Alteration of Memorandum of Association (MOA)

The Memorandum of Association (MOA) is a critical document for any company. It outlines the company’s objectives, its official address, and other essential information. However, as businesses grow or change direction, it might be necessary to modify the MOA to reflect these updates.

In this blog, we’ll explain what the alteration of MOA entails, why it may be necessary, and the steps involved in making changes to this important document in India.

What is a Memorandum of Association (MOA)?

Before we dive into the alteration process, let’s first understand what an MOA is. Think of the MOA as the company’s legal foundation. It contains key information about the company, such as:

• Company Name: The official name under which the company is registered.
• Location: The address of the company’s registered office.
• Business Activities: The scope of activities the company is allowed to carry out.
• Liability Clause: The extent of the shareholders’ liability in case of financial troubles.
• Capital Clause: The total amount of authorized share capital the company can raise.
• Subscribers: The names of the first shareholders and the number of shares they own.

The MOA serves as a legal guideline for how the company operates, and any major changes to the business need to be reflected in this document.

Why Would a Company Need to Alter its MOA?

As a company evolves, certain aspects of its MOA may need to be updated. Common reasons for altering the MOA include:

1. Expansion of Business Activities:
   If the company wishes to enter new markets or industries, it will need to revise the Object Clause to include the new activities.
2. Change in Registered Office:
   If the company relocates to another state or city, the Registered Office Clause will need to be updated to reflect the new address.
3. Increase in Share Capital:
   If the company plans to raise additional funds by issuing more shares, it must amend the Capital Clause to allow for the increased share capital.
4. Change in Company Name:
   Companies sometimes rebrand or merge, requiring them to update the Name Clause of the MOA.

How Can a Company Alter Its MOA?

Altering the MOA is a formal process governed by the Companies Act, 2013. Here’s a step-by-step guide on how a company can make changes to its MOA:

1. Board Meeting and Resolution:
   The company’s Board of Directors needs to pass a resolution proposing the changes to the MOA. The resolution should clearly outline the reasons for the alteration and the specific clauses being amended.
2. Shareholder Approval:
   After the Board’s resolution, the company must hold a general meeting to get approval from its shareholders. A special resolution needs to be passed, meaning at least 75% of the shareholders must agree to the changes.
3. Filing with Registrar of Companies (RoC):
   Once the special resolution is passed, the company must file the updated MOA with the Registrar of Companies (RoC). This should be done within 30 days of the resolution, along with Form MGT-14 and a copy of the special resolution.
4. RoC Review and Approval:
   The RoC will examine the proposed changes to ensure they comply with legal requirements. Once approved, the updated MOA becomes valid and reflects the company’s new structure or objectives.
5. Effect of Changes:
   After the RoC grants approval, the changes are officially in effect, and the company can begin operating under the new terms outlined in the altered MOA.

Types of MOA Alterations

Here are some common types of changes companies might make to their MOA:

1. Name Change:
   Changing the company’s name requires approval from the RoC. In some cases, permission from the Central Government may also be required.
2. Changing Registered Office:
   If the company moves its office to another state, it requires a special resolution and approval from the Regional Director of the RoC.
3. Altering the Object Clause:
   If a company wants to change or add business activities, it must update the Object Clause. This requires shareholder approval and must be filed with the RoC.
4. Changing Capital Structure:
   When a company wants to raise more capital, it needs to alter the Capital Clause to reflect the increased number of authorized shares.
5. Changing the Liability Clause:
   If a company wishes to change the liability of its shareholders (for example, from limited liability to unlimited), it must pass a special resolution and notify the RoC.

Things to Keep in Mind

• Ensure the proposed changes follow the Companies Act, 2013 guidelines.
• Only alter the MOA if necessary for the company’s operations or future plans.
• Make sure to file the changes with the RoC on time to avoid penalties.

Conclusion

Altering the Memorandum of Association (MOA) is an important step when a company needs to adapt to changes in its business structure or objectives. Whether it’s updating the company’s name, shifting the registered office, or expanding business activities, it’s crucial to follow the correct legal procedures.

If your company is considering altering its MOA, it’s wise to seek legal advice to ensure the process is handled smoothly and according to the rules.