How to Alter the Memorandum of Association of a Corporation

A Step-By-Step Guide to Altering the Memorandum of Association of A Corporation: Compliance, Examples, and Process

The legal procedure for Amending the Memorandum of Association:

Introduction

A corporation is a legal entity that is separate and distinct from its shareholders. One of the key documents that establish a corporation is the memorandum of association (MOA). The MOA sets out the fundamental purpose and scope of the corporation and outlines the rights and duties of its shareholders. From time to time, a corporation may need to alter its MOA to reflect changes in its business or to comply with legal requirements. This article will provide a comprehensive guide to the alteration of the memorandum of association of a corporation, including details on the process, examples, and step-by-step instructions.

What is a Memorandum of Association?

The memorandum of association is a document that sets out the fundamental purpose and scope of a corporation. It outlines the rights and duties of the shareholders and establishes the corporation as a separate legal entity. The MOA typically includes information such as the name of the corporation, the address of its registered office, the types of business the corporation is authorized to carry on, and the number of shares that the corporation is authorized to issue.

Common Reasons for Alteration of Memorandum of Association

There are several reasons why a corporation may need to alter its memorandum of association. These include:

Changes in the business:

As a corporation's business evolves, the MOA may need to be altered to reflect the changes. For example, if a corporation that originally focused on manufacturing products decides to expand into the service sector, the MOA would need to be amended to reflect this change.

Compliance with legal requirements:

A corporation may need to alter its MOA to comply with changes in laws and regulations. For example, if a new law requires a corporation to have a minimum number of directors, the MOA would need to be amended to reflect this requirement.

Mergers and acquisitions:

In the event of a merger or acquisition, the MOA of the acquiring corporation may need to be altered to reflect the new business.

Capital raising:

If a corporation wants to raise capital by issuing new shares, the MOA would need to be amended to increase the number of shares authorized to be issued.

Steps Involved in Alteration of Memorandum of Association:

The process of altering a memorandum of association can vary depending on the jurisdiction in which the corporation is incorporated. However, there are several steps that are typically involved in the process, including:

Obtain board of directors' approval:

The first step in altering an MOA is to obtain the approval of the board of directors. The board will review the proposed changes and determine whether they are in the best interests of the corporation.

Hold a shareholders' meeting:

The next step is to hold a meeting of the shareholders to vote on the proposed changes. The meeting must be called and conducted in accordance with the corporation's bylaws.

Obtain regulatory approval:

In some jurisdictions, the proposed changes to the MOA must be approved by the relevant regulatory authorities. This may include filing the proposed changes with the relevant government body and obtaining their approval.

File the amended MOA:

Once the proposed changes have been approved by the board of directors, shareholders, and any necessary regulatory authorities, the amended MOA must be filed with the relevant government body.

Alteration of Memorandum of Association of a corporation in Pakistan:

The process of altering the memorandum of association of a corporation in Pakistan is governed by the Companies Ordinance, 1984. Here are the steps involved in the process:

Obtain board of directors' approval:

The first step in altering a MOA is to obtain the approval of the board of directors. The board will review the proposed changes and determine whether they are in the best interests of the corporation.

Hold a shareholders' meeting:

The next step is to hold a meeting of the shareholders to vote on the proposed changes. The meeting must be called and conducted in accordance with the corporation's bylaws. At least 21 days' notice should be given to the shareholders before the meeting.

Obtain regulatory approval:

The proposed changes to the MOA must be approved by the Securities and Exchange Commission of Pakistan (SECP). This may include filing the proposed changes with the SECP and obtaining their approval.

File the amended MOA:

Once the proposed changes have been approved by the board of directors, shareholders, and the SECP, the amended MOA must be filed with the SECP.

Publication in the official gazette:

The changes made to the Memorandum of Association should be published in the official gazette.

File the notice of alteration with the Registrar of Companies:

The company must file the notice of alteration with the Registrar of Companies within 30 days of the alteration.

It is important to note that the Companies Ordinance, 1984, also stipulates that certain changes in the memorandum of association, such as changes in the main objects of the company or alteration in share capital, require special resolution passed by the shareholders.

