Changing objectives of a Company
Object clause mentioned in Memorandum of Association of a company explains–
1. Main business activity of the company (Main object)
2. Activities which are necessary for conducting the main business activity (Ancillary objects)
A company may want to change its main object or the ancillary objects. To get this done a company has to follow these steps:
Step 1: Pass board resolution
Pass a resolution at the board meeting to approve the object clause. A director or the Company Secretary of the company will be authorised in the meeting to sign, certify and file the required forms with the RoC. Also, the Board of Directors will fix a day, time and venue of Extra Ordinary General Meeting of members.
Step 2: Special resolution in EGM
In the EGM, a special resolution will be passed by the members.
Specific clause in passing special resolution
If a company has raised funds from the public by issuing prospectus and possesses some unutilised funds out of those, it has to make some disclosures along with passing a special resolution.
- The special resolution of the members will be obtained by postal ballot. A notice will be issued to the members which will contain the details –
- Total money received (from public by issuing prospectus)
- Total money utilized for the objects stated in the prospectus
- Unutilized money out of the total money received by issuing prospectus
- Details for the proposed change in the objects
- Justification for the change in the objects
- Amount proposed to be utilized for the new objects
- Estimated financial impact of the proposed change on the earnings and cash flow of the company
- Other relevant information
- The place from where a person interested can obtain a copy of the notice of resolution to be passed.
- The special resolution will be published in the newspapers (one in English and one in vernacular language) in the city where the registered office of the company is located.
- SR will also be placed on the website of the company.
- Dissenting shareholders (who vote against the decision of object clause) will be given an opportunity by the promoters and other shareholders to exit.
If the company hasn’t received any funds from the public, or the funds received are fully utilised, then the company is not required to make the disclosures, only the special resolution would be enough.
Step 3: MGT-14 to be filed with RoC
Once the special resolution is passed at the EGM, the authorised director or the company secretary will file Form MGT-14 with the RoC. Along with MGT-14, other documents to be filed are–
- Certified copy of the special resolution
- Notice of Extra Ordinary General Meeting (EGM)
- Explanatory statement to the notice
- Altered Memorandum of Association
Step 4: Issuance of fresh certificate of incorporation
After receiving MGT-14, the RoC will examine the form, and if they are satisfied, they will register the change in object clause by issuing a fresh certificate of incorporation.
Object clause change is not completed until the RoC issues a fresh certificate of incorporation.
Step 5: Incorporating object clause in MoA and AoA
Once the certificate of incorporation is received from the RoC, the object clause must be incorporated in all the copies of Memorandum of Association.