Alteration of Registered Office Clause

ALTERATION OF REGISTERED OFFICE CLAUSE
CHANAKYA NATIONAL LAW UNIVERSITY

PATNA
FINAL DRAFT
SUBJECT: -CORPORATE LAW-I
TOPIC: - ALTERATION OF REGISTERED OFFICE CLAUSE
Submitted by:TANYA RAJ

ROLL NO: - 632
VIIth SEMESTER, 4th year.
ACKNOWLEDGEMENT
It gives me incredible pleasure to present a research work on- ALTERATION IN

REGISTERED OFFICE CLAUSE. I would like to enlighten my readers regarding this topic
and I hope I have tried my best to pave the way for bringing more luminosity to this topic.
I am grateful to my faculty MR. BRIJ NATH who has given me the idea and
encouraged me to venture this project.
And, finally yet importantly I would like to thank my parents for the financial support.
RESEARCH METHODOLOGY
Method of Research
The researcher has adopted a purely doctrinal method of research. The researcher has made
extensive use of the library at the Chanakya National Law University and also the internet
sources.
Aims and Objectives:
The aim of the project is to present a detailed study of the Alteration in Registered Office
Clause as per Company Law.
Sources of Data:
The following secondary sources of data have been used in the project1
Books
Websites
Method of Writing:
The method of writing followed in the course of this research paper is primarily analytical.
Mode of Citation:
The researcher has followed a uniform mode of citation throughout the course of this research
paper.
INDEX
INTRODUCTION5
MEMORANDUM OF ASSOCIATION........6-9
ALTERATION OF MEMORANDUM OF ASSOCIATION....10
ALTERATION OF REGISTERED OFFICE CLAUSE.11-13
CONCLUSION14
BIBLIOGRAPHY.......15
INTRODUCTION
Memorandum of association is a fundamental document. It is the charter of the company and

