How to change business activity of a Company?
The Memorandum of Association is a constitutional document of the company that helps to bring change in a business activity. It consists of five clauses as listed below:
- Name clause- It provides the name of the company. From the name of the company, one can come to know whether it is private or public limited company.
- Registered office clause- It shows in which state the company is incorporated.
- Object clause- From the object clause, it shows the purpose of the company.
- Liability clause- It shows the liability of the members of the company. It can be limited by shares or guarantee.
- Capital clause- Companies having share capital will show the total authorized capital which is divided into the number of shares and the amount.
Hence the company has to follow the procedure as specified under law to change the business activity in of a company. For this, the company will require the approval from the shareholders by passing a resolution.
Reasons for change a business activity of a Company
- If a company wants to expand the business.
- If a company take over another company with different business activity.
- If a company wants to start a completely different business.
- If the Government prohibits the current business activity under any law.
Pass a resolution in a board meeting
A board meeting must be called to approve the new object clause by the directors. The BOD may decide a date and time to call Extraordinary General Meeting to take approval from shareholders. Further, BOD may authorize any of the directors to file all required forms with MCA. The notice for the EGM must be sent to all the shareholders at least before clear 21 days from the date of EGM.
Pass a special resolution in Extraordinary General Meeting
The company must call an EGM at a specified date and time. To change the object clause in MOA, shareholders must pass a Special resolution. For companies that are not a Private Limited Company or issue capital through prospectus, then the company must pass a special resolution by postal ballot for change in business activity.
Filing of form with MCA
Company shall file the form MGT-14 for the special resolution passed in the extraordinary general meeting. The form must be filed with the MCA within 30 days from the date of resolution. The process ends when the company receives approval from MCA.
Following documents must be attached with the form:
- A true copy of a board resolution
- Notice of EGM
- A true copy of special resolution
- Altered MOA
Alteration of MOA
The company after receiving approval from the MCA must alter every copy of the Memorandum of Association. The company can start new business activities after receipt of approval from the MCA.
Be compliant with all the rules and regulations to avoid any consequences. The company must update MCA by filing forms from time to time as and when required such as a change in registered office business activity, capital, etc. Otherwise, the company, as well as the officers in default, will be liable for the penalty.