Change in Object Clause

The third clause in the memorandum of any company is the object clause. The object clause states the objects or specifies the business's purpose for the incorporation of the company and any other matter that is necessary for furtherance thereof. Any act that is done by the company that is beyond the objects and powers. As per Companies Act, 2013, the object clause is one of the most important provisions. While getting a company registered, the subscribers decide upon the objects of the company. They can do so by following all the required legal procedures under Section 13 of the Companies Act read with the Companies (Incorporation) Rules, 2014.

According to Section 4(6), a company's memorandum must be made in the respective specified forms. As per Section 4(1), the memorandum contains the following relevant clauses:

Name clause that contains the name of the company.
Registered Office Clause consisting of all the details such as the name of the state where the registered office is situated.
Objects clause of the company and the matters that are considered necessary in furtherance thereof.
Liability clause that explains the liability of the members of the company.
Share capital clause defines the authorized share capital of the company.

What is MOA or Memorandum of Association?

The foundation of any incorporated company is the Memorandum of Association.MOA is the company's constitution as it defines the scope of powers and rights within which the company operates. In case of any conflict between the Companies Act and Clauses in Memorandum, the provisions of law prevail.

Object clause is the part of the memorandum that defines the primary objectives of the company. A company cannot operate beyond its object clause. The company cannot act against the provisions of its memorandum, and if in case it does, these types of transactions will be ultra vires ( going beyond the limits of the constitution of the company) and hence void. If in case a company enters into any arrangement or agreement or contract with any third party, such memorandum will be used as a public document.

Memorandum of Association must be prepared as per the format provided in Table A-F of Schedule I of the Companies Act, 2013. Depending on the status of the company the following table applies:

Table A

MOA for Companies that have got restricted shares.

Table B

MOA of the Companies that is limited by guarantee and has got no share capital.

Table C

MOA of the companies that is limited by guarantee but have share capital.

Table D

MOA of the Unlimited Companies

Table E

MOA of the Unlimited Companies where share capital is available.

What are the Contents of Memorandum of Association?

The following clauses are included in Memorandum of Association:

Name Clause

The first clause in every Memorandum of Association shall mention the company's name with the last word as Pvt.Ltd, Limited, OPC Private Limited, depending on the type of company. Such a requirement must be fulfilled by Section 8 Company.

Registered Address Clause

This clause is mentioned in the mane of the state where the company’s registered office is located.

Object Clause

It specifies the objects for the incorporation of the company.

Liability Clause

It provides the limited or unlimited liability of the members.

Capital Clause

This is the last clause specifying the capital of the company. The company shall mention authorized capital divided into a such number of shares under this clause. Authorized capital is the amount up to which the company can raise the fund.

What is Object Clause in Memorandum of Association of Company?

A complete list of activities that will be performed by a company after its incorporation is specified in the object clause of MOA or Memorandum of Association. An activity to be completed by the company that is included in the object clause consists of mainly two parts:

Main Activity; and
Activities are ancillary to the main business.

The company is generally prohibited from carrying any business that is outside the scope of its objects.

What is the Reason to Change Object Clause?

The reasons for which a company alters its object clause are as follows. The given list may or may not be the same for all companies:

The company aspires to carry on its business on a big scale by enhancing the scope of its activities.
For the purpose of obtaining the goals that have been already set by new or improved methods.
To carry on the additional business that can easily be combined with the existing business of the company.
To dispose or sell the part of a business that can change the structure of the company.
If the company is getting merged with another company, it would need to expand its existing objective.

What is the Process for Change in Object Clause in the Company?

The procedure for a change in the object clause is given below:

Calling of Board Meeting

To change the object clause in the MOA or Memorandum of Association, the first thing that needs to be done is issuing a notice for convening a meeting of the Board of Directors. The main Agenda for the Board Meeting will be as follows:

To attain the in-principal sanction of Directors for the alteration in the object clause that is related to the Memorandum of Association (MOA).
Decide the date, time, and location for conducting the Extra-Ordinary General Meeting (EGM) to obtain the shareholders' consent. This can be done bypassing of the special resolution for alteration in the object clause in the memorandum.
To provide support to make notice of EGM together with the Agenda in addition to the Explanatory Statement that must be suitable as per the notice of the General Meeting as prescribed in S. 102(1) of the Companies Act, 2013.
The Director or Company Secretary who is related to the issue needs to issue the Notice of Extra-Ordinary General Meeting (EGM) as allowed by the board.
Present the notice of the Extra Ordinary General Meeting (EGM) to all the members, Directors, and the Auditors of the company who is in agreement with the provisions as per Section 101 of the Companies Act, 2013.

