[Opinion] Assessing the Legal Ramifications | Delayed Filing of Member’s Resolution for MoA Alteration with RoC

Prof R Balakrishnan – [2023] 152 taxmann.com 511 (Article)

1. The gist of this case

M/s. Alag Brainworks Limited amended its object clause of the Memorandum of Association of the company under the provisions of section 13 of the Companies Act 2013. The company obtained the consent of the members in the general meeting for the alteration by passing a special resolution on 15th June 2022. The company was required to file the members’ special resolution passed at the general meeting along with the explanatory statements etc., in form MGT-14 within thirty days of passing of the resolution – i.e., on or before 14th July 2023 to the Registrar of Companies via MCA portal. However, the company did not file the required MGT-14 form within the stipulated time period and the company did file the form later by a delayed period of 280 days. The regulator initiated the adjudication proceedings on this matter and the company and its directors were penalized for the same. We shall go through this case to understand the full details.

2. Memorandum of Association of a company

Memorandum of Association is a basic important constitutional document of every company based upon which every company shall carry on its business in a legal manner and the Memorandum of Association is approved by Government authorities constituted under Ministry of Corporate Affairs. Companies are bound by the business activities mentioned in the main objects of the company in the Memorandum of Association and any other business activities carried out by the company outside the business activities shall be considered as ultra vires (not within the meaning of law). Investors of larger interest, banks, financial institutions, and Government authorities study the content of the Memorandum of Association in order to ascertain the genuine activities carried out by the company and thereby ensure that their interests are protected. In the current digital era of e-governance and in the wake of the MCA V3 version, an E-Memorandum of Association needs to be uploaded at the time of incorporation while registering the company.

3. Alteration of Memorandum of Association

For making any alteration of any of the clauses of the Memorandum of Association of the company, except for the capital clause, the consent of the members of the company is required to be obtained by way of passing a special resolution in the general meeting of the company. In case of alteration of authorized share capital, the consent of the members by way of an ordinary resolution would suffice as per the provisions of section 61 of the Companies Act 2013.

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