Category: Company Law

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Procedure for altering Articles of Association :  Legal provisions, Procedure, Draft resolution

Posted on by Business So Simple in Company Law, Miscellaneous

What is Articles of Association?

As per Section 2(5) of the Companies Act, 2013 “articles” means the articles of association of a company as originally framed or as altered from time to time or applied in pursuance of any previous company law or of this Act;

By-laws or rules and regulations which govern the management of its internal affairs and the conduct of its business.

Company can alter its AOA by way of addition, deletion, modification, substitution, or combination of them.

They are framed with the object of carrying out the aims and objects as set out in the Memorandum of Association.

Legal provisions:

Section 14 of the Companies Act, 2013  

14. Alteration of Articles  

(1) Subject to the provisions of this Act and the conditions contained in its memorandum, if any, a company may, by a special resolution, alter its articles including alterations having the effect of conversion of– (a) a private company into a public company; or (b) a public company into a private company:  

Provided that where a company being a private company alters its articles in such a manner that they no longer include the restrictions and limitations which are required to be included in the articles of a private company under this Act, the company shall, as from the date of such alteration, cease to be a private company:  

[Provided further that any alteration having the effect of conversion of a public company into a private company shall not be valid unless it is approved by an order of the Central Government on an application made in such form and manner as may be prescribed: Provided also that any application pending before the Tribunal, as on the date of commencement of the Companies (Amendment) Ordinance, [2019], shall be disposed of by the Tribunal in accordance with the provisions applicable to it before such commencement.]]] *

(2) Every alteration of the articles under this section and a copy of the order of the [Central Government]] Tribunal approving the alteration as per sub-section (1) shall be filed with the Registrar (INC -27), together with a printed copy of the altered articles, within a period of fifteen days in such manner as may be prescribed, who shall register the same. (3) Any alteration of the articles registered under sub-section (2) shall, subject to the provisions of this Act, be valid as if it were originally in the articles.  

Procedure :

  1.  Notice of Board Meeting :

Issue notice in writing to every director

The notice must be a seven day notice.

The notice must contain time, date and venue for the meeting and detailed agenda of the business, Notes to agenda & draft resolution.

(As per section 173 and SS-1)

2. Hold Board Meeting

  • Consider and decide which of the articles are to be altered and pass a formal resolution in this respect (Refer Draft resolution).

  • Approve notice, agenda and explanatory statement to be annexed to the notice of the general meeting as per 102 of the Act (Refer Draft resolution & Explanatory statement).
    • Authorize the Company Secretary or any other competent officer of the company to issue notice of the general meeting as approved by the Board.
  • 3. Notice of General Meeting:

Issue notice of the general meeting to all the members of the company, its directors and the auditors (Section 101).

.4. Hold the general meeting

Check the Quorum;

Check whether auditor is present, if not. Then Leave of absence is Granted or Not. (Section- 146) and

Pass the proposed special resolution.[Section-114(2)],

Approval of Alteration in AOA.

5. File with the ROC, Form MGT – 14 within 30 days

File with the ROC, Form MGT – 14 along with a certified copy of the special resolution and the explanatory statement annexed to the notice of the general meeting at which the resolution was passed and a copy of the Articles of Association, within 30 days of the passing of the resolution along with the prescribed filing fee.

6. File with the ROC, Form INC-27 within 15 days

Every alteration of the articles under this section and a copy of the order of the [Central Government]] Tribunal approving the alteration as per sub-section (1) shall be filed with the Registrar (INC -27), together with a printed copy of the altered articles, within a period of fifteen days in such manner as may be prescribed, who shall register the same.

7. Make necessary changes in all the copies of the articles of association of the company lying in the office of the company.

For Listed Company:

  1. Send copies of the notice to each stock exchange where the securities of the company are listed within 24 hour of the occurrence of event [Refer Regulation 30(6) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015]. A general notice of the general meeting may also be published in newspapers.
  2. Intimate stock exchange about alterations in memorandum and articles of the company within 24 hours of the occurrence of event. [Refer Regulation 30(6) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015]
  3. Send to each stock exchanges, a copy of the proceedings of the general meeting in case of a listed company within 24 hour of the occurrence of event [Refer Regulation 30(6) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015].

