According to the Companies Act 2013, the object of a company refers to the purpose or activities for which the company is established. The object clause of the company's Memorandum of Association (MOA) outlines the specific objectives and goals that the company intends to achieve. The Act provides certain categories of objects that a company can have, including:
- Main objects: These are the primary activities for which the company is formed. The main objects should be stated in the Memorandum of Association and should be specific and clear.
- Ancillary objects (Objects that are necessary to fulfill the main object of the Company): These are the activities that are necessary or incidental to the attainment of the main objects of the company. Ancillary objects are related to and supportive of the main objects.
Changing Objects of a Company
A change to the company's object clause necessitates a change to its Memorandum of Association. The process of amending the MOA is governed by Section 13 of the Companies Act 2013 and is applicable to all companies.
According to Section 13 of the Companies Act of 2013, the object of the company may be modified by a special resolution and the Registrar shall register in its records any revision of the memorandum with respect to the objects of the business and shall issue a fresh certificate of incorporation.
Reasons for Changing the Object of a Company
A company may change its objects for various reasons, including:
- Diversification: A company may change its objects to diversify its business activities and enter new markets or industries. This allows the company to explore additional revenue streams and reduce dependence on a single line of business.
- Expansion: Companies often change their objects to expand their operations, either geographically or by introducing new products or services. This expansion may be driven by market opportunities, changing consumer preferences, or technological advancements.
- Strategic Focus: Companies may realign their objects to reflect a change in their strategic focus. This could involve shifting the company's emphasis towards a particular product line, market segment, or business model.
- Legal and Regulatory Compliance: Changes in laws and regulations may require a company to modify its objects to ensure compliance. For example, if new regulations are introduced that affect the company's existing objects or if the company wishes to engage in activities that require specific permissions or licenses, a change in objects may be necessary.
- Merger or Acquisition: In the case of mergers or acquisitions, companies may change their objects to align with the strategic goals of the combined entity or to accommodate the new business activities resulting from the transaction.
- Financial Restructuring: Companies facing financial difficulties or seeking to optimize their capital structure may change their objects to facilitate debt restructuring, asset divestment, or raising new funds.
- Stakeholder Demands: Shareholders, investors, or other stakeholders may request a change in objects to align the company's activities with their interests or to address emerging market trends or societal demands.
Mandatory Requirements for Changing Objects of a Company
According to the Companies Act 2013, the objects of a company can be changed under the following circumstances:
- Special Resolution: A company can change its objects by passing a special resolution at a general meeting of the shareholders. The special resolution requires the affirmative vote of members holding not less than 75% of the total voting rights of the company.
- Alteration of Memorandum: The change in objects requires an alteration of the Memorandum of Association of the company. The altered memorandum should be filed with the Registrar of Companies within 30 days of passing the special resolution.
- Compliance with Notice Requirements: The company must provide notice of the proposed alteration to its objects to all shareholders, creditors, and debenture holders at least 21 days before the general meeting. The notice should contain the details of the proposed alteration and the reasons for the change.
- Central Government Approval: In some cases, the alteration of objects may require prior approval from the Central Government. This applies to certain types of companies or where the change affects the company's main objects in a significant manner.
- Approval of Other Regulators: If the company is regulated by any specific regulatory authority or sectoral regulator, the approval of such regulators may be required for changing the objects, especially if it affects the nature of the company's activities or sector-specific regulations.
Process for Changing Objects of a Company
The process for changing the objects of a company as per the Companies Act 2013 involves the following steps:
- Board Meeting: The Board of Directors of the company must convene a board meeting to discuss and propose the alteration of the objects. They will prepare a draft resolution and the proposed alteration of the Memorandum of Association (MoA) for consideration.
- Notice to Shareholders: A notice of at least 21 days must be sent to all shareholders, creditors, and debenture holders of the company, informing them of the proposed alteration of objects. The notice should include the date, time, and place of the general meeting where the resolution will be considered.
- General Meeting: A general meeting of the shareholders must be held to pass a special resolution approving the alteration of objects. The special resolution requires the affirmative vote of members holding not less than 75% of the total voting rights of the company.
- Filing of Special Resolution with ROC: After the passing of the special resolution, a copy of the resolution along with the altered Memorandum of Association must be filed with the Registrar of Companies (RoC) within 30 days in Form MGT-14. Form MGT-14 includes details of the special resolution, altered MoA, and other relevant information. The filing must be accompanied by the prescribed fee.
- Fresh Certificate of Incorporation: Upon review and acceptance of the filed documents, the RoC will issue a fresh Certificate of Incorporation. The new certificate will reflect the altered objects of the company.
- Submission of Copy of Altered MOA to Stock Exchange (if applicable): Listed Company shall submit the copy of the altered MOA to the Stock Exchange within 24 hours from the approval of Members’ for alteration of Memorandum of Association and post the same on the website of the Company within 2 working days.
- Incorporation of the MoA Object Clauses: After the RoC issues the incorporation certificate, the company must take steps to incorporate the object clause in all the MoA copies.
Documents Required to Set up Objectives of Business
- Notice of EGM along with explanatory statement
- A Certified true copy of the special resolution
- Minutes of the Board Meeting and EGM
- Copy of Altered MoA
- A copy of Subscriber’s Sheet
- A certified true copy of the board resolution (optional)
- Attendance sheet of Board Meetings and General Meetings.
It's important to note that the specific forms, timelines, and requirements may vary depending on the circumstances and the type of company involved. It is advisable to consult with a legal professional or company secretary to ensure compliance with all the necessary procedures and requirements while Changing the Objects in accordance with the Companies Act, 2013.