ALTERATION IN MoA AND AoA OF A COMPANY
WHAT IS MEMORANDUM OF ASSOCIATION (MOA)?
Memorandum
of Association is one of the charter documents of the Company which provides
the basic details about the Company such as its name, state of registered office,
objects for which it has been incorporated, etc. Pursuant to Section 2(56) of
CA 2013- "memorandum" means the memorandum of association of a
company as originally framed or as altered from time to time in pursuance of
any previous company law or of this Act;
PURPOSE OF A MEMORANDUM OF ASSOCIATION
The
following are the main purposes of a Memorandum of Association:
1.
To
declare the reason for the company’s formation: The foremost purpose of a Memorandum of Association is
to let the company’s members know why the company has been formed.
2.
To
let investors understand the company’s activities: It allows any person who is interested in investing in
a company to know everything about its activities.
3. To let investors know the prospect of their investment: A Memorandum of Association is a public document,
which means it can be read by anyone. So, with the help of the Memorandum of
Association, prospective investors will know the exact purpose for which their
investments may be used.
4.
To
assure the investors: The Memorandum of Association helps the existing
investors in the company to stay assured that their investments are not used
for any purpose for which they weren’t foretold.
Below are the steps
required to be followed to bring forth any alteration in a Memorandum of
Association.
The first step to altering any clause of a
Memorandum of Association is to convey to the Board of Directors (BoD) the
proposal to make such an alteration. As mandated by Section 173 of the Act, the BoD must be intimated through a notice at least
seven days prior to the actual board meeting.
The notice must be accompanied by the details
of the proposed alteration and a draft of the resolution.
The second step in altering the Memorandum of
Association involves the holding of the board meeting. The meeting witnesses
the discussion of the need, pros and cons of the proposed alteration. Finally,
if the BoD agrees to carry out such an alteration, the date, venue, and time
for holding the general meeting are decided. Further, a director or someone
else is authorized to furnish a notice to all the members of the company to
participate in the general meeting.
Next, the notice of the general meeting is
sent to all the directors, members, and auditors of the company. As per Section 101 of the Act, the
notice should be sent at least twenty-one days before the date of the actual
general meeting. The notice may be sent either via electronic or physical
means. The notice should specify the exact date, time, and place of the
proposed meeting. Furthermore, it should contain a brief note of the business
that is proposed to take place at the meeting.
Firstly, on the day of the general meeting,
the quorum for the meeting is checked. The quorum for a private company is a
minimum of two (personally present.) In the case of a public company, the
quorum is a minimum of five; however, it changes according to the number of
members present in the meeting under Section 103 of the
Act.
Secondly, the presence of the auditor of the company is checked.
In case he/ she is absent, a leave of absence may be granted.
Finally, the proposed special resolution for
altering the Memorandum of Association has been passed. A special resolution is
said to be passed when it is favourably voted by at least three times the
number of votes cast against it. The votes can be cast either in person,
through a postal ballot, or by proxy.
After passing the required resolution,
various applications have to be filed with the RoC within 30 days from the date
of passing the resolution. The applications vary from one clause to another, as
discussed below.
Section 13 of the Act deals
with the alteration of the Memorandum of Association. The said Section states
provisions for altering every type of clause of the Memorandum of Association,
as discussed below. Please note that the steps discussed in the above-mentioned
subheading are mandatory for making any change in the Memorandum of Association
of a company; such a procedure has to be fulfilled no matter which clause’s
alteration is proposed. Nevertheless, the following provisions need to be
followed with regard to the respective clauses of a Memorandum of Association.
All the forms mentioned below are available on the MCA portal.
Sections 4, 13(2), 13(3), and 16 of the Act provide for the alteration
in the Name Clause of a Memorandum of Association. A company that has passed a
special resolution for the purpose can change its name by
filing an application (Form INC 24) in the Reserve Unique Name (RUN) web portal
service approved by the Ministry of Corporate Affairs (MCA). The RUN service
can be availed only after log-in into the MCA portal.
The MCA takes 2-3 days to approve the newly
proposed name. It will send the name approval letter if the name is in
accordance with Sections 4(2) to 4(5) of the Act. Under Section 13(2) of the
Act, any change in a company’s name shall take effect only after it is
expressly approved by the Central Government. Nevertheless, such approval is
unnecessary in case the change is simply the addition or deletion of the word
‘Private’ when the company gets converted from one class of company to
another.
