Page 229 - DMGT407Corporate and Business Laws

Corporate and Business Laws

Notes 6. To sell or dispose off 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 off 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 30 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
certificate 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).

Example: The objects clause of memorandum of a company empowers it to carry on
distillery business and any other business that is allied to it. The company wants to alter its
memorandum so as to include the cinema business in its objects clause. The company may make
the proposed alteration if the cinema business may conveniently or advantageously be combined
with the existing business.

9.3.5 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.

Notes 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.

9.3.6 Alteration of Capital Clause

This clause deals with alteration of share capital.
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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