Change in Company Object Clause in Surat
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Object Clause of a Company: Definition, Significance, and Procedure of Alteration
What is the object clause of a company?
Every company is established with a specific purpose, referred to as its object clause, which outlines the range and type of its activities. This clause is a vital element of the company’s Memorandum of Association (MOA) and ensures that the company operates within its intended scope.
If a company wants to expand, modify, or change its objectives after incorporation, it must adhere to the procedures set out in the Companies Act. Any modification to the object clause requires updates to the MOA.
What constitutes the definition of an Object Clause?
The object clause enumerates both primary and secondary corporate activities. Typically, instances tend to belong to one of two distinct classifications:
What is CHG-1 Form?
Form CHG-1 is an official application for registering the creation or modification of a charge (excluding debentures). This form is very mandatory when a company secures a loan by pledging its assets.
When can a company change its object clause?
A company could want to change its object clause because of many reasons among
1. The company expands its business operations into more industries.
Also called Nominal or Registered Share Capital.
This is the maximum capital a company can raise, as specified in its Memorandum of Association (MoA).
The company can increase this limit by following legal procedures.
2. Shifting the emphasis from one to multiple industry.
The portion of authorized capital that the company has offered for subscription to investors.
This amount can be equal to or less than the authorized capital but never more.
3. Tracking market trends and opportunities.
The part of issued capital that investors have agreed to purchase.
Not all issued shares may get subscribed, but at least 90% of them should be.
4. Legal or regulatory adjustment.
The portion of subscribed capital that the company has requested payment for from shareholders.
It is equal to or less than the subscribed capital.
5. The charge secures a specific financial amount.
The actual amount paid by shareholders for their subscribed shares.
If any shareholder fails to pay, it becomes a “call in arrears.”
When all dues are cleared, paid-up capital equals subscribed capital.
6. The fundamental elements and stipulations governing the charge
A portion of capital reserved for emergencies (e.g., company liquidation).
It cannot be used for regular business activities.
7. Rate of interest
The actual amount paid by shareholders for their subscribed shares.
If any shareholder fails to pay, it becomes a “call in arrears.”
When all dues are cleared, paid-up capital equals subscribed capital.
8. Detailed specifications of repayment conditions including monthly duration and installment particulars.
A portion of capital reserved for emergencies (e.g., company liquidation).
It cannot be used for regular business activities.
9. The loan facility nature encompasses categories like working capital loans, term loans, and overdraft options.
The actual amount paid by shareholders for their subscribed shares.
If any shareholder fails to pay, it becomes a “call in arrears.”
When all dues are cleared, paid-up capital equals subscribed capital.
10. Date of loan disbursement
A portion of capital reserved for emergencies (e.g., company liquidation).
It cannot be used for regular business activities.
Why is Alteration of the Object Clause Important?
The modification of the object clause stands as a fundamental necessity to guarantee:
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Adherence to statutory mandates.
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Business operations transparency.
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Engagement in legal conflicts concerning unauthorized actions is intentionally circumvented.
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The process of broadening and varying operations unfolds smoothly.
What Happens When You Don't File the Forms on Time?
If you don’t submit the required forms by the deadline, you’ll face penalties:
Late Fee:
You’ll have to pay INR 100 for each day you delay filing.
On the Company:
INR 1,000 per day, subject to a maximum of INR 10 Lakhs.
On Every Officer in Default:
INR 1 Lakh, plus INR 100 per day of delay, subject to a maximum of INR 5 Lakhs.
Steps for Modifying a Company's Object Clause
The process to alter a company’s object clause requires adherence to several procedural steps including:
1. Holding a Board Meeting
The Board of Directors must convene a meeting to: (1) Execute a formal agreement to sanction the suggested modification of the object clause. (2) Empower a director to execute every necessary filing and formality. (3) Select the specific date along with time and location for an Extraordinary General Meeting (EOGM) to secure shareholders' approval.
2. Executing the Extraordinary General Meeting (EOGM)
To obtain shareholder consent for the alteration during the EOGM a special resolution needs to be passed.
3. Registrar of Companies (ROC) receives Form MGT-14 when it is filed by entities.
Upon passing the special resolution, the company must file Form MGT-14 with the ROC within a 30-day period. This document serves as the official resolution notification and must be submitted together with all required paperwork.
4. The generation of an entirely new incorporation certificate.
The ROC examines the application and upon finding all elements satisfactory proceeds to issue a revised Certificate of Incorporation which includes the modified object clause.
Timely filing of DPT-3 ensures compliance, prevents legal risks, and maintains your company’s credibility with financial institutions and stakeholders.
Government Fees for Filing CHG-1
The government fee for CHG-1 filing depends on the company’s authorized share capital. The fee structure is outlined under the Companies (Registration of Offices and Fees) Rules, 2014.
For the latest fee details, visit the Ministry of Corporate Affairs (MCA) website: http://MCA.GOV.IN