Procedure to Change Object Clause of NBFC Company

Narendra Kumar

03 Dec, 2020

The process of change in the object clause of NBFC is almost similar to the normal private limited company or limited company, but also require the approval of RBI. Change in object clause can be done as the Assets Finance Management Company wanted to convert to Loan Company or vice versa. The same needs to be strategically planned keeping in mind the size of the assets of the company.

When do you need to change the object clause of NBFC?

• Generally, in NBFC founders opt for a change in the business activity after the takeover of NBFC. For example, AFC has been takeover for the purpose of the lending
• Existing NBFC may experience better opportunity in other types of NBFC likewise AFC/ LC/ IFC / VC.
• To carry on any other business which may be combined with the existing business of the company.
• Post-Merger / Takeover / Amalgamation of NBFC may need to change the object clause.

Procedure for change in object clause of the Company

Change in Object Clause of the Company involves alteration of Memorandum of Association (hereinafter referred to as “Memorandum”) of the Company. The provisions related to alteration of MOA are provided under Section 13 of the Companies Act^[1], 2013 read with Companies (Incorporation) Rules, 2014.
Secretarial procedure for alteration in the object clause is given below:

• Holding of Board Meeting: Issue notice in accordance with the provisions of section 173(3) of the Companies Act, 2013, for convening a meeting of the Board of Directors. The agenda for the Board Meeting would be:

• To Get in-principal approval of Directors for change in object clause of Memorandum;

• Fix date, time and place for holding an Extra-ordinary General Meeting (EGM) to get the approval of shareholders, by way of Special Resolution, for amendment in object clause of Memorandum. This amendment in the object clause of Memorandum shall be in accordance with the requirement of section 13 of the Companies Act, 2013;

• To approve a notice of EGM along with Agenda and Explanatory Statement to be annexed to the notice of General Meeting as per section 102(1) of the Companies Act, 2013;

• To authorize the Director or Company Secretary to issue Notice of the Extra-ordinary General Meeting (EGM) as approved by the board.
• Issue Notice of the Extra-ordinary General Meeting (EGM) to all Members, Directors and the Auditors of the company in accordance with the provisions of section 101 of the Companies Act, 2013;
• Holding of General Meeting: Hold the Extra-ordinary General Meeting (EGM) on the due date and pass the necessary Special Resolution under section 13(1) of the Companies Act, 2013, for change in object clause of Memorandum.
• Form filing of Registrar of Companies: As per section 13(6), Company is required to file Special Resolution passed by shareholders for the alteration of Memorandum with concerned Registrar of Companies. Hence, file form MGT.14 within 30 days of the passing of Special Resolution with the concerned Registrar of Companies, with prescribed fees and along with following attachments:
  • Notice of EGM;
  • Certified True Copy of Special Resolution;
  • Altered Memorandum of Association;
  • Certified True Copy of Board Resolution may be attached as an optional attachment.
• The Registrar shall register any alteration of the memorandum with the respects of the company only if it has been approved by the RBI in advance, a copy of RBI approval must be attached with the MCA – forms.
• Necessary ROC compliance must be completed within 30 days from the RBI approval.
• No alteration made under this section shall have any effect until it has been registered in accordance with the provisions of Companies Act 2013 and RBI Act. 1934 i.e. an NBFC company may alter its object clause by way of addition, deletion, modification, substitution or in any way subject to RBI Approval.
• RBI may reject the new business activity if it is not in the compliance of RBI laws/ guidelines. After RBI Approval the respective Registrar of companies shall take effect of the change in the object clause of NBFC.