In short, the following steps will be required:

What to Consider When Altering a Memorandum of Association

According to Section 20, a company cannot alter the condition contained in its memorandum except in the cases and in the mode and to the extent for which express provision is made by law. A company subject to the provision of the Ordinance, may by Special resolution, alter the conditions contained in its memorandum so as to: 

a. Change the place of this registered office from one province to another or from one city or town in a province to another, or from a part of Pakistan not forming part of a province to a province or vice versa, or

b. With respect to the objects of the company, Section 21. The company is empowered to change any of the clauses contained in its memorandum,

Provided the legal formalities are fulfilled, namely:

Any clause in the memorandum can be changed by the following procedure: 

(1) Change of Name Clause:

A company can change its name by the following procedure:  

(2) Change of Registered Office Clause:

A company can shift its registered office from one place to another place within the same city, town, or village or from one province to another province. 

(a) From place to place:

A company can change the place of its registered office from one place to another place within the same province or from Islamabad Capital Territory to the Province of Punjab or from Punjab to Islamabad Capital Territory by fulfilling the following formalities:  

(b) From province to province:

A company can shift the place of its registered office, from one province to another or from a part of Pakistan not forming a part of a Province to a Province by fulfilling the following formalities: 

(3) Change of Objects Clause:

A company can change its objects clause for the following purposes:

The company is required to follow the following procedure to change its objects:

(4) Change of Liability Clause: 

No change can be made in this clause so as to make the liability of members unlimited. Section 34 provides that the liability of the members cannot be increased without their consent. It lays down that a member cannot, by altering the memorandum or articles, be made responsible to take more shares unless he agrees to do so in writing.

(5) Change of Capital Clause: 

A limited company can alter the capital clause by the following procedure: 

a. Alternation of capital:

A limited company can alter the capital clause in any of the following ways: 

The procedure for the alteration of capital is as under:

b. Reduction of capital:

A company limited by shares may reduce its share capital in any of the following ways:  

• i. By extinguishing or reducing the liability of members for uncalled capital. 
• ii. By paying off any paid-up capital which is in excess of the needs of the company. 

The procedure for reducing is as under:

6. Change of subscription clause: 

The subscription clause cannot be changed at all. This clause contains the names of the persons who sign the memorandum at the time of incorporation of the company. But later on, the death of the subscriber leaves no effect on the life of the company because it attains a separate entity after registration. As a result, the change has no effect on the subscription clause.

Examples of Alteration of Memorandum of Association

Here are a few examples of scenarios where a corporation may need to alter its memorandum of association:

Change of company name: A corporation may need to change its name if it has been acquired by another company, or if the company wants to rebrand itself to better reflect its products or services. In this case, the company would need to alter its memorandum of association to reflect the new name.

Increase in share capital: A corporation may need to increase its share capital if it wants to raise more capital for expansion or other business purposes. In this case, the company would need to alter its memorandum of association to reflect the increased share capital.

Change of registered office: If a corporation needs to move its registered office to a different location, it would need to alter its memorandum of association to reflect the new address.

Addition of new objects: A corporation may need to add new objects to its memorandum of association if it wants to expand its business activities. For example, a company that primarily sells clothing may want to add a new object of manufacturing clothing in its memorandum of association.

Alteration in the share capital clause: A company may want to alter the share capital clause of its memorandum of association in order to issue different types of shares such as preference shares or redeemable shares.

Change in the number of directors: A corporation may need to alter its memorandum of association if the number of directors on its board needs to be increased or decreased.

Change in authorized share capital: A corporation may need to alter its memorandum of association if it wants to increase or decrease the authorized share capital.

Conclusion

In conclusion, the alteration of the memorandum of association (MOA) of a corporation is a process that requires the approval of the board of directors, shareholders, and regulatory authorities. The Companies Ordinance, 1984, of Pakistan governs the process and stipulates certain changes that require special resolution passed by the shareholders. The process includes steps such as obtaining the board of directors' approval, holding a shareholders' meeting, obtaining regulatory approval, filing the amended MOA, publication in the official gazette, and filing the notice of alteration with the Registrar of Companies. Examples of scenarios where a corporation may need to alter its MOA include a change of company name, increase in share capital, change of registered office, the addition of new objects, alteration in the share capital clause, change in the number of directors, and change in authorized share capital.

Important Questions: