PROCEDURE TO INCREASE A COMPANY AUTHORIZED SHARE CAPITAL

The objects clause in a company’s Memorandum of Association (MoA) outlines the scope of activities that the company is legally authorized to undertake.. As businesses evolve, companies may need to modify this clause to reflect new ventures or changes in strategy. Altering the objects clause is a significant step, governed by the Companies Act, 2013, and requires careful adherence to legal procedures.

Reasons for Changing the Objects Clause

Companies may change their objects for several reasons:

• Expansion into New Markets or Activities: A company may explore new business areas not covered by its original objectives.
• Change in Business Strategy: The Company might shift direction, necessitating an amendment to its objectives.
• Regulatory Requirements: Changes in regulations may require updating the objects clause.
• Diversification: Companies entering unrelated fields may need to update their objectives to include new activities.

Steps to Change the Objects Clause

1. Board Meeting for Approval

The process begins with a board meeting to discuss and approve the proposal to change the objects clause. The board must:

• Approve the draft resolution to amend the objects clause.
• Set a date for an Extraordinary General Meeting (EGM) to seek shareholders’ approval.
• Authorize a director or company secretary to issue a notice for the EGM.

2. Issuing Notice for Extraordinary General Meeting (EGM)

Once the board approves the proposal, the company must send a notice to shareholders, directors, and auditors. The notice should:

• Include the agenda for the EGM and the resolution for altering the objects clause.
• Provide an explanation of the new objectives and reasons for the change.
• You must send the notice at least 21 days before the EGM, in compliance with Section 101 of the Companies Act..

3. Holding the Extraordinary General Meeting (EGM)

At the EGM, shareholders will vote on the resolution. Since changing the objects clause is a significant alteration to the company’s MoA, the resolution must be passed as a Special Resolution, requiring at least 75% of the votes to be in favor.

4. Filing Special Resolution with Registrar of Companies (ROC)

After the Special Resolution is passed, the company must file it with the ROC using:

• Form MGT-14: To file the special resolution within 30 days of the EGM.
• A certified copy of the special resolution and a notice of the EGM.
• The altered MoA, reflecting the new objects.

5. Approval from Registrar of Companies (ROC)

The ROC reviews the application, and if everything is in order, they approve the changes and update the company’s MoA. The change is effective from the date of ROC approval.

6. Amendment of Certificate of Incorporation (if required)

In some cases, where the objects are a major part of the company’s identity, the Certificate of Incorporation may need to be updated to reflect the new objectives. A practising company secretary in Coimbatore can assist with the entire process, ensuring that all legal formalities are properly handled and the company’s records are accurately updated.

Post-Approval Compliance

After approval, the company must:

• Update corporate records and communicate the change to stakeholders, financial institutions, and other relevant parties.
• Ensure the company’s website, letterheads, and public documents reflect the new objects.

Conclusion

Changing the objects clause is a significant step, requiring careful execution of legal procedures. By following the proper steps—board meeting, shareholder approval, and filing with the ROC—companies can realign their objectives while ensuring legal compliance.