When and how the Memorandum can be altered?

When and how the Memorandum can be altered?

The memorandum of association of a company being its charter, the right of the company to alter its contents is rigidly limited by the provisions of the act. Section 16 of the act provides that a company shall not alter the conditions contained in its memorandum except in the cases, in the manner and to the extent provided in the act.

(a) Change of Name: A company can Change its name. For this purpose, it must first pass a special resolution and then obtain approval of the central government in writing. However, so such approval is necessary for merely including or deleting the word ‘private’ consequent on the conversion of the public company into a private company and vice versa. If through inadvertence or otherwise a company is registered by a name, which in the opinion of the central government, is identical with or too nearly resembles the name on an existing company, it can change its name by passing an ordinary resolution and with the previous of the central government signified in writing. The central government may also, within twelve months of its registration direct the company to change its name. Within three months of such direction, the company must change its name by passing an ordinary resolution and with the previous approval of the central government signified in writing. Default in complying with the direction is punishable with a fine up to Rs. 100 for every day during which the default continues. The Registrar shall enter the new name on the register in place of a former name and shall issue a fresh certificate of incorporation. Necessary alteration shall also be made in the memorandum by the registrar. The change of name shall be complete and effective only on the issue of such a certificate. The right and obligations of a company will not be affected by the change of its name.

(b) Change of registered office: A company can shift its registered office from one place to another within the same city, town or village, provided notice of the change is given to the registrar within 30 days of such change. But, where the registered office is to be changed outside the local limits of any city, town or village in the same state, a special resolution to that effect must be passed. A notice of such change shall be given to the registrar within 30 days of the change. These two changes in the registered office do not involve alteration of a memorandum.

Where a company wants to shift its registered office from one state to another, the memorandum of a company has to be altered. For effecting this change a special resolution must be passed by the company and a copy thereof must be filed with the registrar within 30 days. Further, the sanction of the company law board for this purpose must be obtained. The company law board, before confirming the resolution, will give an opportunity to members, creditors and other persons such as state and the registrar. The company law board may then issue the confirmation order on such terms and conditions as it may think fit. A certified copy of the order of the company law board together with a printed copy on the altered memorandum shall be filed with the registrar of each state within three months from the date of the order. When the registered office of the company is shifted to its new location in another state, notice of the new address shall be given to the registrar within 30 days of the transfer.

The registrar of the state, from which such office is transferred, shall send to the registrar of the other state, all records relating to the company. A company cannot change its registered office from India to another country and the company law board has no power to sanction such alteration of the memorandum.

(c) Change of the objects clause: A company has no unlimited right to alter the objects clause of the memorandum however urgent or beneficial such alteration may be. The intention of the legislature is to prevent too easy an alteration of the condition contained in the memorandum. Section 17 only gives a limited right to the company to alter its object clause. This section provides that the objects clause can be altered only if the change enables the company:

(a) To carry on its business more economically or more efficiently,

(b) To attain its main object by new or improved means;

(c) To enlarge or change the local area of its operation;

(d) To carry on some business this under existing circumstances may be conveniently or advantageously combined with the business of the company;

(c) To restrict or abandon any of the object specified in the memorandum;

(d) To sell or dispose of the whole or any part of the undertaking of the company;

(g) To amalgamate with any other company or body of persons.

The companies can alter its objects clause only to the above extent and only for the above-named purposes. The company law board has no jurisdiction to confirm any alteration which is not covered by section 17(i). The alteration must leave the business of the company substantially the same what it was before with only such changes in the mode of conducting it as will enable it to be carried on more economically or more efficiently. The additions or alterations should be a step in aid to improve efficiency.

A company is allowed to undertake any new business having no relation to its existing business except that it must be such as can conveniently or advantageously be combined with the company’s existing business. Whether one business can be conveniently combined with another is essentially a business question to be determined by the directors and shareholders. The new business must not, of course, be destructive of or inconsistent with the existing business of the company.