Friday, January 27, 2017

Alteration of memorandum of association

Alteration of memorandum of association of a corporation under company law

Legal procedure for alteration of existing memorandum of association:

Understanding of Alteration of memorandum of association,company law

1. STEPS REQUIRED FOR ALTERATION OF MEMORANDUM:

The following steps are involved in the alteration of memorandum:  
1. Preliminary discussion at broad meetings and company’s advisers to determine the best course to adopt and the precise nature of the desired alteration.
2. Where company’s shares are quoted on a stock exchange, ensure that the requirements of the exchange are fully and well understood and complied with. 
3. Prior consultation with some of the large shareholders, creditors and the debenture-holders to ensure, so far as possible, that the proposed change will be adopted. 
4. Can any matter be settled beforehand with the registrar, e.g whether a new name will meet with his approval. 
5. Printing of notice of general meeting explanatory circulars etc.
6. Routine of convening and holding necessary meeting arrangements with the press, filing of copies of special resolution. 
7. Whether new share certificates are to be issued or old certificates are to be called in for alteration. 
8. The printing of resolution required to be annexed to the memorandum and to be registered with the registrar.

2. Alteration of memorandum of association of a business corporation GENERALLY:

According to Section 20, a company cannot alter the condition contained in its memorandum except in the cases and in the mode and to the extent for which express provision is made by law. A company subject to the provision of the Ordinance, may by Special resolution, alter the conditions contained in its memorandum so as to: 
a. Change the place of this registered office from one provision to another or from one city or town in a provinces to another, or from a part of Pakistan not forming part of a province to a province or vice versa, or
b. With respect to the objects of the company, Section 21. The company is empowered to change any of the clauses contained in its memorandum, provided the legal formalities are fulfilled, namely:
(a) Name clause 
(b) Situation of registered office clause. 
(c) Objects clause. 
(d) Limitation of liability clause.  
(e) Capital clause. 
(f) Subscription clause cannot be changed. ,  
Any clause in the memorandum can be changed by the following procedure: 

(1) Change of Name Clause:

A company can change its name by the following procedure:  
a. Special resolution: A special resolution is required to be passed by the 
shareholders. 
b. Approval of registrar: After passing a special resolution, a copy of resolution in writing is sent to the Registrar for approval  
c. Registration of change of name: Where a company changes its name the registrar enters the new name on the register in place of former name.  
d. Issuance of new certificate: After entering the new name on the register in place of the former name, the registrar issues a new certificate of incorporation to meet the circumstances of the case. On the issuance of new certificate, the change of name shall be complete.

(2) Change of Registered Office Clause:

A company can shift its registered office from one place to another place within 
the same city, town or village or from one province to another province. 
(a) From place to place: A company can change the place of its registered office from one place to another place within the same province or from Islamabad Capital Territory to the Province of Punjab or from Punjab to Islamabad Capital Territory by fulfilling the following formalities:  
i. Special resolution: The shareholders pass a special resolution to change the place of the registered office. 
ii. Intimation to registrar: A copy of special resolution passed by the shareholders is sent to the registrar for information. 
(b) From province to province: A company can shift the place of its registered office, from one province to another or from a part of Pakistan not forming a part of a Province to a Province by fulfilling the following formalities: 
i. Special resolution: A special resolution is required to be passed by the shareholders. 
ii. Confirmation by authority: A copy of special resolution passed by the shareholders is required to be confirmed by the Corporate Law Authority. 
iii. Intimation to registrar: If the alteration is confirmed by the authority a copy of authority’s order confirming the alteration along with the altered Memorandum, shall be filed with the registrars of both the places.

(3) Change of Objects Clause:

A company can change its objects clause for the following purposes:
To run the business with economy and efficiency.
To attain main purpose by new or improved means.
To enlarge or change the local area of operation.
To sell the whole or any part of the business of the company.
To amalgamate with any other company or body of persons.
To limit or give up any of the objects specified in the memorandum. 
To carry on some business which may be easily combined with the business of the company.
The company is required to follow the following procedure to change its objects:
a. Special resolution: A special resolution must be passed by the shareholders.  
b. Confirmation by authority: The alteration in objects must be confirmed by the 
Corporate Law Authority. 
c. Intimation to registrar: A copy of the Authority's order confirming the alteration, along with the printed copy of the altered memorandum, shall be filed by the company with the registrar for intimation.

(4) Change of Liability Clause: 

No change can be made in this clause so as to make the liability of members unlimited. Section 34 provides that the liability of the members cannot be increased without their consent. It lays down that a member cannot, by altering the memorandum or articles, be made responsible to take more shares unless he agrees to do so in writing.

(5) Change of Capital Clause: 

A limited company can alter the capital clause by the following procedure: 
a. Alternation of capital: A limited company can alter the capital clause in any of the following ways: 
i. It may increase its share capital by issuance of new shares. 
ii. It may consolidate and divide its share capital into shares of a larger amount. 
iii. It may sub-divide its shares into shares of smaller amount. 
iv. It may cancel shares which have not been taken up.
The procedure for alteration of capital is as under:
(i) Special resolution: The company must pass a special resolution in the general meeting to alter the share capital in any of the above ways. 
(ii) Intimation to registrar: The company shall give notice of the above alterations to the registrar. 
b. Reduction of capital: A company limited by shares, may reduce its share capital in any of the following ways:  
i. By extinguishing or reducing the liability of members for uncalled capital. 
ii. By paying off any paid-up capital which is in excess of the needs of the company. 
The procedure for reducing is as under:
(i) Special resolution: The company must pass a special resolution for reduction of capital. 
(ii) Confirmation by Court: The company must apply to the Court for an order continuing the reduction. 
(iii) Intimation to registrar: The company shall give notice of the above alteration to the registrar. 
c. Change of subscription clause: 
The subscription clause cannot be changed at all. This clause contains the names of the persons who sign the memorandum at the time of incorporation of the company. But later on, the death of subscriber leaves no effect on the life of company because it attains a separate entity after registration. As a result, the change has no effect on subscription clause.

Questions:

What procedure is adopted for alteration of memorandum of association under company law?
In what respect memorandum of association can be altered?

This Article includes the following:

Alteration of memorandum of association under Companies ordinance.
Alteration of capital clause of memorandum of association
Alteration of object clause.
Alteration of name clause.

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