How is a company’s object clause changed?
A company changes its business activity by altering the objects clause of its memorandum. The members pass a special resolution, the resolution is filed in Form MGT-14 within 30 days, and the new activity has no effect until the Registrar registers the alteration.
Which clause records the activity?
Section 4 puts the objects in the memorandum, with the name, the state of the registered office, the liability of members, and the share capital where the company has a share capital. The objects are the purposes for which the company is incorporated. A new line of business that the clause does not cover is a change of that clause, not a board note.
The Act does not keep a separate “other objects” list from the older company law. One objects clause states what the company may do. A private limited company and a one person company both have that clause.
Who approves the change?
Section 13(1) requires a special resolution. Under section 114(2), the votes cast in favour are not less than three times the votes cast against. The board calls the general meeting on at least 21 clear days’ notice, unless members holding at least 95 percent of the voting rights consent to shorter notice.
A one person company does not hold that meeting. Section 122 treats the resolution, once the member has signed it and it is recorded in the minute book, as passed. The member is the person who decides the new objects.
Which form is filed?
Form MGT-14 files the special resolution within 30 days of the day it is passed. The altered memorandum is attached, with the notice of the meeting and a copy of the resolution. There is no separate name-approval form for an objects change. Form INC-24 is used when the name itself changes.
Section 13(6) asks the Registrar to register an alteration of the objects and to certify that registration. Section 13(9) says the alteration has no effect until it is registered. After registration, every copy of the memorandum that the company issues must carry the altered clause. Other filings the company still owes are on the stay-compliant page.
When is an extra step required?
Section 13(8) applies where the company raised money from the public through a prospectus and any of that money is still unutilised. That company cannot change the objects for which the money was raised by a resolution alone. The prescribed details are published, and the promoters and shareholders in control give the dissenting shareholders an exit in the manner the securities regulations set.
A private company that did not raise money from the public in that way does not take the section 13(8) step. Wanting a wider business, or stopping an activity the law no longer allows, is a reason to propose the change. It is not a substitute for the resolution and the registration.
Frequently asked questions
Four questions cover the start date, Form INC-24, a one person company, and money raised from the public.
Does the new activity start on the meeting date?
No. Section 13 says the alteration of the objects has no effect until the Registrar registers it.
Is Form INC-24 used for a new activity?
No. INC-24 is the application when the company changes its name. An objects change is filed in Form MGT-14 with the altered memorandum.
Does a one person company call a general meeting?
No. The member records the resolution under section 122. That record is the special resolution. There is no meeting of members.
Can every company change objects by a meeting alone?
A company that has raised money from the public through a prospectus, and still holds an unutilised amount of that money, must also follow section 13(8). An ordinary private company that did not raise money that way does not.
Sources
The objects sit in the memorandum. Section 13 of the Companies Act, 2013 is the alteration. Form MGT-14 files the special resolution.