The Memorandum of Association (MOA) is the charter document of a company, defining its legal identity, scope of operations, and fundamental objectives. It acts as a constitutional framework that binds the company, its shareholders, and regulatory authorities.
Importance of MOA Realignment for Companies Incorporated Under the Companies Act, 1956
With the enactment of the Companies Act, 2013, companies originally registered under the Companies Act, 1956 must realign their MOA to comply with updated statutory provisions. The 2013 Act introduced significant changes, including revised object clause structures, compliance requirements, and governance norms. Failing to amend the MOA in line with the new Act can lead to regulatory non-compliance, operational inefficiencies, and legal challenges.
Key Amendable Clauses in the MOA
Under Section 13 of the Companies Act, 2013, companies may amend the following MOA clauses:
Name Clause – Changing the official name of the company.
Situation Clause – Altering the registered office location.
Object Clause – Expanding, modifying, or restricting business activities.
Liability Clause – Changing the liability structure of members.
Capital Clause – Revising the authorized capital structure.
Note: The Subscription Clause (which records initial shareholders and their holdings) cannot be amended.
Step-by-Step Procedure for MOA Amendment
Step 1: Board Approval
The Board of Directors must pass a resolution approving the proposed MOA amendment.
A decision is taken to convene an Extraordinary General Meeting (EGM) for shareholder approval.
Step 2: Drafting and Issuing EGM Notice
The company must issue a clear and comprehensive EGM notice at least 21 days in advance.
The notice must include:
The text of the proposed amendment.
An explanatory statement detailing the rationale for the amendment.
Step 3: Passing a Special Resolution in the EGM
The amendment must be approved by a three-fourths majority of shareholders present and voting.
Shareholder dissent, if any, must be appropriately addressed, particularly for companies with public investments.
Step 4: Regulatory Filings with the Registrar of Companies (RoC)
The company must file Form MGT-14 within 30 days of passing the special resolution.
Required attachments:
Certified copy of the special resolution.
The revised MOA.
Explanatory statement from the EGM.
Step 5: Approval from RoC and Effective Implementation
The RoC examines the amendment for compliance with statutory norms.
Upon approval, the changes are formally recorded, and the revised MOA becomes enforceable.
Specific Considerations for Different Amendments
1. Name Clause Amendment
The new name must comply with MCA’s naming guidelines.
If the name includes restricted words like "India," prior approval from the Central Government is required.
2. Situation Clause Amendment (Change of Registered Office)
Within the same city: Simple RoC approval is sufficient.
Interstate relocation: Requires Regional Director (RD) approval in addition to RoC filings.
Mandatory Filing: Form INC-22 must be submitted.
3. Object Clause Amendment
If the company has raised public funds, additional requirements include:
Publishing notices in two newspapers (one English, one local language).
Providing dissenting shareholders an exit route per SEBI guidelines.
4. Capital Clause Amendment
Any changes in authorized capital require Form SH-7 to be filed with the RoC.
Proper disclosures must be made to shareholders and regulators.
5. Liability Clause Amendment
Any alteration in liability terms must be explicitly approved by shareholders through a special resolution.
The revised structure must be communicated transparently.
Common Pitfalls to Avoid
Missed Regulatory Deadlines: Delayed filings of MGT-14, INC-22, SH-7 attract penalties.
Inadequate Shareholder Approval: A three-fourths majority is mandatory; non-compliance renders the amendment invalid.
SEBI Non-Compliance for Listed Companies: Publicly listed companies must follow additional disclosure norms.
Rejection of Proposed Name Changes: Ensure the new name aligns with MCA approval guidelines to avoid rejection.
Conclusion
Amending the MOA is a strategic and compliance-critical process. Companies incorporated under the Companies Act, 1956 should proactively realign their MOA with the Companies Act, 2013 to ensure smooth business operations and legal compliance. A structured approach, timely filings, and strict adherence to legal requirements will facilitate a hassle-free amendment process and safeguard the company from regulatory risks.
