What is the Main Object Clause in the MOA and How to Change it?

  • Setindiabiz Team
  • January 25, 2023
What is Main Object of the Company in MoA and How it can be Changed ?
The main object clause of MOA defines the scope of a company’s business activities. This blog explains the complete process of changing the object clause in order to alter the scope of activities a company can conduct.

The Object Clause is the one of the 6 clauses a Company’s Memorandum of Association contains. Its purpose is to define the primary business activities of a Company. The company is restricted to conduct only those activities which are mentioned in the Object Clause. So, to expand and alter the scope of its activities, a company will have to first change the object clause of its MOA. Understanding the process of changing the Object clause is thus, quite crucial in this context.

Memorandum of Association and Its Clauses

Memorandum of Association, often referred to as the “Charter of a Company”, is a document that lays down its legal foundation. It mentions and confirms all the basic details and information with which a company gets incorporated. These include its name, registered office, capital, nature of shareholder’s liability, primary object and so on. The document is drafted in the format mentioned under Schedule I of the Companies Act, 2013. Each of these formats are divided into specific clauses as mentioned in the table below.
Clauses Their Purpose & Content
Name Clause
Company’s Name ending with the words “Limited” for Public Limited Company and “Private Limited” for Private Limited Companies and OPCs
Situation Clause
Name of the State in which the Company’s Registered Office is situated
Object Clause
Primary Object or business activity of the Company, and the matters essential for its furtherance
Liability Clause
Nature of Liability of Shareholders - Limited by Shares, Limited by Guarantee or Unlimited
Capital Clause
Subscribed Capital of the Company
Declaration Clause
Names, Addresses, Shareholding, and Signatures of all Subscribers to the MOA intending to form a company in its pursuance
Nominee Clause
Name and Signature of the Shareholder’s Nominee, only in case of OPC
Note that any changes in the above details of the company will require an alteration of the concerned clause according to the procedures specified under Section 13 of the Companies Act, 2013. This generally includes a resolution passed by the shareholders in general meeting followed by an intimation to the ROC in the appropriate form supported by proper documentation. Once the alteration is made, the ROC grants a Certificate confirming the change to the company. In the further sections, we are going to discuss in detail the procedure of one of the most important MOA clauses viz. the object clause for your clear understanding.

Object Clause in MOA - Meaning, Purpose & Content

The Object clause is one of the most significant clauses of the MOA. It defines the scope and extent of activities a company can undertake in its due course of business. An activity which has not been mentioned in the MOA cannot be carried out by the company, unless an alteration is made to that effect in the Object clause. The doctrine of Ultra Vires applies here which states that any activity or transaction of the company which falls outside the object clause of the Memorandum shall be considered “Ultra Vires” or beyond the powers of the company to carry out.
Effects of Ultra Vires Activities: What if a company carries out activities not mentioned in the object clause of MOA? Well, in the that case such activities will be considered Ultra Vires and will have the following effects:
  • It will be declared null and void. 
  • The company will not be bound by these activities. Also, the company can neither sue or be sued in regards to these activities 
  • The shareholders can get an injunction order to restrain the company from carrying out these activities
  • The directors will be responsible to ensure that the company’s capital is used for the activities stated in the MOA only. Any diversion of funds for other activities have to be personally compensated by the directors.

Implied Powers

While the main object of the company is specified in the object clause of the MOA, there are certain activities that the company must carry out to achieve this object successfully. The power to carry out these activities are implied and not explicitly mentioned in the MOA. For instance, a trading company would have to appoint and act through an agent, borrow and give security for the purposes of its business, and sell its products / services to achieve its main object. The power to carry out these activities are implied for the company owing to the nature of its main object.

The principle underlying the exercise of these implied powers is that a company, in carrying on the business for which it is constituted, must be able to pursue those things which may be regarded as incidental and consequential upon that business. However, there are certain powers which are not implied even if they are consequential to the main object of the company. A list below explains all these exceptions in detail.
  1. Acquiring any business similar to the company’s own business
  2. Enter into Agreement with any entity for carrying out business in partnership and share profits
  3. Acquiring shares in other companies with similar objects 
  4. Promoting other companies or helping them financially
  5. Sell / dispose off the entire undertaking in a company
  6. Use Company’s funds for Political Purposes 
  7. Give gifts and donations for charities not relating to the main object
  8. Acting a guarantor

How to Change the Object Clause In MOA? - Stepwise Process

As already discussed earlier, a company cannot conduct any business activity that’s beyond the scope of what’s been mentioned in the object clause. So, any alteration in the business activity of a company must be reflected in the Object Clause of the MOA. The process for altering the Object Clause of the MOA is mentioned in Section 13 of the Companies Act. Here are the detailed steps you need to navigate for the purpose
Stepwise Process Change the Object Clause In MOA

Step 1: Call Board Meeting

Issue notice in writing to every director of the company at his address registered with the company. The notice must be sent 7 days before the actual date of the meeting. The notice must contain the time, date, venue and detailed agenda of the meeting. Hold the Board Meeting as per the set date, time and venue.

