How to Alter the Memorandum of Association of a Company

The Memorandum of Association, also called the Charter of a company, defines the scope of the company’s activities, and the powers within which it can act. The objective of the company is also stated, including the rights and liabilities of the members, and the relationship of the company with its stakeholders. Section 13 of the Company Act, 2013 (along with any other applicable provisions) will have to be complied with if the company intends to make any changes to the Memorandum of Association.

The Memorandum of Association is considered to be the supreme document of the company and is mandatory for company registration. It’s the basis of the company’s very existence and defines and limits the permitted range of the company’s activities, association with its stakeholders and the superstructure of the company.

Memorandum of Association clauses

The Memorandum of Association comprises of various clauses that define the Name, Object, Capital, Address (Registered Office) and Liability of the company. The company cannot go against any of these clauses. For instance, if a company’s objective is to run only a real estate brokering business, then the company cannot start building property since it was not defined in the MOA. However, under the Companies Act, a company can alter its Memorandum of Association even after commencing its business, but only through the procedure laid down by the Act.

3 steps to alter company MOA after commencing business

The procedure for alteration has been defined under the Act. Only after such procedural modifications can a company change the way it functions. To alter the MOA, a special resolution would have to be passed by the members of the Company. The company would also have to comply with the related provisions of the Act, including Sector 13 (and section 61 in case of alteration of capital clause) of the Act.

1. Board Meeting u/s 173:

• The first step is to issue a notice for a Board Meeting, and send it to all the directors of the company. The Act specifies that the notice should be sent at least 7 days before the meeting. The Notice must also specify the Agenda (and notes to the Agenda) for the meeting.
• The next step is to draft the Board Resolution with regard to the alteration of the MOA. Typically, the legal or secretarial department ensure that this is completed.
• In the Board Meeting, the resolution regarding alteration of the MOA must be passed. Also, approval should be given by the board to convene an Extraordinary General Meeting (EGM) to recommend the modification of the MOA to the members of the company. The Special Resolution for the same must be drafted and circulated to the directors.
• Specifics of conducting the General Meeting, such as date, time and venue is to be decided.

2. General Meeting u/s 101:

• The authorising Director or Company Secretary must send the notice of the EGM to all the members, directors, and auditors of the company at least 21 days before the date of the General Meeting.
• However, in special circumstances, a Short Notice is allowed with the consent of 95% of the members who have voting rights. Such approval can be given in written or electronic form.
• At the Extra Ordinary General Meeting, the Quorum and the presence of the Auditors of the company are first checked as under Section 101 and 146 of the Act to see if the meeting can be conducted. If the Quorum is not present, the meeting is either cancelled or adjourned.
• During the course of the meeting, a Special Resolution is to be passed according to the provision of Section 114 of the Act. Once the Special Resolution is passed, the approval to alter the MOA has been secured.
• The altered MOA is to be drafted in accordance to the clauses mentioned in the Special Resolution.

3. Registrar of Companies u/s 117:

• Within a period of 30 days from passing the Special resolution, the necessary documents related to the alteration of the MOA must be filed with the ROC using Form MGT-14
• The documents necessary include, the special resolution passed in the EGM, notice of the EGM and a copy of the changed MOA.

Note that the Act does not require any stamp duty to be paid for the alteration of the MOA. Also, the Subscription Clause of a company’s MOA can’t be altered during the lifespan of the company.