Draft Agenda, proposal, resolution of Board Meeting, Minutes – Gist of Discussion

Agenda Title: To amend Articles of Association of the Company

Proposal

An amendment to the AOA of the Company is required in view of __________. A detailed proposal is placed before the Board for the same.

The Board members may discuss and approve the following resolution.

Proposed Resolution

“Resolved that subject to the provisions of Section 14 and other applicable provisions, if any, of the Companies Act, 2013 and subject to the approval of the members at the General Meeting, the Articles of Association of the Company be and hereby amended by inclusion of the following clause at__________________.

Resolved further that an Extraordinary General Meeting of the members of the Company be called and held at _______ on _________ day of_________at ___________ as per the draft notice and explanatory statement placed before the meeting duly initiated by the Chairperson for the purpose of identification.

Resolved further that the draft notice of Extraordinary General Meeting be and is hereby approved and the Company Secretary and the Directors be and are hereby authorized severally to issue the said notice to the members and others who are entitled for the same, and take all necessary action in this regard.

Resolved further that Directors and the Company Secretary of the Company be and are hereby authorized severally to file necessary e-forms with the Registrar of Companies, __________, in applicable e-Forms and to do all such acts, deeds and things as may be necessary to give effect to the above resolution.”

Minutes – Gist of Discussion

The Board discussed the proposal to amend the Articles of Association of the Company in view of ____________, a copy of which was tabled at the meeting for approval. The following resolution was approved.

Draft Agenda, Explanatory Statement, proposal, resolution of General Meeting,  Minutes – Gist of Discussion

Agenda Title: Amendment to Articles of Association

Proposed Resolution

To consider and, if thought fit, to pass with or without modification(s), the following resolution as a Special Resolution:

“Resolved that pursuant to Section 14 of the Companies Act, 2013, the Articles of Association of the Company be and is hereby altered as below:________________.

Resolved further that the Board of Directors and Company Secretary be and are hereby severally authorised to sign all such forms and returns and other documents and to do all such acts, deeds and things as may be necessary to give effect to the aforesaid resolution.”

Minutes – Gist of Discussion

Proposed by _________________, seconded by ___________ Resolution passed unanimously/ by majority / rejected.

Explanatory Statement

The Board of Directors of the Company at its meeting held on DD/MM/YYYY_ recommended that the existing Article of Association be altered with the text as set out in the resolution. Consent of the Members by way of Special Resolution is required for such alteration of Articles of Association in terms of the provisions of Section 14 of the Act.

None of the Directors and Key Managerial Personnel of the Company, or their relatives, is interested in this Special Resolution.

The Board recommends this Special Resolution for your approval.

Ministry of Corporate Affairs is launching Second set of Company Forms covering 56 forms in two different lots on MCA21 V3 portal

Posted on by Business So Simple in Company Law

In our continuous endeavour to serve you better, the Ministry of Corporate Affairs is launching Second set of Company Forms covering 56 forms in two different lots on MCA21 V3 portal.

10 out of 56 forms will be launched on 09th January 2023 at 12:00 AM and the remaining 46 forms on 23rd January 2023.

Following forms will be rolled-out on 09th January 2023:

SPICe+ PART A, SPICe+ PART B, RUN, AGILE PRO-S, INC-33, INC-34, INC-13, INC-31, INC-9 and URC-1.

46 forms which will be rolled-out on 23rd January 2023 ( List given).

To facilitate implementation of these forms in V3 MCA21 portal, stakeholders are advised to note the following points:

(1) Company e-Filings on V2 portal will be disabled from 07th January 2023 12:00 AM to 08th January 2023 11:59 pm for 10 forms which are planned for roll-out on 09th January 2023.

(2) Company e-Filings on V2 portal will be disabled from 07th January 2023 12:00 AM to 22nd January 2023 11:59 pm for 46 forms which are planned for roll-out on 23rd January 2023.

(3) All stakeholders are advised to ensure that there are no SRNs in pending payment and Resubmission status.

(4) Offline payments for the above 56 forms in V2 using Pay later option would be stopped from 28th December 2022 12:00 AM. You are requested to make payments for these forms in V2 through online mode (Credit/Debit Card and Net Banking).

