25 November 2014
The Articles may contain entrenchment provisions. This is new a concept under the Indian Companies Act, as there was no such concept under the Companies Act, 1956.
The word ‘entrench’ is not defined under the Companies Act, 2013. As per Oxford English Dictionary, the word ‘entrench’ means establish (an attitude, habit, or belief) so firmly that change is very difficult or unlikely. As per wikipedia, an entrenched clause or entrenchment clause of a basic law or constitution is a provision which makes certain amendments either more difficult or impossible, i.e., inadmissible. It may require a form of supermajority, a referendum submitted to the people, or the consent of another party.
Use of word ‘may’ suggests that a company has discretion to include entrenchment provisions in its articles.
Such entrenchment provision may relate to the effect that specified provisions of the articles may be altered only if conditions or procedures as that are more restrictive than those applicable in the case of a special resolution, are met or complied with.
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