Need TO Change Business Objective
- Undertake New Ventures: One of the main reasons companies update or change their objectives is to accommodate a transition into new ventures and fields. A business objective, when defined in the MOA restricts the scope of business of a company. Sometimes, as companies evolve, they need to branch out into other auxiliary fields to stay competitive. Therefore, vertical and horizontal expansion of the company results in an expansion of products, services and hence, the activities undertaken by the company.
- Company Takeover: When a company is taken over by another company, the management undergoes a major upheaval. The new company may want to retain the name, logo and other branding agents in order to capitalise on the market value built, but may want to take the business in a different direction. In such cases, the objects of the company which has been acquired might not be in accordance with the views or needs of the new management. Therefore, they require updating, in order for the business to grow and expand further.
- Eliminate abandoned activities: Sometimes, as the company grows, top-level management understands that certain businesses or activities undertaken by the company will not work out. Therefore, they slowly reduce and then finally stop indulging in such activities. Furthermore, there are certain activities which are actively pursued during the growing phase of a Company, which is not required once the Company gets established.
- Banned or prohibited activities: As Governmental policies change over time, sometimes a company will have to change the way it works. For instance, if a particular activity undertaken by the company is deemed prohibited in the coming year, they will have to stop indulging in such an activity. Furthermore, they must remove that from their MoA, or completely change their objectives in order to avoid getting into legal hassles.
Process to change the objective of the company
The MoA explains two major actions or objectives of the business.
- Main object- The main business activities
- Ancillary object- Activities necessary to conduct main objects.
The main object targets the major business activities of the company while the ancillary object targets the necessary activities for conducting the business plans and needs.
Following are the steps company takes to change the objects of the company
Firstly, a resolution has to be passed to make the essential changes in name and objectives at the meeting. The director of the company is supposed to sign the resolution, certify
and file the necessary forms with the RoC on behalf of the company. The meeting of the board should be fixed in prior. Besides that, it must contain all the necessary members of the firm to avoid any type of disputes and differences.
Special resolution in EGM
Secondly, a special resolution has to be passed would mention the necessary facts about the company and its workings. It will be issued to all the board members as well as members of their respective groups.
In the EGM, a special resolution will be passed by the members. The reply of the members to the special resolution is obtained through a postal ballot. All the members will be sent a notice.
Once this notice is circulated, the resolution is passed. Following this, the resolution is published in one English and one vernacular language newspaper in the company’s registered city. The Resolution must also be added to the Company website.
Any shareholder who voted against the changes must be given a chance to exit the company by the promoters.
If a company has raised funds from the public by issuing a prospectus and possesses some unutilised funds out of those, it has to make some disclosures along with passing a special resolution.
The company is not under any obligation to make the disclosures, if it has not obtained any funds or money from the general public or the funds/money have been fully utilized. The special company resolution would be sufficient in this case
File form MGT-14 with RoC
After passing the board resolution and special resolution, the company and its director(s) need to fill the MGT-14 form to the Registrar of Companies (RoC) to proceed further. Also, along with the MGT-14 form, the company will have to submit certain important documents to complete the whole process. Important documents like the below mentioned have to be submitted.
- A copy (certified) of the special company resolution
- A copy of the EGM (Extraordinary General Meeting) notice
- The explanatory statement issued with regard to the said notice
- Altered MoA (Memorandum of Association)
Issuance of fresh certificate of incorporation
After the completion of the above steps, the company is all set to submit the form along with the necessary documents to the RoC. The RoC will check, verify all the issued documents carefully and if everything is perfect, the RoC will issue a new certificate of incorporation to the company. Hereby, that will highlight the new changes made by the company. Object article change is not completed until the RoC provides a fresh certificate of incorporation to the company.
Incorporation of the MoA and AoA object clauses
After the RoC (Registrar of Companies) issues the incorporation certificate, the company must take steps to incorporate the object clause in all the MoA copies.