In the Memorandum of Association of a company, the object clause explains –
- Business activity of the company (Main objective)
- Ancillary activities (Ancillary objects) are the activities necessary for conducting the main business activity.
An organization might want to change its primary objective or ancillary objectives. Companies must follow the steps below to do this:
Step 1: Pass board resolution
Pass a resolution to approve the object clause at the board meeting. It will be the responsibility of a director or the company’s Secretary to sign, certify, and file the relevant forms with the ROC. A day, time and location of the Extraordinary General Meeting of the members will be set by the Board of Directors.
Step 2: Special resolution in EGM
The members of the EGM will pass a special resolution. Passing a special resolution requires certain disclosures if a company has raised funds from the public via prospectus and possesses some of the funds unutilised.
- Postal ballots will be used to obtain the special resolution of the members. Members will receive a notice that will contain the details.
- Amount of money collected (from the public through prospectus)
- Total amount spent on the objectives set forth in the prospectus
- Unused funds from the total money received by issuing a prospectus
- Containing detailed information about the proposed changes
- With detailed justifications
- Proposed amount to be used for the new items
- Estimation of the impact the proposed change would have on the company’s earnings and cash flow
- Additional relevant information
- Persons interested in the resolution can obtain a copy from the place shown in the notice.
- In the city where the registered office of the company is located, two newspapers (one in English and one in vernacular language) will be published with the special resolution.
- The resolution will also be posted on the company’s website.
- Promoters and other shareholders will give dissenting shareholders the chance to exit the company if they vote against the object clause decision.
It would not be necessary for the company to disclose any information if they did not receive or utilized any public funds. The special resolution would suffice if they did not receive or utilized any public funds.
Step 3: MGT-14 to be filed with RoC
A special resolution is passed at the EGM and a form MGT-14 is filed with the RoC by the authorised director or company secretary. Other documents must be filed with the RoC besides MGT-14, including:
- Copies of the special resolution certified as authentic
- Extraordinary General Meeting (EGM) notice
- The explanatory statement to the notice
- Altered Memorandum of Association
Step 4: Issuance of fresh certificate of incorporation
As soon as the RoC receives MGT-14, it will examine the form, and if they are satisfied, they will issue a new certificate of incorporation to reflect the change in object clause. A new certificate of incorporation must be issued before a change in object clause is complete.
Step 5: Incorporating object clause in MoA and AoA
Upon receiving the certificate of incorporation from the RoC, all copies of the Memorandum of Association must include the object clause.