Every company in India is formed with a specific goal or purpose. These goals are mentioned in the Memorandum of Association (MoA) of the company, particularly in the Object Clause. This clause defines what the company intends to do and limits its activities to only those mentioned. However, as businesses grow, they may want to enter new areas or discontinue some activities. In such cases, the company must change its object clause.
The Companies Act, 2013, provides a clear process for changing the object clause of a private limited company. This blog explains the step-by-step procedure in a simple way, covering all necessary legal steps, documents, and compliance requirements.
What is the Object Clause?
The Object Clause is one of the most important parts of a company’s Memorandum of Association (MoA). It tells:
- Main Object: The main business or purpose for which the company is formed.
- Ancillary Object: The activities that support the main object.
- Other Objects: Any other activities the company may pursue (though this category has limited relevance under the Companies Act, 2013).
A company is allowed to do only those activities that are mentioned in its object clause. If it wants to do something else, it must first change the object clause officially.
Why Change the Object Clause?
Here are some common reasons:
- The company wants to start a new business.
- The company wants to shut down its existing business and move in a new direction.
- The business model or industry trends have changed.
- A merger, acquisition, or internal restructuring has happened.
Changing the object clause allows the company to legally expand or shift its business operations…!
Legal Provisions Applicable
The procedure to change the object clause of a company is governed by:
- Section 13 of the Companies Act, 2013
- Rule 29 of the Companies (Incorporation) Rules, 2014
Step-by-Step Procedure for Change of Object Clause
1. Hold a Board Meeting
Purpose:
To pass a Board Resolution for the purpose of approving the proposed change in the object clause and calling for an Extra-Ordinary General Meeting (EGM) of shareholders.
Agenda of Board Meeting:
- Approve the draft of the new object clause.
- Decide the date, time, and venue of the EGM.
- Approve the draft notice of the EGM.
2. Issue Notice of the EGM
The company must send a clear notice of the EGM to all shareholders, directors, and auditors (if appointed) at least 21 days before the meeting.
The notice must include:
- Date, time, and place of the meeting.
- Explanatory statement as per the provision of Section 102 of the Companies Act.
- Special resolution text for the proposed change.
3. Hold the EGM and Pass Special Resolution
At the EGM, the shareholders must pass a Special Resolution (i.e., at least 75% of shareholders’ approval) to change the object clause in the MoA.
Important: The resolution must be properly recorded in the minutes of the meeting.
4. File Form MGT-14 with ROC
After the special resolution is passed, the company must file Form MGT-14 with the Registrar of Companies (ROC) within 30 days of passing the resolution.
Details to be filed in MGT-14:
- Certified copy of the Special Resolution.
- Notice of EGM with Explanatory Statement.
- Copy of the altered MoA.
- Copy of the Board Resolution.
Fee: The ROC filing fee depends on the authorised capital of the company (ranges from ₹200 to ₹600 or more).
5. ROC Verification and Approval
The ROC will check the documents submitted, and if all is in order, it will approve the change and update the records.
After approval, the company will receive a Certificate of Registration of Alteration of the Object Clause.
Once this certificate is received, the change becomes official and the company can legally act on the new objective.
Key Points to Remember
- The object clause cannot be changed without shareholders’ approval.
- Filing of MGT-14 is mandatory; if delayed, additional fees will apply.
- The new object clause must be within the framework of lawful business as defined under Indian law.
- In case the company has raised money from the public through a prospectus and has unutilised funds, then an additional process involving a postal ballot and publication in newspapers may be required. However, this is not applicable to private companies that have not raised money from the public…!
Documents Required for Changing the Object Clause of a Company
Here is a list of documents required at different stages of the process:
Before EGM:
- Notice of Board Meeting.
- Draft of new object clause.
- Board Resolution approving EGM notice.
At EGM:
- Notice of EGM with explanatory statement.
- The attendance sheet of shareholders.
- Special Resolution passed at EGM.
For ROC Filing:
- MGT-14 form
- Signed copy of Special Resolution
- Altered MoA with new object clause
- Board resolution and EGM notice
Format of Special Resolution
Here is a sample format of the special resolution to change the object clause:
“RESOLVED THAT following to the provisions of Section 13 and the other applicable provisions of the Companies Act, 2013 and the rules made thereunder (including any statutory modification or the re-enactment thereof), the consent of the shareholders be and is hereby is accorded to alter the object clause of the Memorandum of Association, (MOA) of the Company by replacing the existing Clause III (A) with the following clause:
‘To carry on the business of [insert new object] …’
RESOLVED FURTHER THAT any Director of the company be and is hereby authorised to sign and file necessary forms and documents with the Registrar of Companies and to do all such acts, deeds and things as may be necessary to give effect to this resolution.”
Post-Approval Actions
After the ROC approves the specific changes, the following steps should be taken:-
- Update all the company records and internal documents.
- Inform all stakeholders, such as banks, vendors, and investors.
- Update the company’s website, business stationery, and letterheads…!
Conclusion
Changing the object clause of a private company is a legal and structured process. It allows businesses to adapt to changing markets, explore new opportunities and evolve. However, proper compliance with the Companies Act, 2013 is very essential to avoid penalties or rejection by the ROC.
Timely communication with stakeholders and accurate filing of documents are key to a smooth transition. Seeking professional help from a Company Secretary or Chartered Accountant can make the process easier and error-free.
By following the step-by-step procedure mentioned above, a company can legally change its object clause and set itself up for growth and expansion in a new direction.