Once the name of the company is altered, the
RoC will replace the old name with the newly altered name in the register of
companies. After registering it, the RoC will issue a new certificate of
incorporation with the altered name printed on it. The issue of the fresh
certificate of incorporation marks the end of the company’s name
change.
Sections 12(4), 12(5), 13(4), 13(5), and 13(7) of the Act give the
provisions as to the change in the registered office clause of a Memorandum of
Association. For altering the registered office clause in case the registered
office is to be shifted within the local limits of the same city, after passing
a special resolution for the purpose, the company can file an application (Form
INC 22) with the RoC.
In case the company wishes to shift the
registered office from one city to another within the jurisdiction of the same
RoC, it should file e-Form MGT-14 and INC-22 within 30 days of passing a
special resolution.
To shift its registered office from the
jurisdiction of one RoC to another within the same state, the company can file
e-Form MGT-14 within 30 days of passing a special resolution. Furthermore, it
should file INC- 23 with the Regional Director, who may issue an order
approving the change in registered office. Then, INC-28 should be filed by the
company within 60 days of the RD’s order. Lastly, within 30 days of getting the
approval under INC-28, the company should file INC 22.
In the event a company wishes to shift its
registered office from one state to another, it should file an application
(Form MGT 14) within 30 days of passing a special resolution in this regard.
Then, the company must file Form GNL 2, followed by INC 26 for advertising the proposed
change in newspapers in vernacular language and English. Then, INC 23 is to be
filed to get the approval of the RD; the RD’s approval order should then be
filed with the RoCs of the respective states from and to where the change in
the registered office is proposed. Finally, the approval of both the RoCs must
be filed as INC 22 within 30 days.
Under Section 13(9) of the Act, the Object
Clause in the Memorandum of Association of any company can be altered by
passing a special resolution in this regard. The said Section provides that any
company that wishes to alter its Object Clause must pass a special resolution
and get it approved by the RoC within 30 days of passing the resolution. For
that, the company should file Form MGT 14, following which the RoC shall
register such a proposed change and issue a certificate
thereof.
Sections 13 and 61 deal with the alteration of the share
capital clause in a Memorandum of Association, provided the company’s Article
of Association (AOA) permits it. Such an alteration may include the following;
v Increase
the authorized share capital of the company;
v Increase
or decrease the amount of each share;
v Convert
its fully paid-up shares into stock or vice versa, and
v Cancellation
of shares.
The alteration of the Share Capital Clause of
a company requires the passing of an ordinary resolution at a general meeting
in that regard. Within 30 days from passing the resolution, Form MGT 14 must be
filed with the RoC, who shall then register the change in the Register of
Companies.
The Liability Clause in a Memorandum of
Association can be altered by passing a special resolution in this regard.
Within 30 days of passing the resolution, the company must file an application
(Form MGT 14) with the RoC.
The Subscription Clause in the Memorandum of
Association cannot be altered throughout the life of the company.
Generally, to alter any clause in a
Memorandum of Association, the following documents are required to be sent
along with the application filed under Section 13 of the Act;
v Copy
of the Memorandum of Association along with the proposed changes;
v A
detailed report of the details of the board and general meetings in which the
resolution allowing such an alteration was passed;
v A
certified copy of the resolution passed by the Board, and
v The
list of creditors and debenture holders, along with their names, addresses,
debts, claims, or other liabilities due to them.
As discussed in this article, the alteration
of a Memorandum of Association involves a complex process. The process
witnesses lengthy discussions and brainstorming to ensure that the company’s
growth is ensured without hurting the interests of the members. Section 13 of
the Act provides flexibility to alter the contents of a Memorandum of
Association; at the same time, restricts the company from doing major changes
in the business without the members’ express consent. The doctrine of ultra
vires plays an intrinsic role in balancing the interests of both the company
and the investors.
A Memorandum of Association is one of the
most important documents that every member of the company must go through
before investing in it. It decides the prospective relationship between them
and the company. Hence, it is always advised to thoroughly read it before
investing in any company.
