Change in Object Clause

Are you a business owner in India looking to change the main object or ancillary objects of your company? It’s important to understand the legal procedures involved in making these changes. The Companies Act 2013 provides guidelines on how to change the object clause in your Memorandum of Association. In this blog post, we will explore the steps involved in this process and the necessary disclosures that need to be made. Keep reading to learn more about the procedure for changing the object clause of companies in India.

1. Importance of Object Clause in Company Memorandum

The Memorandum of Association (MOA) of a company is an important legal document that defines the company’s activities and relationship with its members. The object clause of the MOA specifies the purpose of the company’s incorporation and the range of its activities. As per the Companies Act 2013, any changes to the object clause need to be approved through a special resolution.

The object clause plays a vital role in determining the activities a company can undertake. It sets out the company’s objectives, powers, and scope of operations. This clause is significant for stakeholders such as shareholders, investors, creditors, and potential partners who rely on the company’s MOA to understand its business activities.

Incorporating the correct object clause in the MOA is crucial, and the company’s board of directors needs to carefully consider the proposed activities that would be included in it. Any change to the object clause of a company needs to be in compliance with the applicable laws and regulations while being in the best interest of the company and its stakeholders.

“Every clause on the MOA can be altered by passing a special resolution.” However, the company needs to follow the procedure outlined in the Companies Act 2013 while making any changes. Following the correct procedure is critical to avoid any legal implications in the future.

In conclusion, the object clause of a company’s MOA is of significant importance as it outlines the company’s activities and purpose of incorporation. Any changes to the object clause need to follow the procedure outlined in the Companies Act 2013 to ensure that the company remains in compliance with the applicable laws and regulations. 

2. Procedure to Change Object Clause

The clause of a company indicates the objective of its incorporation. In case a company intends to change its object after incorporation, it must amend its Memorandum of Association (MOA) as per the Companies Act 2013. So, let’s discuss the procedure for changing the object clause of a company.

The first step to change the object clause of a company is to amend the MOA. The Memorandum of the company contains different clauses such as the Name clause, Registered Office clause, Objects clause, Liability clause, and Share Capital clause.

Out of these clauses, the ‘objects clause’ needs to be altered to change the object of the company. For altering this clause, the company needs to follow section 13 of the Companies Act 2013.

The process for making changes in the object clause involves the following steps:

– Issue a notice in accordance with Section 173(3) of the Companies Act 2013 to convene a Board of Directors meeting.

– Get in-principal approval of the Board of Directors for a change in object clause of MOA.

– Fix a date, time, and place for convening an Extraordinary General Meeting (EGM) to obtain the nod of shareholders through Special Resolution for amending the object clause of MOA.

– Authorize the director or CS to issue a notice of EGM and approve the notice of EGM along with Agenda and Explanatory Statement to be appropriated to the notice of General Meeting as per section 102(1) of the Companies Act 2013.

In addition to these steps, several other documents are necessary, such as Board Resolution for Approval of Object Clause Change, Notice of General Meeting for Object Clause Change, Special Resolution for Object Clause Change, and Registrar’s Approval for Object Clause Change.

Thus, by duly following the mentioned procedure and complying with the provisions of the Companies Act 2013, a company can make changes in its object clause. 

3. Role of Board Meeting in Object Clause Change

Once company decides to alter the object clause as stated in its Memorandum of Association (MOA), it needs to follow a certain procedure as per the Companies Act 2013. One of the essential steps is holding a board meeting, which plays a crucial role in object clause change. During the meeting, the board members need to discuss the proposed changes and pass a board resolution recommending the proposal for members’ consideration by way of a special resolution.

According to Section 173 and SS-1, the board also needs to issue a notice of the board meeting to all the directors of the company at least seven days before the date of the board meeting. Once the board has passed the resolution, it needs to fix the date, time, and venue of the general meeting and authorize a director or any other person to send the notice for the same to the members.

The notice of the general meeting should be given at least 21 days before the actual date of the extraordinary general meeting (EGM), as specified by Section 101 of the Companies Act 2013. During the EGM, the shareholders need to pass a special resolution to approve the alteration, which requires consent from a majority in number and ninety-five percent of such part of the paid-up share capital of the company giving a right to vote at the meeting.

