Change Objective/Activity

Overview

A company’s objectives or activities may change over time due to various reasons such as changes in market conditions, mergers and acquisitions, diversification, and more. In such cases, the company may need to update its objectives or activities in its Memorandum of Association (MOA) to reflect the new changes.

Objects Clause in the Memorandum of Association

The objects clause in the Memorandum of Association defines the objectives for which a company is formed. A company cannot operate beyond the scope of its objects clause. Any action taken beyond these objectives is considered ultra vires (beyond the powers) and is therefore void. The Memorandum serves as a public document, particularly when the company enters into contracts, arrangements, or agreements with third parties.

The Memorandum of Association must adhere to the format specified in Tables A-F of Schedule I of the Companies Act 2013. These tables cater to different types of companies based on their status:

• Table A: MOA for companies limited by shares.
• Table B: MOA for companies limited by guarantee without share capital.
• Table C: MOA for companies limited by guarantee with share capital.
• Table D: MOA for unlimited companies.
• Table E: MOA for unlimited companies with share capital.

Object Clause in the Memorandum of Association

The Object Clause outlines the activities a company will undertake after incorporation, divided into two parts:

1. Main Activity: The primary business activities.
2. Ancillary Activities: Activities that support the main business.

A company is prohibited from engaging in activities outside the scope of its objects clause.

Why Change

A company’s operations are confined to the objectives stated in its MoA. Objectives may need to be revised in scenarios such as Corporate Acquisition: When a company is acquired, operational and goal-oriented shifts may occur, even if the brand identity remains. New Business Endeavors: Introducing new products or services, or penetrating new markets, may necessitate a reevaluation of company objectives, including geographic or service expansion. Regulatory Compliance: Changes in government regulations may render certain activities illegal or restricted, prompting a company to revise its objectives to comply with new legislation. Outdated Practices: Discarding ineffective methods and adopting new strategies may lead to a change in objectives to align with more current practices.

Updating the objectives or activities of a company may be necessary for various reasons, such as:

1. Diversification: If a company wants to enter a new market or introduce a new product, it may need to change its objectives or activities to reflect the new business.
2. Merger or Acquisition: In case of a merger or acquisition, the company may need to change its objectives or activities to align with the new business strategy.
3. Regulatory Compliance: If the company’s existing objectives or activities are not compliant with the relevant regulations, it may need to change them to avoid legal issues.

Contents of Memorandum of Association

MOA of the Company consists of the following clauses:

Name Clause

This is the first clause in every MOA that shall mention the name of the Company with the last word as Private Limited, Limited, OPC Private Limited depending upon the type of Company. Such requirement needs not to be fulfilled by Section 8 Company.

Registered Address Clause

It is the clause that mentions the name of the state where the Company’s registered office is situated.

Object Clause

It specifies the objects for which the Company is incorporated.

Liability Clause

It specifies the limited or unlimited liability of the members.

Capital Clause

This is the last clause that mentions the Capital of the Company. Authorized Capital divided into such shares shall be mentioned by the Company under this clause. Authorized Capital is the amount up to which the Company can raise the fund.

Procedure

The procedure for changing the objectives or activities of a company involves the following steps:

1. Hold a Board Meeting: The first step is to convene a Board meeting to discuss the proposed change and obtain approval from the Board of Directors.
2. Pass a Resolution: The Board must pass a resolution to approve the proposed change and authorize a Director or Company Secretary to file the necessary forms with the Registrar of Companies (ROC).
3. File Form MGT-14: The next step is to file Form MGT-14 with the ROC within 30 days of passing the resolution.
4. File Form INC-24: Once Form MGT-14 is approved by the ROC, the company must file Form INC-24 within 30 days to update the MOA.
5. Obtain Certificate of Incorporation: Upon approval of Form INC-24, the ROC will issue a new Certificate of Incorporation with the updated objectives or activities.

Documents Required

The following documents are required for changing the objectives or activities of a company:

1. Board Resolution approving the change
2. Copy of the amended MOA
3. Form MGT-14
4. Form INC-24

Process

The process of changing the objectives or activities of a company may take approximately 30-45 days, subject to the approval of the ROC.

It is advisable to seek the guidance of a professional consultant to ensure a hassle-free and smooth process.

We at Corporate Raasta Consulting have a team of experts who can assist you in changing your company’s objectives or activities with ease. Contact us today to know more!