Page 158 - DCOM404_CORPORATE_LEGAL_FRAMEWORK

Unit 8: Formation of Company

3. To enlarge or change the local area of its operation. In India Mechanical Gold Extracting Notes
Company, In Re (1891) 3 Ch. 538, the company’s business was confined to the ‘Empire of

India’. It wanted to enlarge its operations by dropping these words. It was allowed to do so
on the condition that the word ‘Indian’ was also dropped from its name.
4. To carry on some business which under existing circumstances may be conveniently
or advantageously combined with the business of the company. In fact, most of the
amendments sought in objects clause are based on this ground. This clause enables a
company to diversify. The working of the clause makes its scope very wide in as much
as any activity which may either conveniently or advantageously be combined with the
existing business may be allowed.
5. To restrict or abandon any of the objects specified in the memorandum. Even for deleting

any portion of the object clause, the procedure laid down in s.17 has to be followed.
6. To sell or dispose of the whole or any part of the undertaking. Where a company wishes
to adopt a cut-back or retrenchment strategy, i.e., where it feels that it has either grown too
big or diversified in various directions that managing becomes difficult or uneconomical, it

may alter its objects to sell or dispose of any of its undertakings.
7. To amalgamate with any other company or body of persons.

A printed or a typewritten copy of the special resolution is required to be filed with the Registrar
within thirty days of the passing thereof.

Also a petition is to be filed with the Central Government for confirmation of the special resolution.

The Central Government, being satisfied that the notice of the resolution was given to all persons

whose interests are likely to be affected by the alteration, including the Registrar and the State

Government and having heard them, may confirm the alteration either wholly or in part.
A certified copy of the order of the Central Government together with a printed copy of the

altered memorandum must be filed within three months of the date of the order, with the

Registrar. The Registrar will register the documents and issue, within one month a certifi cate
which will be conclusive evidence that everything required has been done (s.18). If the required
documents are not filed within the prescribed time, the alteration and the order of the Central

Government confirming the alteration, shall, at the expiry of such period, become void and

inoperative (s.19).
Alteration of liability clause (s.38). The liability of a member of a company cannot be increased
unless the member agrees in writing. The consent of the member may, however, be given
either before or after the alteration. Increase in liability may be by way of subscribing for more
shares than the number held by him at the date on which the alteration is made or in any other
manner.
In case where the company is a club or any other similar association and the alteration in the
memorandum requires the member to pay recurring or periodical subscription or charges at
a higher rate, although he does not agree in writing to be bound by the alteration, it shall be
binding on him.
In case of unlimited liability company, the liability may be made limited. The alteration will,
however, not affect any debts, liabilities, obligations or contracts entered into by or with the
company before the conversion.
Alteration of capital clause. Section 94 provides that, if the articles authorise, a company limited
by share capital may, by an ordinary resolution passed in general meeting, alter the conditions of
its memorandum in regard to capital so as:
1. to increase its authorised share capital by such amount as it thinks expedient by issuing
fresh shares;

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