Prospectus.

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POOJA (Querist)
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29 January 2015 Dear sir,

Can you please send me contents of prospectus for the purpose of increase of authorised capital?

Thank You

RAMESH KUMAR VERMA

RAMESH KUMAR VERMA (Expert)
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29 January 2015 Increase of Share Capital

A company may increase its share capital in two way, viz.

(a)by the issue of un issued shares, and

(b)by increasing its authorized capital.

CONTENTS:

The Memorandum of association of every company must contain the following clauses:

1. Name Clause:

This clause states the name of the company.

In the context of the name clause, the following points may be borne in mind:

1) A name is considered undesirable, when it includes words like 'Government', 'State', 'Municipality', etc., implying patronage or support of the Government, State or Municipality, without the express permission of such authority.
2) A name is considered undesirable when it is identical with or too closely resembles the name of an existing company.
3) The name of the company must end with the word "Limited" in the case of a public company or the words "Private Limited" in the case of a private limited company.
4) The purpose of adding the word "Limited" or the words "Private limited" is to enable all those dealing with the company to know that the liability of the members of the company is limited.
5) Once a company is registered with a name, the name of the company must be painted on signboards and displayed outside every office or place of business of the company. The name must also be engraved in legible characters on the seal-of the company, on its letter heads, notices, invoices, receipts, bills of exchange, advertisements, etc, .

However, if a company is 'formed not with the object of declaring dividends, but to promote science, culture, etc, .The Central Government may permit the company to drop the word 'limited'.

2. Situation Clause or Domicile Clause:

1) This clause states the state in which the registered office of the company is to be situated.
2) The name of the State, in which the registered office of the company is to be situated, is stated in the Memorandum.
3) The provision insisting on the mere 'State’ has been made to avoid any unnecessary legal formalities and expenses, if there is a subsequent change in the address of the company.
4) It determines even the nationality of the company, i.e., whether the company is an Indian company or a foreign company.

3. Object clause:

1) Of all the clauses in the memorandum, the object clause is the most important. This clause states the objects or purposes and powers of the company. It should specify in unambiguous languages the objects for which the company is formed. Great care should be taken in drawing up this clause, as the company will not be allowed to do any business, which is not specifically mentioned here.
2) The objects stated in this clause must not be contrary to the provisions of the Companies Act and the general law of the country. The objects stated should be as wide as possible because a company cannot carry out objects which are not included in this clause. Acts done by 'the company which are not included in this clause are 'Ultra Vires' and void [i.e., invalid}. "Ultra" mean "beyond" and "Vires" means "authority or right". Therefore "Ultra Vires" means acting beyond authority
3) As it is difficult to alter the object clause later, it is necessary that promoters should include in this clause all possible types of business (activities) in which a company may engage in the future.
4) According to the amendment to the Companies Act made in 1965, the object clause of a company formed after the commencement of the Amendment Act, must contain
i. (a) Main objects of the company and objects incidental or ancillary, to the attainment of these main objects.
(b) Other objects of the company not included above
ii. In case the objects are not to remain confined to one state, states whose territories the objects extend.

4. Liability Clause

This clause states that the liability of members is limited to the face value of the shares held by them. If a member has already paid some amount on the shares, he can be called upon to pay only the unpaid amount on the shares.

5. Capital Clause

1) The capital clause states the registered, authorized or nominal capital of the company (i.e. the minimum capital with which the company is proposed to be registered) and the division of the authorized share capital into shares of fixed amount.
2) In case the capital of the company consists of different classes of shares, then, the division of the total authorized capital into different classes of shares and the face value of shares of each class are also stated in this clause.
3) The rights and privileges attached to the different classes of shares are specified in the Articles of Association.
4) It is better to fix the authorized capital at a sufficiently higher figure so that there would be adequate provision for further issue of shares later on to finance the extension or expansion of the company's business.

6. Association Clause, Subscription Clause or Declaration Clause:

1) This clause contains a declaration by the subscribers to the memorandum that they are desirous of forming themselves into a company in pursuance of the memorandum and agreed to take up and pay for the number of shares in the capital of the company noted against their names. The subscribers should sign their names and state their full addresses and the number of shares taken up by them.
2) The declaration clause should be signed by at least seven persons in the case of a public company, and by two persons in the case of private company.
3) Further, the signatures of the subscribes must be witnessed by at least one who should give his signature, name, full address, description and occupation.

ALTERATION OF MEMORANDUM OF ASSOCIATION

The fundamental conditions or compulsory clauses found in the memorandum of association cannot be altered ordinarily as a routine thing. Such a provision is made in order to protect the interests of the creditors and other members of the public who deal with the company as well as the interests of the shareholders of the company. It is because of this provision that the memorandum of association is considered as an unalterable charter of a company.

