Alteration of Memorandum and Articles of Association

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Alteration of Memorandum and Articles of Association

Introduction

  • Memorandum of association is regarded as an unalterable document of a company.
  • Companies ordinance Sec 21 prohibits any alteration of the conditions in the memorandum of association except as is expressly permitted by the later sections of the ordinance.

Alteration of Memorandum of Association

  • Any clause in the memorandum of association may be altered by following the conditions laid down in the ordinance.
  • The procedure for alteration of each clause varies.
Alteration of Memorandum of Association
Alteration of Memorandum of Association

Procedure to make alteration in memorandum of association:

Alterations in the memorandum of association may be made by.
(i) Passing a special resolution and
(ii) Obtaining where necessary the sanction of commission.

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Object clause of a Memorandum of Association:

  • The statement objects defines the sphere of the company’s activities.
  • It determines and restricts the powers of the company.
  • This clause is considered the essence of  memorandum of association.
  • Any business activity carried out side the territories specified in the object clause is ultra virus and void.
  • Object clause is the most important part of the memorandum of association it should be drafted very carefully.

Non-existence & Alteration  of main object:

Non-existence of main object:If he main object of the company is gone, the company may be wound up.

Alteration of objects:

A company can alter its objects.
(i) Confirmation:
A company cannot change its object clause without the confirmation of commission. 

Limits with in which a company can alter its object clause:

  • Alteration is made with in the following limits:
    (a) To carry on its business more economically or more efficiently. OR
    (b)To attain its main purpose by new improved means. OR
    (c) To enlarge or change to local areas of its operation. OR
    (d) To carry on some other business which may be conveniently combined with its own. OR

(e) To restrict or abandon any of its own objects. OR
(f) To sell its undertaking.
(g) To amalgamate with another company.

Procedure for alteration of objects:

  • Notice:
    A sufficient notice must be given to all persons whose interests are likely to be affected by the proposed alteration.
    II. Hearing of object:
    Commission will hear the objections of any of the creditors of the company. 
    III. Power of commission to dispense with the notice:
    Commission is empowered to dispense with the notice on sufficient reasons.
  • Power of commission when confirming alteration:
    The commission may make an order confirming the alteration either wholly or in part, and on such terms and conditions as it thinks fit, and make such order as to costs as it thinks proper. 
    V. Procedure on confirmation of the alteration:
    A certified copy of the order confirming the alteration, together with a printed copy of the memorandum as altered, in the office of registrar.
  • Time of filing:
    Such copy will be filed within ninety days from the date of the order by the company.
    VII. Certificate of registration:
    Registrar will issue a certificate of registration will be conclusive proof of alteration and validity.

Legal effect of not to follow the procedure:

    The procedure as laid down in company’s ordinance must be complied with, otherwise the alterations in object clause become null and void.

Conclusion:

                To conclude I can say, that the object clause is the most important part of the memorandum of association. companies ordinance 1948 provides a procedure to alter the objects of the company. the alteration in object clause is made with the confirmation of securities and exchange commission of Pakistan

Alteration Of An Article Of Association 

  1. There must be a board meeting whereby a resolution will be passed to alter the article.
  2.  A notice of 21 days’ notice must be given to the members accompanied with the said special resolution.
  3. The company must convene a general meeting and pass a special resolution to alter the article.
  4. The company must ensure that the alteration does not go contrary to the provisions of the memorandum of association.
  5. The next step would be the delivery of the printed copy of the article and printed copy of the resolution to Corporate Affairs commission within 15 days of passing the resolution.
  6.  Evidence of payment of Annual return must be made available at the commission and it must be up to date. 
    Note: CAC do not attend to post incorporation issues of a company where the payment of their Annual returns is not up to date.
  7. The company would be required to annex the resolution to every copy of the article issued after the passing of the resolution.

Subject Matters of An Article of Association.

1.Meetings of the company.
2. Notice of meetings
3. Quorum of meetings
4. Who to chairman the meeting
5. Voting at meetings
6. Directors of the company.
7.Appointment of Directors
8. Filling of causal vacancy in the post of a Director.
9. Share qualification of Directors.
10.Tenure of the office of a Director.