defines its reason for existence. It regulates the external affairs of the company in relation to
outsiders. Its purpose is to enable shareholders to know what its permitted range of enterprise is.
It is the area beyond which the actions of the company cannot go. Memorandum of association
defines the scope of the companys activities. It is the document that sets out the constitution of
the company. According to Lord Macmillan, the purpose of memorandum of association is to
enable the shareholders, creditors and those who deal with the company to know what is the
permitted range of enterprise. It is one of the most essential documents for incorporating a
registered company.
As per the general rule, the companies does not have the inherent right to alter or to modify the
memorandum of association as once the document is registered one has to abide by it. It is the
document which represents the Company so Doctrine of Estopple applies.
However this is not the rigid principle as change is the law of nature. Company may be permitted
to modify its M.O.A. but it is subject to statutory provisions. Any content of M.O.A. can be
modified barring the association clause, i.e. name clause to capital clause can be modified. But
this modification does not apply immediately as it has to be registered by the Registrar of the
Company. Alteration has to be intimated to the Registrar who would then issue
Acknowledgement letter to the Company and on receiving of such letter modification gets
complete. Alteration of memorandum of association involves compliance with prescribed
procedure. Alterations only to the extent necessary for simple and fair working of the company
would be permitted. Alterations should not be prejudicial to the members or creditors of the
company and should not have the effect of increasing the liability of the members and the
creditors.
MEMORANDUM OF ASSOCIATION
Concept of M.O.A. :Memorandum of association is a fundamental document. It is the charter of the company and
It is the area beyond which the actions of the company cannot go.
Memorandum of association defines the scope of the companys activities. It is the document
that sets out the constitution of the company. According to Lord Macmillan, the purpose of
memorandum of association is to enable the shareholders, creditors and those who deal with the
company to know what is the permitted range of enterprise. It is one of the most essential
documents for incorporating a registered company.
According to section 2 (28) of the Companies Act, memorandum means memorandum of
association of a company as originally framed or altered from time to time in pursuance of any
previous companies law or this Act. Section 13 of the Act specifies in clear terms the contents of
this important document which is a charter of the company. It contains the fundamental
provisions of the companys constitution. It contains the essential conditions upon which the
company can be incorporated.
The main purpose of the memorandum of association of a company is two folded. First, the
intending shareholders before making investment in the company should know the field in or the
purpose for which it is going to be used and what risk he is taking in making the investment.
The Second purpose is that anyone dealing with the company will know without doubt what is
the permitted range of enterprise of the company.
Content of M.O.A:An important step in the formation of a company is to prepare a document called the
memorandum of association. As observed by Palmer: 1 it is a document of great importance in
relation to the proposed company. Its importance lies in the fact that it contains the following
fundamental clauses which have often been described as the conditions of the companys
incorporation:2
1. Name Clause;
1 Palmers COMPANY LAW, 56 (20th Edn, 1959).
2 Section 13 states the requirements with respect to memorandum.
2. Registered Office Clause;
73. Objects Clause;
4. Liability Clause;
5. Capital Clause; and
6. Association Clause and Subscription.
1. NAME CLAUSE [SECTION 13(1) (A)]:
A company being a legal entity must have a name of its own to establish its separate identity. No
company shall be registered by name which in the opinion of the Central Government is
undesirable. Here, undesirable means the name which is identical with or which too nearly
resembles with the name of our existing company. The Registrar has to make preliminary
enquiries to ensure the applicability of the name. The object is to prevent the use of a name that
is likely to mislead the public; e.g. a company is not allowed to use a name which is prohibited
under the Emblems and Names (Prevention of Improper Use) Act, 1950.
A person cannot be permitted to name a company even after his personal name if that name
resembles the name of an existing company. Every public company must write the word
Limited after its name and every Private Limited company must write the word private
limited after its name. But the company whose liabilities are not limited is prohibited from using
the word Limited. The name of the company and the address of its registered office must be
painted or affixed outside every office or place at which its business is carried on, in a
conspicuous position and in letters easily legible in English and in the language in general use in
the locality.
2. REGISTERED OFFICE CLAUSE [SECTION 13(1) (B)]:
A company should have registered office from the day that begins to carry on business or within
