Change In Company Object Clause

Object Clause and its alteration 

While speaking about the companies specifically, the object clauses are defined as the main clauses mentioned in the memorandum of association (MOA). These main clauses define the objective and scope of the company’s primary activities under which it can perform. Any company registered in India cannot perform the activities that are not mentioned in its object clause.

With time many companies make strategic changes and expansions. They may perform new activities. But before commencing new activities, all the companies have to update their new activities in the MOA. This alteration in Object clause of MOA is only possible after seeking the approval of all the shareholders. The company has to conduct a board meeting and pass a resolution for the alteration of object clause in the MOA. Besides, the shareholders, companies also need approval from the Ministry of Corporate Affairs to change the object clause.

When a company undertakes new activities

Addition of new activities in an entity is one of the primary reasons for changing the object clause. This happens mostly when a company grows vertically and horizontally. With time every company makes strategic changes. It happens when a company gains the customer’s trust.

They start adding new services and products to their company. But before commencing any new activities, a company needs to update it in the MOA. As per the Companies Act, Any company registered in India cannot undertake any new activity without changing the object clause in MOA. Thus, it is one of the major reasons for object clause alteration.

Takeover of the company

There are many instances when one entity takes over another company. They do it only for their market value built. In such cases, the object clause of the companies acquired also becomes the object clause of the parent company. Thus, they have to change their object clause to lead the business further. The object clause of a company is changeable before /after taking over. It completely depends upon requirement of the company.

Eliminating abandoned activities

There are times when a company disown many activities started by the company. They do not undertake any such activities due to a lack of resources/ or any other reasons. In such cases, a company needs to update and eliminate those activities that are not performed anymore. Besides, a company’s MOA is accessible to anyone in the MCA portal. Anyone may access it before making any contractual relation with the company. Thus, it is crucial to update the object clause by deleting those activities that are no longer performed.

Prohibition of current activities

The policies of the government change frequently; this may affect one company and its operation. There are times when the activities performed by one company are declared banned under the new policies. Thus, any company that has business objectives that are banned should remove it from the MOA. A company may also change the object clause in the MOA completely. It depends upon the need of the company.