It
is extremely important for every organization to have a set of rules and regulations
for its smooth operation. In the case of Private
Limited Companies or One Person
Companies, these set of rules and regulations are
known as Memorandum of
Association (MoA) and Articles of
Association (AoA), collectively, which form the basis of
the company. While Articles of Association constitutes of bigger concerns about
the company, the Memorandum of Association focuses on the smallest details.
Let’s
take a closer look at what both MoA and AoA focus on, with regards to the
company, its members and employees.
THE ARTICLES OF ASSOCIATION MAINLY
CONSISTS OF THE FOLLOWING –
v
First Directors of Company.
v
Share Capital and Variation of Rights.
v
Transfer and Transmission of shares.
v
Annual General Meeting, Extraordinary
General Meeting and Board Meeting, voting rights of the members in such
meetings and provisions about veto power.
v
Details of First Subscribers.
v
Dividends and Reserve policies.
v
Details regarding Chief Executive Officer,
Manager, Company Secretary or Chief Financial Officer.
v The closure of the
company along with the conditions under which it can be dissolved are also
discussed.
v
The Members of the Board are bound by a
confidentiality clause as stated in the AoA, which means that no member can
disclose the functioning of the company to an outsider.
v Any
amendment made in the Articles of Association can only be made in the
above-mentioned clauses by informing the concerned Registrar of Companies about
the change being made.
v On
the other hand, the Memorandum of Association consists of the following clauses
–
v
Name of the company
v
State in which the company has its
registered office
v
Objects of the company and matters
considered important related to these objects
v
Liability of the Members in the company
v
Share capital of the company
v All
amendments made in the MoA should be with regards to the clauses stated above.
v Now
that you know what constitutes the MoA and AoA of the company and that both
Memorandum of Association and Articles of Association can be changed, as per
the requirement of the company, let’s talk a little bit about the process that
is required to be followed to make amendments in either of the two.
A meeting is conducted by the Members of the Board to make changes in the AoA
and MoA of the company. Even though both these documents can be altered in the
same meeting, the process thereof might be different.
v Process
of Changing the Memorandum of Association of a Company –
v
As per Section 173(3) of the Companies
Act, 2013, a notice will be issued for calling a Meeting of the Board of
Directors, of the company to get the approval from the Directors, in order to
make amendments in the MoA.
v
A date, place and time need to be fixed to
hold an extraordinary general meeting or annual general meeting to get the
approval from the shareholders of the company by passing a special resolution.
v
Hold the GM on the fixed date and pass the
special resolution.
v
Once the special resolution is passed, our
team will file Form MGT-14 within 30 days of passing the resolution along with
the documents provided by you, which are stated below –
v Our team of experts will
file Form MGT-14 along with the documents provided by you with the concerned
Registrar of Companies, who will verify the form and its attachments and
approve the amendments made in the MoA.
v After the amendments are
approved by the RoC, the company will have to incorporate the changes in every
copy of the Memorandum of Association.
PROCESS OF CHANGING THE ARTICLES OF ASSOCIATION –
v
A notice needs to be issued for conducting
a Board Meeting at least 7 days prior to the meeting.
v
A special resolution is passed at the
Board Meeting with the consent of the members for making changes in the
Articles of Association.
v
Date, time and place should be fixed for
holding a General Meeting and a Director needs to send the notice to all the
members informing them about the same.
v
The quorum needs to be checked at the
General Meeting, which will mean getting the approval of the members to change
the clauses in the Articles of Association which will be stated in the special
resolution thereon.
v
Form MGT-14 is filed with the RoC along
with a certified true copy of the special resolution, explanatory statement,
copy of the notice of the meeting sent to members and a copy of the altered
Articles of Association within 30 days of passing the special resolution.
v
The Registrar of Companies will
accordingly register the changes made in the AoA and issue a certificate which
will be conclusive of the amendments made. The alteration will be complete and
effective only when the RoC issues the certificate.
v
After the certificate has been issued by
the RoC, the company will need to make the changes in every copy of the
Articles of Association.
v
The Memorandum of Association and Articles
of Association that is amended should be in accordance with the latest
Companies Act, 2013. Moreover, after making changes in the AoA and MoA of the
company, pursuant to Section 13 & 14 and other applicable provisions of the
Companies Act, 2013 (including any amendment thereto and re-enactment thereof),
the existing rules and regulations stated in the MoA and AoA should be replaced
with new ones immediately in every copy that is already printed and in new
copies which will be printed thereon.