How to Apply for Change in Object Clause of Company

 When a company is incorporated, its Memorandum of Association (MOA) defines the scope and boundaries of its business activities. One of the most crucial parts of the MOA is the Object Clause, which states the purpose for which the company is formed. However, businesses evolve with time. A company may want to expand into new areas, diversify its services, or shift its focus entirely. In such cases, it becomes necessary to make a Change in Object Clause of Company. This article explains the process, legal requirements, and practical steps for changing the object clause in India.


Understanding the Object Clause

The Object Clause in the MOA defines:

Main Objects

The primary business activities the company intends to carry out.

Ancillary Objects

Activities that support or are incidental to the main objects.

Other Objects

Activities that the company may take up in the future, if needed. Since the MOA is a public document, the object clause ensures that shareholders, creditors, and other stakeholders are aware of the company’s business intentions.

Why Companies Change the Object Clause

Companies may need to change their object clause for several reasons such as business expansion, diversification, adaptation to market changes, strategic partnerships or joint ventures, and compliance reasons. For example, a company initially set up for IT services may later decide to expand into digital marketing or e-commerce. To legally conduct these new activities, the MOA must be amended.

Legal Framework for Change in Object Clause

The process of changing the object clause is governed by the Companies Act, 2013 and the rules framed under it. Since the MOA is a foundational document, any alteration requires approval of shareholders through a special resolution, approval of the Registrar of Companies (RoC) after filing the necessary forms, and in certain cases, approval of the Central Government (for companies that have raised money from the public).

Step-by-Step Process to Apply for Change in Object Clause of Company

1. Convene a Board Meeting

The first step is to call a Board Meeting by issuing notice to all directors. The agenda of the meeting should include approval of the proposal to change the object clause, fixing the date, time, and venue of an Extraordinary General Meeting (EGM), and drafting the notice of EGM along with an explanatory statement.

2. Draft Notice for EGM

A notice of the EGM must be sent to all shareholders, directors, and auditors at least 21 clear days before the meeting. The notice should include the proposed resolution for altering the object clause and an explanatory statement stating the reasons and justification for the change.

3. Hold the Extraordinary General Meeting

At the EGM, the shareholders vote on the resolution. For the change to be valid, a special resolution must be passed, meaning at least 75% of shareholders present and voting must approve it.

4. File Special Resolution with RoC

After the EGM, the company must file Form MGT-7 (special resolution details) within 30 days of passing the resolution and attach the altered MOA showing the new object clause.

5. File Form INC-24 (if applicable)

In certain cases, especially if the company has raised funds from the public, an additional form, INC-24, must be filed with the RoC seeking approval of the Central Government.

6. Registrar’s Approval

The Registrar reviews the documents. If everything is in order, the RoC issues a fresh Certificate of Incorporation reflecting the alteration in the object clause.

Special Case: Companies with Public Money Involved

If a company has raised money from the public through a prospectus and still has unutilized funds, changing the object clause requires passing a special resolution through a postal ballot, publishing details of the resolution in newspapers, and providing exit opportunities to dissenting shareholders. This ensures transparency and protection of investors’ interests.

Documents Required for Change in Object Clause

Certified true copy of the board resolution, certified true copy of the special resolution, notice of the EGM with explanatory statement, altered copy of the Memorandum of Association, minutes of the EGM, and forms MGT-7 and INC-24 (if applicable).

Timeline for the Process

The entire process usually takes 2–4 weeks, depending on the speed of approvals from the Registrar of Companies. However, if Central Government approval is required, it may take longer.

Compliance After Change in Object Clause

Once the object clause is changed, the company must update all statutory documents such as MOA, Articles of Association, and records, intimate banks, creditors, and stakeholders about the change, and update the company’s website, letterheads, and other official communications. This ensures that all parties dealing with the company are aware of its new business scope.

Practical Example

Imagine a private limited company incorporated for the purpose of providing software development services. Over time, the management decides to enter into e-commerce by launching an online platform for retail products. Since e-commerce is not part of the original object clause, the company cannot legally operate this business. To do so, the company must follow the above process, pass a special resolution, file necessary forms with the RoC, and get approval for the new object clause. Only after approval can the company legally conduct e-commerce activities.

Key Points to Remember

The object clause defines the legal boundary of a company’s activities. Any change requires a special resolution and filing with the RoC. Companies with public funds need additional approvals and must provide exit options to shareholders. Updating stakeholders after the change is a compliance necessity.

Conclusion

A Change in Object Clause of Company is not just a procedural requirement; it is a legal necessity to ensure that the business activities remain aligned with the Memorandum of Association. The process may seem lengthy, but it provides clarity, transparency, and legal backing to the company’s operations. For businesses looking to expand or diversify, altering the object clause is often the first step towards new opportunities. With proper planning and compliance, this change can help a company adapt to market needs and achieve long-term growth.

FAQs on Change in Object Clause of Company

1. Can a private limited company change its object clause?

Yes, a private limited company can change its object clause by passing a special resolution in a general meeting and filing the necessary forms with the Registrar of Companies (RoC).

2. What forms are required to be filed for change in object clause?

The company must file Form MGT-7 for the special resolution and, in some cases, Form INC-24 for Central Government approval. The altered MOA must also be submitted.

3. How long does it take to change the object clause?

The process generally takes 2–4 weeks, depending on the timely filing of documents and approvals from the RoC. If Central Government approval is needed, it may take longer.

4. Is shareholder approval mandatory for changing the object clause?

Yes, a special resolution must be passed by at least 75% of shareholders present and voting in the general meeting to change the object clause.

5. What happens after the object clause is changed?

Once approved, the company receives a fresh Certificate of Incorporation from the RoC. The company must then update its statutory records, inform stakeholders, and modify official documents.

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