Issue Notice for conducting an Extra-ordinary General meeting (EGM)

The notice of the Extra-Ordinary General Meeting must be issued to all the Directors, members, and the auditors as per the provisions of Section 101 of the Companies Act, 2013.

Holding of General Meeting

In the Extra Ordinary General Meeting, a special resolution will be passed by the members. There must be a specific clause in passing a special resolution.

In case the company has raised funds from the public by issuing a prospectus and possesses some unutilized funds out of those funds, it has to make some disclosures along with passing a special resolution.

The special resolution of the members is obtained by postal ballot. A notice will be issued to members regarding the same consisting of the following details:

a) Total received money from the public by way of issuing a prospectus.

b) The total money that is utilized for the objects that are stated inside the prospectus.

c) The unutilized money out of the total money received by issuing a prospectus.

d) Details of the proposed changes in the objects.

e) Poper justification for the change in the objects in Object clause.

f) The amount suggested being utilized for the new objects.

g) The total calculated financial impact of the proposed change on the company's earnings and cash flow.

h) Any other relevant information.

i) The place where a person interested can obtain a copy of the notice of a resolution that is passed.

The special resolution passed will be published in the newspapers (one in English and the other in local language) in the city where the registered office is located.

Special Resolution will also be placed on the website of the company.
The dissenting shareholders (who voted against the decision of the object clause) will be provided a chance by the promoters and other shareholders to exit.
If in case the company has not received any funds from the public, or the funds collected are fully utilised. The company is not bound to make any disclosures, and only the special resolution will be enough.

ROC Form Filing

According to Section 13(6) of the Companies Act, 2013- a special resolution must be passed by shareholders to alter the object clause in the memorandum of association with the concerned Registrar. Hence, file form MGT-14 within 30 days of passing a special resolution with the concerned Registrar of Companies with the prescribed fees and the following attachments:

Notice of EGM.
A Certified True Copy of special resolution.
An Altered MOA or Memorandum of Association.
A Certified True Copy of Board Resolution may be attached as an optional attachment.

Approval by ROC for Change in Object Clause

Upon receiving the application, the Registrar shall inspect the same. Upon satisfaction of the application's correctness, it shall approve the alteration and certify the registration within 30 days of filing a Special resolution.

Duty of Registrar

The Registrar will issue such a certificate that shall be conclusive evidence as per all the requirements with respect to the alteration that has been duly complied by the company. Further, no change is made under the section that shall have any effect until it has been registered according to this section's provisions.

The alteration shall be complete and valid only after the Registrar issues the certificate.

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Frequently Asked Questions

Can an object clause be altered?

Every clause in an MOA can be alerted. The capital clause is the only exception where an ordinary resolution needs to be passed for passing an ordinary resolution. The object clause can be altered by passing a special resolution as per Section 13 of the Companies Act.

What is the Procedure to change an Object Clause in the Memorandum of Association?

The procedure to change the object clause in the MOA is as follows:

• Step1: Pass Board Resolution.

• Step 2: Special Resolution in the EGM.

• Step 3: MGT-14 to be filed with ROC.

• Step 4: Issuance of fresh certificate of incorporation.

• Step 5: Incorporating Object Clause in MOA and AOA.

What is the object clause in the Memorandum of Association of a company?

The object clause of a company is the third clause in a memorandum of association of any business stating the objects i.e., the business or purpose for the company's incorporation and any other matter that is considered necessary in furtherance thereof.

What is the objective of the object clause in memorandum of association?

The objectives of the objects clause for a memorandum of association are as follows:

• It limits and explains the scope of a company's operations.

• It also provides details on the scope of activity the company will undertake and explains how capital provided by members will be used.

How many main objects can a company have?

At present, companies can only have only two types of Objects. One for which company will incorporate and second one are for attaining the main objects.

How do I change the capital clause in MOA?

A company can change its capital clause by the passing of an ordinary resolution in a general meeting.

What are the objects of articles of association?

The contents of the AOA are as follows:

• Classes of shares, its values, and the rights attached to all of them.

• Calls on shares, transfer of shares, forfeiture, conversion of shares, and alteration of capital.

• Directors, their appointment, powers, duties, etc.

• Meetings and minutes, notices, etc.

• Accounts and Audit.

Is it mandatory to alter MOA and AOA as per Companies Act 2013?

It is suggested that whenever a company amends its articles, it should ensure that after the amendment, the Articles of Association as per the format that is specified under the Companies Act, 2013. It is compulsory to pass a special resolution and file MGT 14 if you alter MOA and AOA as per the Companies Act, 2013

What is the purpose of memorandum and articles of association?

The MOA is a document that forms a company, and the AOA specifies how the company is run, owned and governed. The article of association includes the directors' responsibilities and powers and how the members exert control over the board of directors.