The articles of association of a company contains the regulations for management of the company. Section 2(5) of the Companies Act, 2013 defines articles as below:-
‘ (5) “articles” means the articles of association of a company as originally framed or as altered from time to time or applied in pursuance of any previous company law or of this Act;‘
A company can alter its articles of association by passing a special resolution. Anything contained in the articles of association so as to render it unalterable is void and bad in law. The alteration of the articles of association should be consistent with the Companies Act, 2013 and memorandum of association of the company.
Section 14 of the Companies Act, 2013 deals with alteration of articles of association of a company. Section 14(1) of the Companies Act, 2013 reads as below:-
“(1) Subject to the provisions of this Act and the conditions contained in its memorandum, if any, a company may, by a special resolution, alter its articles including alterations having the effect of conversion of –
a) a private company into a public company; or
b) a public company into a private company“
Further, as per Section 2(3) of the Companies Act, 2013, “alter” or “alteration” includes the making of additions, omissions and substitutions.
The Articles of association of a company may contain provisions for entrenchment 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. If the provisions for entrenchment is to be made by an amendment in the articles, then such amendments must be agreed by all the members of the company in the case of a private company and by a special resolution in the case of a public company. Where the articles contain any entrenchment provision in respect of alteration of the articles of association, a company should follow the procedure as specified in those provisions.
Procedure for alteration of Articles of Association of a company
1
Issue not less than 7 days’ notice along with agenda and notes on agenda to every director of the company at his address registered with the company. A meeting of the Board may be called at shorter notice to transact urgent business subject to the specified conditions.
2
Hold a board meeting
- To consider the alteration of articles and to pass a resolution for alteration of articles of association subject to the approval of the members of the company.
- To fix day, date, time and venue for holding a general meeting to obtain the approval of the members of the company.
- To approve the draft notice of the general meeting along with explanatory statement u/s 102 and authorise company secretary or any director to sign and issue notice for the general meeting.
3
Issue notice calling general meeting along with the explanatory statement u/s 102 at least 21 clear days in advance of the general meeting to all the members, directors, , auditors, secretarial auditors, debenture trustee of the company and others who are entitled to it.
An EOGM may be called after giving shorter notice, if consent, in writing or by electronic mode, is accorded thereto, by majority in number of members entitled to vote and who represent not less than 95%, of such part of the paid-up share capital of the company as gives a right to vote at the meeting.
4
Hold the general meeting and pass a special resolution for the alteration of articles of association.
5
Make necessary arrangements for e-voting, if applicable.
6
File E Form MGT-14 within a period of 30 days from the date of passing of the special resolution.
Attachment:
- Certified true copy of the special resolution along with explanatory statement under section 102.
- Altered articles of association
- Optional attachments, if any
7
Every alteration made in the articles of association of a company shall be noted in every copy of the articles of association specifying the date and manner of passing the resolution.