30 days after incorporation whichever is earlier. The registered office clause must mention the
State where it is situated mainly for two reasons. Firstly, it ascertains the domicile, nationality
and the jurisdiction of the court with reference to the registered office of the company.
Secondly, it is the place where all the essential records must be kept as well as communication,
notice etc must be sent.
3. OBJECT CLAUSE [SECTION 13 (1) (C) & (D)]:
This is the most important clause in memorandum of association, as it defines for which the
company is formed as well as determines the extent of the powers which the company can
exercise. All companies registered under the Companies (Amendment) Act, 1965, divide their
objects clause into two sub-clauses, namely
i) Main Objects: These are the objects incidental or ancillary to the attainment of the main
objects.
ii) Other objects: These are the objects which are not included in the Main Object but pursued
by the company at anytime in the future.
Thus this clause determines the purpose and capacity of the company and the acts beyond which
are ultra vires. The subscribers to the memorandum of association enjoy almost unrestricted
freedom to choose the objects. The only restriction is that objects should not be illegal and
against the provisions of the Companies Act, 1956.
The subscribers to the memorandum of association cannot do any activities beyond the
objectives. It has certain restrictions, like:
1. The objectives should not be against the policy of the Constitution.
2. The objects must not be against the public policy.
3. The objects should not include anything which is illegal or against public policy.
4. LIABILITY CLAUSE [SECTION 13 (2)]:
This clause states the liability of the members. The liability may be by shares or guarantee. The
effect of this clause is that in a company limited by shares, no members may be called upon to
pay more than the amount which remains unpaid. For example, if his shares are fully paid up, his
liability is nil. But, if he is holding Rs.100 shares and he has paid Rs. 25 then, he can be called
upon to pay the balance amount i.e. Rs. 75.
In a company limited by guarantee, the liability clause will state the amount which each member
should undertake to contribute to the assets of the company in the event of liquidation of the
company. He cannot be called upon to pay anything before the company goes into liquidation.
5.CAPITAL CLAUSE [SECTION 13 (4) (a)]:
This clause states the amount of capital with which the company is registered, unless the
company is an unlimited company. The shares into which the capital is divided must be of fixed
value, which is commonly known as the nominal value of the share.
The usual way to state the capital in the memorandum is The capital of the company is Rs 20,
00,000 divided into 2, 00,000 equity shares of Rs. 10 each. The company cannot issue shares
beyond this limit without altering the memorandum.
If both equity and preference shares are issued, then the division of the capital is shown under
two heads. If it receives applications for shares beyond the shares covered by the authorized
capital, the amount received on excess number of shares should be returned.
6. ASSOCIATION CLAUSE AND SUBSCRIPTION:
The memorandum of association concludes with the declaration by the subscribers, as:
9
We, the several persons whose names and addresses subscribed, are desirous of being formed
into a company in pursuance of this memorandum of association, and we respectively agree to
take the number of shares in the capital of the company set opposite our respective names.
Then follow the names, address, occupations of the subscribers, and the numbers of shares each
subscriber has taken and his signatures attested by a witness.
The statutory requirements regarding subscription of memorandum of association are that:
a. It must be signed by each subscriber.
b. Each subscriber must take at least one share.
c. Each subscriber must write opposite his name the number of shares which he agrees to take.
10
ALTERATION OF MEMORANDUM OF ASSOCIATION
As per the general rule, the companies does not have the inherent right to alter or to modify the
memorandum of association as once the document is registered one has to abide by it. It is the
document which represents the Company so Doctrine of Estopple applies.
However this is not the rigid principle as change is the law of nature. Company may be permitted
to modify its M.O.A. but it is subject to statutory provisions. Any content of M.O.A. can be
modified barring the association clause, i.e. name clause to capital clause can be modified. But
this modification does not apply immediately as it has to be registered by the Registrar of the
Company. Alteration has to be intimated to the Registrar who would then issue
creditors.
But the Act has no specification regarding the time period of intimation hence shall be intimated
within fifteen days, unless and otherwise specified.
The alteration of the memorandum of association may be in the following respect:
a. By changing its name (Section 21 to 24)
b. By altering it in regard to the State in which the registered office is to be situated or its objects
(Section 17)
c. By altering its share capital (Section 94)
d. By reorganizing its share capital (Section 391 to 396)
e. By reducing its capital (Section100)
f. By making the liability of the directors unlimited (Section 322)
For the alteration of the memorandum of association, a rigid procedure is to be followed and