(5) In view of the upcoming launch of 56 Company forms, V3 portal will not be available from 07th January 2023 12:00 AM to 08th Jan 2023 11:59 pm due to 10 company forms roll-out and from 21st January 2023 to 22nd January 2023 for 46 company forms roll-out.

(6) V2 Portal for company filing will remain available for all the forms excluding above mentioned 56 forms.

Stakeholders may plan accordingly.

What is private Limited Company?

Posted on by Business So Simple in Company Law

“Private Company” means a company having a minimum paid-up share capital as may be prescribed, and which by its articles:–

(i) restricts the right to transfer its shares;

(ii) except in case of One Person Company, limits the number of its members to two hundred:

Provided that where two or more persons hold one or more shares in a company jointly, they shall, for the purposes of this clause, be treated as a single member:

Provided further that –

(a) persons who are in the employment of the company; and

(b) persons who, having been formerly in the employment of the company, were members of the company while in that employment and have continued to be members after the employment ceased, shall not be included in the number of members; and

(iii) prohibits any invitation to the public to subscribe for any securities of the company.

(Section 2(68) of the Companies Act, 2013)

Points to be noted

  • Definition of private limited company specifies the restrictions, limitations and prohibitions must be expressly provided in the articles of association of a private limited company.
  • Only the number of members that is limited to two hundred. A private company may issue debentures to any number of persons, the only condition being that an invitation to the public to subscribe for debentures is prohibited.
  • if a private company alters its articles in such a manner that they no longer include the restrictions and limitations which are required to be included in the articles of a private company under this Act, such company shall, as from the date of such alteration, cease to be a private company.( Section 14 (1) of the CA 2013)
  • The words ‘Private Limited’ must be added at the end of its name by a private limited company.
  • A private company may be formed for any lawful purpose by two or more persons, by subscribing their names to a memorandum and complying with the requirements of this Act in respect of registration. (Section 3(1), of CA 2013)
  • A private company shall have a minimum number of two directors. (Section 149(1) of the CA 2013 ) . The only two members may also be the two directors of the private company.

AUDIT QUALITY INSPECTION GUIDELINES (Press release 11 Nov 2022)

Posted on by Business So Simple in Audit, Company Law

Audit quality inspections will provide an opportunity for feedback and course correction to the audit firms and at the same time foster a greater mutual understanding of the policies and procedures that underlie audit quality management. The inspections are intended to bring about systemic improvements in overall financial reporting framework in the country. Refer guidelines

IBBI amends Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 and Insolvency and Bankruptcy Board of India (Voluntary Liquidation Process) Regulations, 2017 (MCA Press Release 20 Sept 2022)

Posted on by Business So Simple in Company Law, IBBI

The Insolvency and Bankruptcy Board of India notified the Insolvency and Bankruptcy Board of India (Liquidation Process) (Second Amendment) Regulations, 2022 (‘Amendment Liquidation Regulations’) and Insolvency and Bankruptcy Board of India (Voluntary Liquidation Process) (Second Amendment) Regulations, 2022 (‘Amendment Voluntary Liquidation Regulations’) on 16th September, 2022.

To enable better participation of stakeholders and streamline the liquidation process to reduce delays and realise better value, the amendment in Liquidation Regulations make the following major modifications:

  • The Committee of Creditors (CoC) constituted during Corporate Insolvency Resolution Process (CIRP) shall function as Stakeholders Consultation Committee (SCC) in the first 60 days. After adjudication of claims and within 60 days of initiation of process, the SCC shall be reconstituted based upon admitted claims.
  • The liquidator has been mandated to conduct the meetings of SCC in a structured and time bound manner with better participation of stakeholders.
  • The scope of mandatory consultation by liquidator, with SCC has been enlarged. Now, SCC may even propose replacement of liquidator to the Adjudicating Authority (AA) and fix the fees of liquidator, if the CoC did not fix the same during CIRP.
  • If any claim is not filed during liquidation process, then the amount of claim collated during CIRP shall be verified by the liquidator.
  • Wherever the CoC decides that the process of compromise or arrangement may be explored during liquidation process, the liquidator shall file application only in such cases before Adjudicating Authority for considering the proposal of compromise or arrangement, if any, within thirty days of the order of liquidation.
  • Specific event-based timelines have been stipulated for auction process.
  • Before filing of an application for dissolution or closure of the process, SCC shall advice the liquidator, the manner in which proceedings in respect of avoidance transactions or fraudulent or wrongful trading, shall be pursued after closure of liquidation proceedings.