However, the Companies Act has made provision for the alteration of the memorandum of association in certain cases and to certain extent.
1. Alteration of the Name clause:

The alteration of the name clause can be considered under three heads. They are

a) When a company is registered with a name which is identical with or similar to the name of an existing company by inadvertence (i.e. by mistake) ---ordinary resolution should be passed at Extraordinary General Meeting.
b) When the Central Government directs a company to change its name--- ordinary resolution should be passed at Extraordinary General Meeting.
c) When a company wants to change its name on its own accord --special resolution should be passed at Extraordinary General Meeting.

Procedure to be followed to change the Name clause:

1. The name of a company can be altered by passing a specie' resolution at the Extraordinary General Meeting.
2. Obtaining the approval of the Central Government for the change of name
3. Filing of a copy of the special resolution with the Registrar.
4. Filing of the Central Government's approval for the change with the Registrar.
5. Obtaining the fresh or new certificate of incorporation with the changed name.
6. Filing of the altered copies of Memorandum of Association and Article of Association with the Registrar.
7. Incorporating the change of name in various documents.

Duties of the Secretary:

The procedure to be followed by the secretary to change th~ name clause can be summed up as follows:

a) The secretary has to ascertain from the Registrar of Companies whether the proposed name is undesirable.
b) If the Registrar informs him that the proposed name is undesirable, the secretary has to obtain a written consent from the Central Government for the change of name.
c) The secretary has to arrange a board meeting for the purpose of recommending the changed name to be members and to convene an Extraordinary General Meeting.
d) The Secretary has to get a special resolution passed at the extraordinary general meeting and get copies of the special resolution signed by the chairman of the meeting.
e) The secretary has to file a copy of the special resolution with the Registrar within 30 days of passing of the resolution.
f) On filing of the resolution, the registrar makes the necessary change in the register and issues a fresh certificate of incorporation with the changed name.
g) The secretary has to arrange for the changing at name on all the documents of the company, and for getting the new seal approved by the board, he should also notify all parties dealing with the company, of the change of name.
h) Finally, the secretary has to arrange for the changing of name on all the documents of the Company, and for getting the new seal approved by the board. He should also notify all parties dealing with the Company, of the change of name.

2. Alteration of Domicile clause situation clause or registered office clause.

The alteration or change of the domicile clause is possible only when such a change enable s the company to meet any of the purposes. Such as:

a) To carryon its business more economically or efficiently.
b) To attain its main purpose by new or improved means.
c) To enlarge or change its local area of operations.
d) To carry on some business which under existing circumstances can be conveniently or advantageously combined with present business of the company.
e) To restrict or abandon any of the objects specified under the objects clause of the memorandum of association.
f) To sell or dispose of the whole or any part of undertaking of the company.
g) To amalgamate the company with any other company or body of persons.

To change of the registered office of a company can be considered under three heads:

a) Change of the registered office of a company from one locality to another locality in the same city, town or village.
b) Change of the registered office of a company from one city, town or village to another city, town or village in the same state.
c) Change of the registered office of a company from one state to another state.

a) Change of the registered office of a company from one locality to another locality in the same city, town or village.

Change of the registered office from one locality to another locality in the same city, town or village can be easily effected by a company. For this purpose, the following procedure or steps should be taken:-

 Passing of a resolution at the board meeting.
 Giving of a notice of change of location to the Registrar.
 Giving a public notice.

b) Change of the Registered Office of a company from one city, town or village to another city, town or village in the same state.

A company can change its registered office from one city, town or village to another city, town or village in the same state. For this purpose, the following procedure should be followed:

 Passing of a special resolution at the extraordinary meeting of the shareholders.
 Filing of a copy of the special resolution with the Registrar.
 Giving a notice of change of location to the Registrar.

c) Change of Registered office of a company from one state to another state. A company can also change its registered office from one state to another state. But, for such a change of location, a lengthy procedure has been prescribed by the Companies Act. The procedure to be followed for such a change is as follows:

 Passing a special resolution at the extraordinary general meeting.
 Obtaining the sanction of the Company Law Board for the change.
 Filing of a copy of the special resolution with the Registrar.
 Filing of the copies, of the confirmation order of the Company Law Board with the Registrar of the both the states.
Filing of the altered copies of memorandum of association and article of association with the Registrars of both the states.
Obtaining certificates of registration of the transfer (i.e., shifting) from the Registrars of both the States.
Giving of a notice of the location of the new office to the registrar of the State to which the registered of office is shifted.
Sending of all the documents of the company by the Registrar of the State from which the registered office is shifted to the Registrar of the other State.