strict compliance of the procedure is demanded by law. Failure to comply with the express
provisions made under the Act for the purpose of alteration of the conditions contained in the
memorandum will be deemed as a void.
11
A company can shift its registered office from one place to another within the same city, town or
village.3 But if it is proposed to carry the registered office from one city to another within the
same State, a special resolution to that effect must be passed. 4 A notice of any such change must
be given to the Registrar within thirty days of the change. 5 If the shifting of the registered office
has the effect of taking the office from the jurisdiction of one Registrar of Companies to that of
another within the same State, permission of Regional Director must be taken. Application for
permission has to be made on prescribed form. The Regional Directors are required to confirm
the companys application and inform it accordingly within a period of 4 weeks. 6 After getting
the confirmation of the Regional Director, the company must file a copy of the same with the
Registrar of Companies within two months from the date of confirmation together with copy of
altered memorandum. The Registrars are required to register the same and inform companies
within one month from the date of filing. The Registrars certificate is the conclusive evidence of
the fact of alteration and of compliance with requirements.
Shifting of the registered office from one State to another is a much more complicated affair, as it
involves alteration of the memorandum itself. The alteration of the memorandum for this purpose
is subject to provision of Section 17 which requires, in the first place, a special resolution for the
company and, in the second, confirmation by the Company Law Board (CLB) can confirm the
alteration only if the shifting of the registered office from one State to another is necessary for
any of the purposes detailed in Section 17(1). When this condition is fulfilled, the second stage is
reached, namely, to consider the objections of a person or class of persons whose interest will,
in the opinion of CLB, be affected by the alteration.7 In two cases before the Orissa High
Court,8 shifting of the registered office of certain companies to places outside Orissa was
opposed by the State on several grounds, including the loss of revenue and employment
opportunities. The Court declined confirmation in both cases. In one of them BARMAN J based
3 Section 146(2).
4 Section 17-A.
5 Section 146(4).
6 Ibid 4.
7 Section 17(3).
his decision on the ground that in a Federal Constitution every State has got right to protect its
12
revenue
and, therefore, the interest of the State must be taken into account and are of
considerable importance in confirming inter-State change of registered office.9 The Calcutta High
Court described this as a parochial consideration. In a case before it10A company desired to shift its registered office from the State of West Bengal to Bombay. The
companys petition was registered by the State on the ground of loss of revenue.
The Court refused to sustain the contention of the State and allowed the transfer.11
This decision was indorsed by a Division Bench of the Calcutta High Court in Rank Film
Distributers of India Ltd v registrar of Companies, West Bengal.12 But the problem does not seem
to have ended with it. Capital has a tendency to fly away from the areas of labour trouble.
Another evidence of this is Bharat Commerce & Industries Ltd, Re,13 also before the same court.
A company evolved and sought confirmation for removing its office from West Bengal to New
Delhi. Explaining its reasons the company said that due to disturbance in the registered office
caused by three or more employees it had become impossible to manage the branches of the
company located at different places. The State of west Bengal having learned its lesson in the
earlier cases did not opposed but the employees opposed the confirmation. They felt that the
management has taken this course to frustrate the outcome of an industrial dispute.
They fairly well succeeded. For DUTTA J held that the decision of the management was mala
fide. But on appeal to a Division Bench his decision was over-ruled. 14 The court did not like to
8 Orient Paper Mills v. State, AIR 1957 Ori 232 and Orissa Chemical and Distilleries,
Re, AIR 1961 Ori 162.
9 Sangal and Ponnuswami, Inter-State Change of Registered office of a Company,
(1964) 1 Comp LJ 104 (Journal Section).
10 Mackinnon Mackenzie & Co, Re, (1967) 1 Comp LJ 200.
11 Id. Followed in Minerva Mills Ltd v Govt of Maharashtra, (1975) 45 Comp Cas 1
Bom.
12 AIR 1969 Cal 32.
13 (1973) 43 Comp Cas 162 Cal.
14 Bharat Commerce and Industries Ltd v ROC (WB), (1973) 43 Comp Cas 275 DB
Cal.
decide whether it was open to the court to examine the bona fides of the shareholders resolution
for13removing their office from one State to another.
The CLB did not hesitate in granting permission to a company to move out of the host State
whose action and policies frustrated the hopes and aspirations of the company and to shift its
registered office to any other State which was willing to provide the necessary facilities. 15 Where
a company wanted to shift its registered office from New Delhi to Gurgaon, the CLB, confirmed
the companys resolution and did not hesitate to permit the shifting of registered office to a place
where majority of companys shareholders resided.16 Where some employees objected to the