The Amendment Liquidation Regulations and Amendment Voluntary Liquidation Regulations further lay down the manner and period of retention of records relating to liquidation and voluntary liquidation of a corporate debtor or corporate person, respectively.

The Amendment Liquidation Regulations and Amendment Voluntary Liquidation Regulations are effective from 16th September, 2022. These are available at http://www.mca.gov.in and www.ibbi.gov.in.

Update on MCA21 Version -3 (Press release 24 Aug 2022)

Posted on by Business So Simple in Company Law


MCA21 version-3.0 is a technology-driven forward-looking project, envisioned to strengthen enforcement, promote Ease of Doing Business and enhance user experience. MCA21 version-3.0 rollout has been planned in phases to ensure minimum disruption in regulatory filings.

09 company forms (CHG-1, CHG-4, CHG-6, CHG-8, CHG-9, DIR-3 KYC, DIR-3 KYC WEB, DPT-3 and DPT-4) are scheduled to go-live on 01.09.2022 (00:00 hrs). Remaining company forms and other modules like e-Adjudication, Compliance Management System are scheduled to be fully deployed within this Calendar Year.

In view of the upcoming launch of 09 Company forms in version-3, LLP filings on MCA21 V-3 portal will not be available from 27th Aug (00:00AM) to 28th Aug (23:59hrs). However, MCA21 V-2 Portal for company filings will remain available.

Frequently asked questions (FAQs) and demo for these 09 forms are available on the website of MCA (www.mca.gov.in). Several webinars have been conducted to sensitise all stakeholders in association with Institute of Chartered Accountants of India (ICAI) and Institute of Company Secretaries of India (ICSI).

Phase-1 of rollout was completed on 24th May 2021 with launch of e.Book, e. Consultation Modules and a revamped website.

As part of Phase-2, LLP Module for supporting all LLP filings was launched on 08th March 2022.

*MCA 21 Version 3 (MCA Press Release dated 24th Aug 2022)*

https://youtu.be/eAnbFSEN2AY

4,32,796 companies struck off down during last five years (MCA Press Release 08 Aug 2022)

Posted on by Business So Simple in Company Law, ROC, RD, MCA, NCLT

Section 248 of the Companies Act, 2013 (the Act) provides for removal of name of company from the Register of companies, if it is not carrying on any business or operation for a period of 2 immediately preceding financial years and has not made any application within the said period for obtaining the status of a Dormant Company under section 455 of the Act. This was stated by the Union Minister of State for Corporate Affairs Shri Rao Inderjit Singh in a written reply to a question in Lok Sabha today.

The removal of the name of the company from the Register of Companies is a continuous process and a total of 4,32,796 companies have been struck off during last five years and its year wise details are as under:

The Minister stated that there is no rule making power provided under section 59 ‘Voluntary liquidation for corporate persons’ in the Insolvency and Bankruptcy Code, 2016. A dormant company is covered under the provisions of section 455 of the Act, the Minister stated.

The number of Companies having dormant status as per such provisions, during the last five years are as under:

As per information provided by the Department for Promotion of Industry and Internal Trade, no such measure has been taken to address industrial sickness.

IBBI disposes off 6,172 complaints and grievances out of 6,231 against service providers under IBC (MCA Press Release 08 Aug 2022)

Posted on by Business So Simple in Company Law, IBBI, ROC, RD, MCA, NCLT

The Insolvency and Bankruptcy Board of India (Grievance and Complaint Handling Procedure) Regulations, 2017 enable stakeholders to file a grievance or a complaint against service providers under the IBC. This was stated by the Union Minister of State for Corporate Affairs Shri Rao Inderjit Singh in a written reply to a question in Lok Sabha today.

