This article deals with the Procedure and checklist for amending the article of
association of a company, this article is going to deal with a few questions
like, can a company choose not to amend its articles? can a company make
amendments for its own benefits? Is it that easy to amend articles of a company?
can a company be converted by simply amending the article? what kind of record
one has to maintain while dealing with the alteration of articles and what are
the consequences of not maintaining one?
Change is inevitable, recent era of covid 19 has made a lot of companies to
change their way of conducting businesses, but changing the internal machinery
of a company is not that easy as it seems to be, any change that would be made
is to be under some guidelines so that it is not unjust with the individuals
dealing with the company.
The Article of Association are the bylaws or internal regulations of a company,
these articles contain regulations for the working of a company, members of a
company are bound to follow the article, in Naresh Chandra Sanyal vs Calcutta
Stock Exchange Assn. Ltd. it was held that:
Members of a company are bound by
the provisions that are there in the article of association, the articles help
in regulating the internal management of the company and help in determining the
role and responsibility of the management of the company, they help in
establishing a contract between the company and its members.
It may have regulation regulations that may be prescribed from time to time and
additional matters that may be required according to the needs of the company. A
person entering into a contract with a company is presumed to be aware of the
company's Article of Association and Memorandum of association that is Doctrine
of constructive notice.
Schedule 1 of the Companies Act, 2013 provides a table of the model form for
different companies. For example Table F is Applicable to a company limited by
shares, companies have an option to either frame their own Article of
Association or adopt it from the table, but why would a company adopt when they
could frame their own articles? the primary advantage of adopting the table is
that it is legal beyond all doubts.
Precautions to be taken while framing or amending the Articles
Articles must be printed, divided into paragraphs, each consisting of one
regulation and numbered consecutively. Each subscriber of the memorandum has to
sign the document in presence of at least one attesting witness, both of them
adding their address and occupation. Anything that would be stated or amended in
the articles shall be in accordance with the act, for example, section 272 of
the companies act provides shareholders the right for petition of winding up of
a company, in any circumstance this right cannot be limited by the articles.
shall not contain something that is contrary to the memorandum of a respective
company as the memorandum comprises the purpose of a company and a company
cannot alter its purpose in any way if it does so much addition or amendment
shall be void and incapable of ratification. In Hutton vs Scarborough Cliff
Hotel Ltd, a resolution was passed at a general meeting of a company that
altered the articles by inserting the power to issue new shares with
preferential dividend but no such power existed in the Memorandum of association
thus the alteration was held to be inoperative.
A private company can be converted into a public company by simply altering the
articles of a company where a private company changes its article in such a
manner that they are no longer in sync with the limitations of a private company
it will cease to be a private company as from the date of alteration, but same
is not the case with a public company, it cannot be converted into a private
company unless it is approved by a tribunal.
Section 15 of the Companies Act 2013 requires every alteration of memorandum and
article to be noted on every respective document. The default in this respect is
punishable, it requires the company and a defaulting officer may have to pay Rs
1000 for each copy issued without noting the alterations.
Alteration of articles
Section 14 of the Companies Act 2013 provides a company with the power to alter
its own Article of Association by a special resolution and this right cannot be
negatived in any way, the company cannot amend the articles in such a way or
enter into a contract with another party that deprives the company of the power
These altered articles will be binding in the same way as did the original
Can alterations of articles operate as a breach of contract?
If a company has entered into an individual contract, alteration of articles
won't help a company to get rid of liabilities arising out of breach of
contract, but if an individual enters into an agreement or accepts a job in a
company on the terms of Articles of Association of a Company the company won't
be liable for any breach arising after altering the articles of the company.
For example, a Company Secretory accepted an appointment on terms and conditions
of the Article of association and a clause in the articles provided a monthly
remuneration of Rs 50,000 for a company secretory, but subsequently, the article
was amended and it reduced the pay of the company secretory to Rs 25,000 and
this amendment was held to be operative.
Can articles be amended that easily?
Some articles in an article of association may contain provision of
entrenchment” which means the provisions of those articles may be altered only
if the condition is more restrictive than those applicable in the case of
special resolution. These types of provisions can either be formed on the
formation of the company or by a subsequent amendment.
Procedure for Amending Article of Association of a Company
- The first step is to issue a notice that is not less than seven (7) days along
with the agenda of the board meeting, it needs to be delivered in writing to
each and every director of the company at their respective residences and call a
board meeting to consider the proposal for alteration of an article of
association of a company, all this has to be done according to the procedure
prescribed for issuing and signing a notice of board meeting. (In case of an
urgent business the notice of not less than seven days can be replaced with a
notice of shorter period)
- Second step is to hold a board meeting to consider the articles that are
required to be amended and to pass a board resolution for approving this
proposal, which is subject to the approval of shareholders.
- Once the alteration is made the third step is to delegate the authority
to one of the directors of the company to sign, certify and file the
requisite forms with the registrar of the company or any other statutory
authority to do all such acts, deeds that may be required.
- Fourth step is to circulate the summary of the meeting within 15 days
from the date of conclusion of the board meeting, to all the directors for
their comments, summary of the meeting or Board Minutes shall be according
to the procedure prescribed for preparing, circulating, signing and
- Fifth step is to send notice of general meeting proposing an
aforementioned special resolution to all the shareholders, director, auditor
and other person entitled to receive it, by giving not less than 21 days' notice or
shorter notice, if the consent of shorter notice is given by a minimum of 95
percent of a member entitled to vote at such meeting.
- Sixth step is to hold a shareholder meeting and pass the special
resolution for altering either by 3/4th majority or unanimously.
- After passing a special resolution, file a certified copy of the
resolution with the registrar in E - Form No. MGT.14 under S117 of the Act
within 30 days of passing a special resolution in a general meeting along with
the following attachments:
- Copy of the special resolution accompanied with Explanatory Statements.
- Notice for Convening General Meeting.
- Altered articles including the provision of entrenchment.
- Shorter Notice consent letter.
- Miscellaneous attachments.
Every company has the clear power to amend its article of association which is
granted by section fourteen (14) of the Companies Act 2013, and as mentioned
previously it cannot be negatived either by a contract or in any other way, but
this power may or may not be beneficial for the individuals associated with the
company, suppose there is an individual who has agreed to provide a service or
to receive a service and he has accepted the appointment on the terms of article
of association of the company, by accepting this service on terms of article of
association that individual takes the risk of those articles being altered,
and this is what doctrine of constructive notice states that the person dealing
with the company is deemed to be aware of the company's Article of association
and Memorandum of Association, even though there are several exceptions to this
doctrine, while on the other hand the creditors and shareholders of the
company needs to be assured that the company is making itself compatible with
the changing environment by amending their article of Association, but the
amendment or insertion that is being done needs to be in line with the companies
act 2013 .
- Company law: Avtar Singh