Upon passing the special resolution, the company needs to file the resolution and agreements with the Registrar within 30 days of passing, along with other documents such as certified true copies of the special resolutions, attendance sheet of the general meeting, and a printed copy of the MOA. The Registrar will then register the alteration, and the company must incorporate the alteration in every copy of the memorandum. As such, the role of the board meeting is vital in ensuring the successful alteration of the object clause as per the Companies Act 2013. 

4. Board Resolution for Approval of Object Clause Change

In order to change the object clause in the Memorandum of Association (MOA) of a company, the first step is to obtain approval from the board of directors. The board should be presented with the reasons for the change and its impact on the business of the company. Once the board approves, a special resolution should be passed by the shareholders in a general meeting.

The board resolution for approving an object clause change should follow a set format. It should mention the applicable provisions of the Companies Act 2013, and the alteration to be made in the Object Clause of the MOA. The proposed change should be tabled before the board, and a draft copy of the amended MOA should be approved and adopted by the board. The resolution should also authorize designated officers or directors to sign and execute all applications, forms, and documents required for the alteration.

It is important to note that the Registrar of Companies’ approval is also required for any object clause change, and the company should obtain all other required approvals, permissions, and sanctions from the statutory authorities. Once the approval is received, the company should file certified true copies of the special resolutions, notices, attendance sheets, and other required documents with the registrar within 30 days.

“Changing the object clause of a company’s MOA can have significant implications on the company’s activities. It is necessary to take the approval of the board, shareholders, and the registrar before making any changes to the MOA.”

5. Notice of General Meeting for Object Clause Change

After a company decides to change its object clause, the first step is to pass a resolution at a board meeting to approve the object clause change. A notice of the Extraordinary General Meeting (EGM) of the members of the company is then circulated to all shareholders with the details of the proposed change. This notice must include the amount of money received from the public, the total money utilized for the stated objects, unutilized money, justification for the change, the proposed amount to be used, estimated financial impact, and where to obtain a copy of the notice of resolution to be passed.

The EGM then passes a special resolution to approve the object clause change. The resolution must be published in a newspaper, and the dissenting shareholders must be given the opportunity to exit. If the company hasn’t received any funds from the public or the funds received are fully utilized, then only a special resolution would be enough.

Once the special resolution is passed, the authorized director or company secretary files Form MGT-14 with the Registrar of Companies (RoC) along with a certified copy of the special resolution and the notice of the EGM. After scrutinizing the form, the RoC issues a fresh certificate of incorporation with the change in object clause. Finally, the object clause must be incorporated into all copies of the Memorandum of Association.

A successful change in object clause requires careful planning and execution. A single mistake can lead to significant delays and financial repercussions. Seeking expert advice from a professional consultancy firm can help ensure a smooth transition.” 

6. Special Resolution for Object Clause Change

When a company wants to change its object after incorporation, it needs to amend the Memorandum of Association (MOA) as per the Companies Act 2013. The process for changing the object clause can be initiated through the passing of a special resolution, which is mentioned in section 13 of the Act. The MOA of a company has object clauses that determine the purpose and range of activities of a company. Every clause on the MOA can be altered by passing a special resolution.

To change the object clause of the MOA, companies need to follow certain procedures as per Chapter II of the Companies Act 2013. This includes issuing a notice for a Board Meeting at least seven days before the meeting. During the Board Meeting, proposed new objects of the company need to be discussed, and the Board has to pass a resolution after selecting the object. The Board then recommends the proposal for members’ consideration by way of a special resolution. A notice needs to be sent for the General Meeting, which should be given at least 21 days before the actual date of EGM. During the General Meeting, the company needs to pass the special resolution and file it with the Registrar along with the requisite filing within 30 days of passing, along with other documents.

“Passing a resolution is an important step in the process of changing the object clause of a company. This resolution should be duly approved by the Board and is then presented to the shareholders for approval”. “The Memorandum of Association (MOA) is a legal document that defines the scope of a company’s activities, so it is important to ensure that all formalities are followed when changing the object clause.” 

