Alteration of article of associates

This query is : Resolved

Deepak Sharma (Querist)
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06 February 2012 Dear All

A private limited Company mentioned Authorised Share Capital in its AoA and also inserted a clause that Company may increase their Authorised Capital by ordinary Resolution
Later on Company increased its Share Capital by passing Ordinary Board resolution but did not change Share Capital in AoA
They are arguing that Section 31 say for Special Resolution for Altering the AoA hence they cannot alter AoA by passing ordinary Resolution but it is not written Company need to alter AOA compulsorily
Kindly suggest Whether it is required to update Authorised share Capital in AoA or not?

Charu Srivastava

Charu Srivastava (Expert)
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06 February 2012 Special resolution is required for alteration of an article.
Article cannot override Companies Act, 1950.
If in article the amount of Authorised Capital is specifically mentioned, then Article should be amended to that effect.

It is recommended to include the following line..

The Authorised Share Capital of the Company shall be of such amount as may from time to time be provided in Clause V of the Memorandum of Association of the Company with power to increase or reduce the Capital of the Company and to divide the shares in the Capital for the time being into several classes and attach thereto respectively such preferential., qualified or special rights, privileges or conditions and to vary ,modify or abrogate any such rights, privileges or conditions in such manner as may be permitted by the Companies Act,1956, or any enactment thereof for the time being in force.”

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Guest

Guest (Expert)

06 February 2012 (ON THE LETTER HEAD OF THE COMPANY)FOR MOA

CERTIFIED TRUE COPY OF SPECIAL RESOLUTION PASSED AT THE EXTRA ORDINARY GENERAL MEETING OF THE MEMBERS HELD ON MARCH 28, 2011.

“RESOLVED that pursuant to the provisions of Section 94 and other applicable provisions of the Companies Act, 1956, the authorised share capital of the company be and is hereby increased from Rs. 25,00,000 (Rupees Twenty Five Lac only) divided into 2,50,000/- (Rupees Two Lacs Fifty Thousand) equity shares of Rs. 10/- (Rupees Ten only) each to Rs. 2,75,00,000 (Rupees Two Crore Seventy Five Lacs only) divided into 27,50,000 (Twenty Seven Lac Fifty Thousand) equity shares of Rs. 10/- (Rupees Ten only) each”

RESOLVED FURTHER THAT accordingly the capital clause V of the Memorandum stands altered as under:

V. “The Authorised Share Capital of the Company is Rs. 2,75,00,000 (Rupees Two Crore Seventy Five Lacs only) divided into 27,50,000 (Twenty Seven Lac Fifty Thousand) Equity Shares of Rs.10/- (Rupees Ten only) each.”

RESOLVED FURTHER THAT the Board of Directors of the Company be and they are hereby authorised to file form no. 5 and form no. 23 with Registrar of Companies and are also authorized to do all such things and acts as may be necessary in connection therewith”.

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Guest

Guest (Expert)

06 February 2012 (ON THE LETTER HEAD OF THE COMPANY) FOR AOA

CERTIFIED COPY OF SPECIAL RESOLUTION PASSED AT THE EXTRA ORDINARY GENERAL MEETING OF THE MEMBERS HELD ON MARCH 28, 2011.

“RESOLVED THAT the Article 3.a) of the Articles of Association be altered as under

3. a) The Authorised Share Capital of the Company is Rs. 2,75,00,000 (Rupees Two Crore Seventy Five Lacs only) divided into 27,50,000 (Twenty Seven Lac Fifty Thousand) Equity Shares of Rs.10/- (Rupees Ten only) each. The Company shall have power to increase or reduce the same and to divide the shares in the capital for the time being, into several classes and to attach thereto respectively such preferential, deferred, qualified or special rights, privileges or conditions and to vary, modify or abrogate any such rights privileges or conditions in such manner as is for the time being provided under the Act and/or the Articles of the Company and consolidate or subdivide these shares and to issue shares of higher or lower denomination.

“RESOLVED THAT the Board of Directors of the Company be and are hereby authorised to file Form no. 5 and From no. 23 with Registrar of Companies and are also authorized to do all such things and acts as may be necessary in connection therewith”.

Guest

Guest (Expert)

06 February 2012 Special Resolution is required. Still you can file the forms with late fees.

Find above the format of resolutions to alter A0A nd MOA.

Deepak Sharma

Deepak Sharma (Querist)
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06 February 2012 Thanks to Charu and Ashwin both for your valuable suggestions but I want to know if Company refuse to alter AoA and continue with unupdated AoA, Is there any prosecution or penalty?

Guest

Guest (Expert)

07 February 2012 It is not valid. The records of RoC cannot be updated unless you complete the procedure. Penalty will be delayed fees.

Prosecution - No idea

Deepak Sharma

Deepak Sharma (Querist)
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07 February 2012 No, they already increased the Capital and ROC data is also updated but AOA is still showing old authorised Capital; that's why I am confused. So please suggest..

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Ajay Mishra

Ajay Mishra (Expert)
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09 February 2012 Dear Deepak,

I agree with Ms. Charu suggestion, in addition you must follow the following guidelines:

1. if at the time of increasing Authorised share Capital, if the Company MOA and AOA metion the number of sharecapital in their respective clause.
2. If the company want to change abovem mentioned clause, you must passed ordinary resolution for change in capital clause in MOA.
3. You must also alter capital clause of AOA by special resolution and if the management demand that in future no need to mention number of capital, follow the line written by Ms. Charu.
4. File Form-23 with Concern ROC with altered MOA and AOA.

5. If you have not filed altered MOA and AOA with concerned ROC through Form-23, in future you can not altered capital clause through ordinary resolution.

5. If you passed Ordinary resolution for changing capital, the capital clause of AOA are deemed to be unaltered and you are violeting the provisions of Companies Act, 1956.

Regards
CS Ajay Mishra