Besides this, the Minister stated, Insolvency and Bankruptcy Board of India (IBBI, the Regulator) also receives complaints and grievances from Centralized Public Grievance Redress and Monitoring System (CPGRAM), Prime Minister’s Office, MCA and other authorities. Till 31st July, 2022, the IBBI had received 6,231 such complaints and grievances, of which 6,172 have been disposed after examination.

The Minister said that the Ministry of Corporate Affairs does not have any role in corporate insolvency resolution process (CIRP) of a corporate debtor (CD) under the provisions of the Insolvency and Bankruptcy Code, 2016 (the Code). CD undergoing CIRP is resolved through a resolution plan formulated by resolution applicants based on market driven process.

The Minister further stated that the Committee of Creditors (CoC) within its commercial wisdom assesses the feasibility and viability of the resolution plan submitted by the proposed resolution applicant which is then approved by the Adjudicating Authority (AA). Further, the realisation by creditors through CIRP under the Code is dependent on quality assets at the time of its resolution, the Minister stated.

Giving more details, the Minister stated that no such investigation has been initiated as section 29A of the Code enlists certain categories of undesirable persons which include related parties ineligible to submit a resolution plan during the CIRP. Regulation 36A(8) of IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 imposes a duty on Resolution Professional (RP) to conduct due diligence to satisfy themselves that the prospective resolution applicant is not ineligible under section 29A of the Code. The resolution plan approved by the CoC, within its commercial wisdom is then approved by AA under section 31 of the Code thereby ensuring that any undesirable persons under section 29A are unable to take over the CD. Likewise, during liquidation proceedings of CD, the proviso to Section 35(1)(f) bars a liquidator from selling immovable and movable property to any person who is ineligible to be a resolution applicant.

Further, the Minister stated that as per information available, Directorate of Enforcement has received one complaint against an RP of one CIRP in which appropriate action under applicable law has been taken. Further, CBI has received one complaint regarding abuse of process in one CIRP matter which was forwarded to the Regulator and on examination, the Regulator has not found any actionable material.

1,67,080 companies registered in FY 2021-22 as compared to 1,55,377 in FY 2020-21 II 43,050 LLPs registered during FY 2020-21 as compared to 42,187 in the previous year (Press release 01 Aug 2022)

Posted on by Business So Simple in Company Law

Limited Liability Partnership (LLP) and Companies are incorporated under the Ministry of Corporate Affairs as per the provisions of LLP Act, 2008 and Companies Act, 2013. This was stated by Union Minister of State for Corporate Affairs Shri Rao Inderjit Singh in a written reply to a question in Lok Sabha today.

Giving more details, the Minister stated that during FY 2021-22, 1,67,080 companies were registered as compared to 1,55,377 in the previous year. Further, during FY 2020-21, 43,050 LLPs were registered as compared to 42,187 in previous year.

On National Financial Reporting Authority (NFRA), the Minister stated that the Company Law Committee constituted by the Ministry of Corporate Affairs in its report of March, 2022 (Chapter 1 Para 11) has inter-alia, recommended that NFRA be empowered to take appropriate action against other contraventions under NFRA Rules, 2018, in addition to its existing powers to take action against ‘professional or other misconduct’. The report is available on the website of Ministry of Corporate Affairs (www.mca.gov.in), the Minister stated.

MCA is launching first set of Company Forms on MCA21 V3 portal effective from 31st Aug 2022

Posted on by Business So Simple in Company Law

MCA is launching first set of Company Forms on MCA21 V3 portal effective from 31st Aug 2022.

Following forms will be rolled-out in this phase: DIR3-KYC Web, DIR3-KYC Eform, DPT-3, DPT-4, CHG-1, CHG-4, CHG-6, CHG-8 & CHG-9. To facilitate implementation of these forms in V3 MCA21 portal, stakeholders are advised to note the following points:

(1).Company e-Filings on V2 portal will be disabled from 15th Aug 2022 12:00 AM for the above 9 forms. All stakeholders are advised to ensure that there are no SRNs in pending payment and Resubmission status.

(2).Offline payments for the above 9 forms in V2 using Pay later option would be stopped from 07th Aug 2022 12:00 AM. You are requested to make payments for these forms in V2 through online mode (Credit/Debit Card and Net Banking)