7. Documents Required for Object Clause Alteration

To change the object clause of a company’s Memorandum of Association, certain documents are required. This process can be completed by following the provisions of Section 13 of the Companies Act 2013 and Companies (Incorporation) Rules 2014. The following documents are required for object clause alteration:

– Board resolution for altering object clause of MOA

– Notice of Extraordinary General Meeting (EGM) including agenda and explanatory statement

– Special resolution passed by members of the company

– Application in e-form MGT-14 for filing with the Registrar of Companies (ROC)

– Amended copy of MOA

– Certified true copy of the special resolution passed, along with the explanatory statement

– Attendance sheet of the EGM

– Notice of EGM issued to all members

It is important to note that the documents required may vary based on the nature and extent of the alteration. The process involves a series of steps, including holding a board meeting, issuing notice for EGM, and obtaining special resolution from the members. Once all the documents are in place and the alteration is approved, it must be registered with the ROC. It is important to comply with the rules and regulations mentioned in the Companies Act to ensure a smooth and efficient process. As quoted by Section 13 of the Companies Act 2013, “Every alteration of the memorandum shall be noted in every copy thereof.” 

8. Registrar’s Approval for Object Clause Change

Once the board of directors of a company approves the change in its object clause, the proposal goes to the shareholders for their approval. After the approval, the company needs to seek the registrar’s approval for the alteration of the object clause. This approval is mandatory and the company must submit an application with the registrar along with the prescribed fees. The registrar will go through the memorandum of association and other related documents to ensure that the change is in compliance with the Companies Act.

“The Registrar of Companies is a designated authority who approves the change in object clause of a company. The registrar is required to ensure that the alteration in the object clause is compliant with the regulatory framework,” says Gaurav N Pingle, a practising company secretary.

Once the registrar approves the change, the company must incorporate the altered object clause in its memorandum as per the Companies Act 2013. It is essential to understand that the object clause defines the scope of business activities of the company and therefore, any change in it impacts the company’s activities. It is necessary to ensure compliance with the Companies Act and other regulatory frameworks to avoid any legal complications in the future. 

9. Incorporating Altered Object Clause in Memorandum

Inporating an altered object clause in the memorandum of association is a crucial process that requires proper documentation and compliance with legal procedures. The Memorandum of Association (MOA) is the main charter of a company that outlines its scope of activities and the relationship with its members. Section 13 of the Companies Act 2013 covers the process of altering the MOA, including the object clause. Any clause on the MOA can be altered by passing a special resolution, except for the capital clause, which requires an ordinary resolution. The alteration can be done by adding, deleting, modifying, substituting, or in any other way that the company desires.

The process of altering the object clause in the MOA involves several steps, including issuing a notice of board meeting to all the directors of the company at least 7 days before the date of the meeting. During the board meeting, the proposed new objects of the company are discussed, and a board resolution is passed after selecting the object. The company then seeks approval to change the object clause before moving to the next step of fixing the date, time, and venue of the general meeting. During the general meeting, a special resolution is passed, and the resolutions and agreements are filed with the Registrar within 30 days of passing.

“A company can alter its object clause only if it wants to.” – Companies Act 2013 

10. Impact of Object Clause Change on Company Activities

The of changing the object clause of a company’s memorandum of association should not be taken lightly. This clause specifies the purpose, main objectives, and auxiliary or ancillary goals of the company’s activities. Any change in this clause will affect the company’s power and scope of authority, which can result in legal consequences. Let’s dive deeper into some of the impacts a change in object clause may have on a company’s activities:

1. Altering the object clause expands or limits the company’s business activities. This change will affect the company’s future course of action and may not be carried out without enough financial resources, expertise, or appropriate approvals.

2. Removing an object from the clause means that the company cannot engage in that business anymore. Therefore, before undertaking such activities, companies must carefully scrutinize the revised object clause.

3. A change in object clause may affect the investors, creditors, and suppliers’ perception, who might look for opportunities elsewhere, depending on the company’s new objectives.

4. Banks and other lending organizations may also be reluctant to lend if they doubt the company’s ability to fulfill its duties after the change.

In conclusion, changing the object clause cannot be done arbitrarily. Rather, a detailed and comprehensive study of the benefits and consequences must be considered before making the alteration. After all, the company’s whole business is organized in accordance with the Memorandum of Association and determines the company’s relationship with outside stakeholders. As mentioned in the Companies Act, 2013, complying with all applicable provisions and obtaining approvals from the concerned parties is essential. Hence, companies must act prudently and responsibly while deciding upon any change in the object cla