To alter the object clause of the memorandum, at first, a special resolution has to be passed at the general meeting of the company. And before holding the meeting, a notice is required to all the members of the company.

  2. Permission of the court: To alter the object clause it is not enough only to pass a resolution, rather permission from the court is required to be obtained in this regard. Actually, the alteration shall not take effect until and except in so far it is confirmed by the court. [ Sec. 12 (2)]

    However, before confirming the alteration, the court must be satisfied on the following-

  • That sufficient notice has been given to the persons whose interest will be affected by such alteration; and
  • That every creditor who is really entitled to place any objection has been given opportunity to raise his objection and his claim has been discharged or determined. [Sec. 12 (3)]

  1. Submission of documents to the Registrar: A certified copy of the order confirming the alteration, together with a printed copy of Memorandum as altered is required to be filed with the office of Registrar within a period of ninety (90) days from the date of such order or within such time as the court may direct. The Registrar shall register the same and shall certify the registration under his hand. [Sec. 15]

  2. Change of situation and address clause

There are also substantive limits as well as procedural limits in case of change of situation clause of the Memorandum.

Substantive limits: Substantive limits indicate the grounds of changing the alteration. The limits mentioned in Sec. 12 (1), which have been discussed in the previous ‘objects clause’ point, shall apply to the change of situation clause also.

[For details, the substantive limits of changing of objects clause referred]

Procedural limits:

  1. Passing of special resolution: For changing the situation or address clause, a special resolution is necessary to be passed in the board meeting.

  2. Courts assent to be obtained: After passing a special resolution, the second step is to seek the court’s permission for making such alteration effective.

  3. Notice to concerned parties: The matter of alteration of the situation clause shall have to be notified to all the parties who usually deal with the company

  4. Notice to Registrar: If the company intends to change the location of the registered office within same city, town or village, it is enough to give a notice about such alteration to the Registrar within 28 days of the change. [Sec. 77 (2)]

  5. Change of liability clause

The liability clause of the Memorandum can also be altered but the following key points should be be kept in mind in this regard.

No increase in members’ liability: No liability clause shall be allowed to change if it makes the liability of the members unlimited. Under Sec. 21, by the alteration of the Memorandum or Articles, no member shall be compelled to take more shares to pay more for the shares already taken, unless he agrees to do so in writing either before or after such alteration.

Making directors’ liability unlimited: Though by alteration of Memorandum, the members’ liability cannot be made unlimited; but by passing a special resolution, the directors’ liability may be made unlimited.

Registration of an unlimited company as a limited company: A company previously registered as unlimited company may register it as a limited company. [Sec. 72]

But such registration shall not affect any debts, liabilities, obligations or contracts incurred or entered into by the company before registration.

  1. Change in the capital clause

By altering the capital clause, the amount of capital may be increased as well as decreased. Sec. 53 of the Companies Act speaks about the increase of share capital and Sec. 65 of the Companies Act along with Sec. 59 speak about decrease of share capital. However, after taking decision about the increasing of share capital, a notice to be filed with the office of the Registrar within a period of fifteen (15) days.