How to amend MOA and AOA?

Businesses should be dynamic in order to evolve with the changing market demands, growth trends and as well as regulatory shifts. To keep up with these changes, companies find the need to update its core documents: the Memorandum of Association (MOA) and the Articles of Association (AOA).

The MOA and AOA are foundational documents for company incorporation in India under the Companies Act of 2013. The MOA defines a company’s objectives, scope of operations, and external relationships, while the AOA outlines its internal governance, management rules, and stakeholder responsibilities. Both documents are mandatory for establishing a company and provide a framework for legal compliance and operational clarity.

Without amending these documents, a company cannot change its operations, activities or even its internal management policies. Let's understand how to amend it.

Memorandum of Association (MOA)

The Memorandum of Association (MOA) is the charter document of a company. It outlines the company's identity and defines the boundaries within which it can operate. It contains the compulsory clauses namely, name, object, domicile, liability, capital, and association, as well as other provisions.

Section 13 of the Companies Act 2013 governs the alteration of the MOA. Any amendment to the MOA requires approval from the company's members through a special resolution. A special resolution is a company decision that requires at least 75% of shareholders to vote in favor.

In some cases, regulatory approvals (e.g., from the Regional Director, RoC, or NCLT) are necessary, depending on the nature of the amendment. Furthermore, no alteration takes effect until it is registered with the Registrar of Companies (RoC).

The MOA ensures that a company operates within its stated objectives, protecting stakeholders from unauthorized actions (ultra vires). However, as businesses evolve, the flexibility to amend the MOA allows companies to redefine their objectives and adapt to new opportunities or challenges.

Articles of Association (AOA)

The Articles of Association (AOA) serves as the company’s internal rulebook. It complements the MOA by detailing how the company will be managed, including rules on governance, decision-making processes, and member rights. Key aspects covered in the AOA include appointment, powers, and removal of directors., shareholding and transfer rules, voting rights and meeting procedures, dividend distribution policies and conflict resolution mechanisms among stakeholders.

The right to alter the AOA is a statutory right under Section 14 of the Companies Act, 2013. Subject to the provisions of the MOA and the Act, a company can amend its articles by passing a special resolution. This right is so fundamental that no company can restrict or eliminate it through contracts or statements within the articles themselves.

Alterations to the AOA allow companies to adapt to changes in management practices, introduce new governance mechanisms, or comply with regulatory changes. For example, converting a private company to a public company (or vice versa) requires amendments to the AOA to reflect the respective structural changes.

Steps to Alteration of MOA & AOA

Although the process for amending/alteration of MOA & AOA is similar, but the procedure to file with the ROC will vary depending upon the documents and subsequent fees. Here are the steps to amend MOA & AOA in a simpler way:

1. Board Meeting: The process begins with holding a Board of Directors meeting where the need to amend the MOA/AOA is discussed and approved. The board passes a resolution to call a general meeting (Annual General Meeting - AGM or Extraordinary General Meeting - EGM) to propose the changes to the shareholders.

2. Notice of General Meeting: After the board approves the proposed changes, a formal notice is sent to all company shareholders, auditors, and directors. This notice must be sent at least 21 days before the general meeting. It will include the agenda for the meeting, the proposed amendments, and the date, time, and venue of the meeting.

3. Explanatory Statement: Along with the notice, an explanatory statement must be attached that explains the reasons for the proposed amendments, as well as their impact on the company.

4. General Meeting: On the scheduled date, the company conducts the general meeting (EGM or AGM), where the proposed amendments are presented to the shareholders. To approve the amendments, a special resolution must be passed, which requires at least 75% approval of the members present and voting.

5. Filing with Registrar of Companies (RoC): Once the special resolution is passed, the amended document along with the special resolution must be filed with the RoC within 30 days (in case of MOA) and 15 days (in case of AOA) of the resolution being passed. This is done by submitting the necessary forms, such as Form MGT-14, along with any required fees and supporting documents.

6. Registrar’s Approval: The Registrar of Companies will review the submitted documents, and once satisfied, they will approve the alterations. Upon approval, the amendments are officially registered, and the changes take effect from the date of registration.

7. Updating Company Records: After the alterations are registered, the updated MOA/AOA must be kept at the company’s registered office, and all statutory records should reflect the changes. The updated MOA/AOA should be available for inspection by stakeholders.

Conclusion

Alteration of the MOA and AOA is a dynamic process that reflects the evolving needs of a company. While the MOA deals with changes in the company’s external objectives, the AOA focuses on its internal governance. Each alteration must comply with legal procedures to ensure transparency and accountability. Whether it's expanding operations, restructuring, or introducing new governance policies, careful planning and compliance are essential for successful amendments.

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FAQs

1. What is the process to alter the Memorandum of Association (MOA)?
   To alter the MOA, a company must pass a special resolution in a general meeting, file the resolution with the Registrar of Companies (RoC) using Form MGT-14, and obtain necessary regulatory approvals (if required). For specific clauses like the Name Clause or Situation Clause, additional steps such as Regional Director or Tribunal approval may be needed.

2. Can the Name Clause of a company be altered?
   Yes, the Name Clause can be altered by passing a special resolution and filing the changes with the RoC through Form MGT-14 and Form INC-24. If the name change involves transitioning from a private to a public company (or vice versa), additional updates to the Articles of Association (AOA) are required.

3. Is it possible to alter the Objects Clause of the MOA?]
   Yes, the Objects Clause can be altered through a special resolution. If the change involves regulated activities (e.g., banking, insurance), approval from the relevant regulatory authority, such as the RBI or SEBI, is also required. The updated MOA must be filed with the RoC via Form MGT-14.

4. How can a company alter its Articles of Association (AOA)?
   The AOA can be altered by passing a special resolution in a general meeting, filing the resolution with the RoC using Form MGT-14 and updating the AOA accordingly. For conversions (e.g., private to public company), compliance with Section 14 of the Companies Act 2013 is necessary.

5. Is approval from the National Company Law Tribunal (NCLT) required for all alterations?
   No, NCLT approval is only required for specific alterations, such as reducing share capital or relocating the registered office from one state to another. Most other alterations can be completed by passing a special resolution and filing the required forms with the RoC.

6. Can the Liability Clause in the MOA be altered?
   Yes, the Liability Clause can be altered to change the nature of liability (e.g., from unlimited to limited). However, for existing members, liability cannot be converted from limited to unlimited. A special resolution is required, and the altered MOA must be filed with the RoC.

7. Are there any limitations to altering the MOA or AOA?
   Yes, alterations must comply with:
   - The Companies Act, 2013
   - Provisions in the existing MOA and AOA.
   - Regulatory guidelines (e.g., SEBI for listed companies).
   Alterations must also not contravene the rights of stakeholders or go against public policy.

8. Is shareholder approval mandatory for every alteration?
   Yes, shareholder approval through a special resolution is mandatory for all alterations to the MOA and AOA. In some cases, additional approvals (e.g., from creditors, Regional Director, or NCLT) may also be required depending on the nature of the change.