Step 2: Pass Board Resolution

In the meeting, the directors are required to pass two resolutions. The first will approve the proposed amendments to the object. The second will approve the time, date, and venue of the general meeting held to ratify the decision of the board. Upon passing the second resolution, the board will authorise the Company Secretary or a similar authority to issue notice to the shareholders for the general meeting.

Step 3: Call General Meeting & Pass Special Resolution

Hold the General meeting attended by all company shareholders, directors, and auditors. Pass the special resolution to approve the proposed amendments to the object clause as per Section 13 (1) of the Companies Act, 2013.

Step 4: File MGT-14 to the ROC

Once the Special Resolution is passed at the General Meeting, the decision to amend the object clause shall be considered approved on the Company’s end. The next step will be to intimate the ROC about the change in object clause. For this, you need to file the copy of the Special Resolution passed at the General Meeting in form MGT-14, within 30 days from the date of passing the resolution. A copy of the Explanatory Statements to the Resolution along with the altered or amended copy of the MOA has to be submitted with the MGT-14 form.
S.No List of Documents Required for Changing Object Clause
1.
Notice of the General Meeting
2.
MGT-14
3.
Copy of Special Resolution passed at the General Meeting
4.
Amended Copy of the MOA with altered Object Clause

Change in Object Clause for Companies which have Raised Money Through Prospectus

Section 13(8) has placed additional requirements for change in objects clause of a Company which raised money through its prospectus and has not utilized these funds. This particularly applies to Public Limited Companies as Private Limited Companies and One Person Companies are not required to have a Prospectus for their companies. The requirements which Section 13(8) places on such companies are mentioned below.
  1. Special Resolution Passed Through Postal Ballot
  2. Details of Special Resolution to be published in at least two newspapers (one in English language, and the other in a vernacular language) in circulation at the place where the company’s registered office is located. 
  3. Details of Special Resolution to be published on the company’s website, if available 
  4. Shareholders dissenting about the change in object of the company will be given an option to exit by the promoters and shareholders having control.

The object clause of a company’s Memorandum of Association (MOA) plays a pivotal role in defining the scope of its business activities. Any changes to this clause require a systematic process as outlined in Section 13 of the Companies Act, 2013. Understanding the significance of the object clause and the stepwise procedure for its alteration is crucial for any company seeking to expand or modify its business activities. By meticulously following the legal framework and adhering to the established guidelines, companies can ensure that their revised object clause accurately reflects their intended scope of operations, while also complying with regulatory requirements.

Conclusion

FAQs

Q1: Why is the object clause in the MOA important for a company?

The object clause defines the permissible business activities of a company. It outlines the scope within which the company can operate and restricts it from engaging in activities not specified. Any alteration in business activities requires a change in the object clause.

Q2: What is the doctrine of Ultra Vires in relation to the object clause?

The doctrine of Ultra Vires holds that any activity beyond the scope of the object clause is considered beyond the company’s legal powers and is therefore null and void.

Q3: What are implied activities in relation to the Object Clause?

Implied activities are activities necessary for achieving the company’s main objective. These are not explicitly mentioned in the object clause. These activities are inferred from the inherent nature of the company’s main object or business.

Q4: What are the consequences of conducting activities not mentioned in the object clause?

Conducting such activities would be considered Ultra Vires, rendering them null and void. The company cannot be bound by these activities, shareholders can seek injunctions, and directors may be personally liable for diverting funds.

Q5: What is the process to change the object clause in the MOA?’

The process to change the object clause of MOA requires the following steps:
  1. Call Board Meeting: Issue Notice to all Directors and call a Board Meeting. 
  2. Pass Board Resolution: Pass resolutions in the Board Meeting to approve proposed amendments in the object clause.
  3. Pass Special Resolution in General Meeting: Hold a general meeting to pass a special resolution approving amendments.
  4. File MGT-14: Intimate the Registrar of Companies (ROC) by filing form MGT-14 within 30 days of passing the special resolution.
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2 thoughts on “What is the Main Object Clause in the MOA and How to Change it?”

  1. Great post! I’m glad you’re exploring the main object of company in MoA. I think it’s an important topic to consider, especially as the company landscape changes.

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