proposed shifting on the ground that they would be prejudiced in respect of their cases pending
before the labour courts, the CLB permitted the shifting but ordered that the workers interest
should be safeguarded.17
Where a company had all its manufacturing units in Uttar Pradesh and none in West Bengal, the
CLB confirmed its special resolution to shift its registered office from West Bengal to Uttar
Pradesh.18 Where a company had one manufacturing unit in Bihar and the other in Maharashtra
and because it has undertaken massive expansion programme in Maharashtra, its desire to carry
the registered office to Pune was allowed. Its Bihar unit was to continue as it was. 19 A company
was allowed to take away its registered office from Bihar to West Bengal in spite of the fact that
the Bihar Government had granted land on lease for the companys factory on the condition that
the registered office would not be shifted. The CLB said that the fact of interest-free loans, salestax, holidays, concessional electricity and other subsidies had no bearing on the companys right
to shift.20
Duty and Power of Law Boards21:-
15 Paradise Platic Enterprises Ltd, Re, (1989) 3 Comp LJ 248, 250 CLB.
16 Pal-Peugeot Ltd, Re, (1997) 89 Comp Cas 808.
17 J.L. Morrison(India) Ltd, Re, (1999) 95 Comp Cas 907 CLB.
18 Upper Ganges Sugar & Industries Ltd, Re, (2000) 27 SCL 369 CLB.
19 Neelachal Auto Ltd, Re, (2000) 38 CLA 217 CLB.
20 Usha Beltron Ltd, Re, (2000) 27 SCL 124 CLB.
21 Section17(2)-(7)
Before confirming the alteration, the CLB must satisfy itself that the sufficient notice has been
14
given
to every debenture-holder or person or class of person whose interest are likely to be
affected.22 In reference to creditors, the CLB has to feel satisfied that those who have raised
objections, their interests have been safeguarded. The CLB may dispense with the requirements
of the consent of any such person. The CLB has also to see that a notice has been served on the
Registrar of the Company to enable him to state his objections, if any. The CLB may make a
conditional order of confirmation. Where there are dissenting members, the CLB may formulate
a scheme of arrangement under which they will be paid out but not in a manner as to affect the
structure of the companys share capital.
And in case of non-compliance of any procedure with respect to alteration, the company itself
shall be penalized up to Rs. 10000 per day till the default period continues and the defaulted
person shall be penalized up to Rs. 5000 per day till the defaulting period continues. This penalty
may range to Rs. 5000 per day to Rs. 1 lacs, whichever is more.
CONCLUSION
A company can shift its registered office from one place to another within the same city, town or
village. But if it is proposed to carry the registered office from one city to another within the
same State, a special resolution to that effect must be passed. A notice of any such change must
be given to the Registrar within thirty days of the change. If the shifting of the registered office
has the effect of taking the office from the jurisdiction of one Registrar of Companies to that of
another within the same State, permission of Regional Director must be taken. Application for
22 Metal Box Indi Ltd, In re, (2001) 105 Comp Cas 939 CLB.
permission has to be made on prescribed form. The Regional Directors are required to confirm
the15companys application and inform it accordingly within a period of 4 weeks. After getting the
confirmation of the Regional Director, the company must file a copy of the same with the
Registrar of Companies within two months from the date of confirmation together with copy of
altered memorandum. The Registrars are required to register the same and inform companies
within one month from the date of filing. The Registrars certificate is the conclusive evidence of
the fact of alteration and of compliance with requirements. Shifting of the registered office from
one State to another is a much more complicated affair, as it involves alteration of the
memorandum itself.
Memorandum of association is a fundamental document. It is the charter of the company and
It is the area beyond which the actions of the company cannot go. Memorandum of association
defines the scope of the companys activities. It is the document that sets out the constitution of
the company. According to Lord Macmillan, the purpose of memorandum of association is to
enable the shareholders, creditors and those who deal with the company to know what is the
permitted range of enterprise. It is one of the most essential documents for incorporating a
registered company. As per the general rule, the companies does not have the inherent right to
alter or to modify the memorandum of association as once the document is registered one has to
abide by it. However this is not the rigid principle as change is the law of nature. Company may
be permitted to modify its M.O.A. but it is subject to statutory provisions. Any content of
M.O.A. can be modified barring the association clause, i.e. name clause to capital clause can be
modified. But this modification does not apply immediately as it has to be registered by the
Registrar of the Company. Alteration has to be intimated to the Registrar who would then issue
creditors.
BIBLIOGRAPHY
Singh, Avatar, COMPANY LAW, (15th Edn.), Eastern Book Company,

(2007)

Alteration of Registered Office Clause

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ALTERATION OF REGISTERED OFFICE CLAUSE

CHANAKYA NATIONAL LAW UNIVERSITY

Submitted by:TANYA RAJ