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Section 21: Companies Act- Incorporating companies and compliances in India

Section 21 of the Companies Act, 2013 deals with the alteration of the Memorandum of Association of a company. The Memorandum of Association is a document that sets out the company's objectives, scope of operations, and powers. Any change to the Memorandum of Association must comply with the provisions of the Companies Act, 2013, and the rules made thereunder.

Section 13 of the Companies Act, 2013 provides for the contents of the Memorandum of Association. It must include the name of the company, its registered office, its objects, and its capital structure. The Memorandum of Association must be submitted to the Registrar of Companies at the time of incorporation of the company.

The alteration of the Memorandum of Association can be done by passing a special resolution. However, such alteration must not be in conflict with the Companies Act, 2013, or any other law in force. The alteration can be made to the name, registered office, objects, and capital structure of the company.

One important aspect of the alteration of the Memorandum of Association is that it must be approved by the National Company Law Tribunal (NCLT). The company must file an application with the NCLT for approval of the alteration. The NCLT will then examine the application and approve the alteration if it is satisfied that it is in compliance with the Companies Act, 2013, and the rules made thereunder.

The case of Re Ashbury Railway Carriage and Iron Co. (1885) 29 Ch D 491 is a landmark case related to the alteration of the Memorandum of Association. In this case, the company's Memorandum of Association had authorized the company to carry on the business of manufacturing and dealing in railway carriages and wagons. The company wanted to expand its business to include the construction of a railway line in Belgium. The court held that the alteration of the Memorandum of Association to include the construction of a railway line was beyond the company's objects and was therefore void.

It is important for companies to regularly review their Memorandum of Association to ensure that it accurately reflects their current objectives and scope of operations. Any changes to the company's objectives or operations may require an alteration of the Memorandum of Association. Failure to comply with the requirements of the Companies Act, 2013, and the rules made thereunder can result in penalties for the company and its officers.

Companies must also ensure that they maintain an up-to-date copy of their Memorandum of Association at their registered office. The Memorandum of Association must be made available for inspection by any member or creditor of the company, free of charge. Failure to maintain and make available an up-to-date copy of the Memorandum of Association can result in penalties for the company.

In conclusion, Section 21 of the Companies Act, 2013 provides the procedure for the alteration of the Memorandum of Association of a company. Companies must ensure that their Memorandum of Association is compliant with the Companies Act and other relevant rules and regulations. Any alteration to the Memorandum of Association must be done in accordance with the provisions of the Companies Act and approved by the National Company Law Tribunal. Companies must also ensure that they comply with the Companies (Incorporation) Rules, 2014, and Companies (Management and Administration) Rules, 2014, among other relevant rules and regulations. By doing so, companies can ensure that they are operating within the legal framework and avoid any legal or regulatory issues.


By Siddharth Dalmia

The StartUp Sherpa

+91-9971799250

dalmiasiddharth1994@gmail.com

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