View Full Version : Q. Explain the methods and limits within which a company can alter the object

08-25-2012, 04:37 AM
Q. Explain the methods and limits within which a company can alter the object clause of its memorandum of association. (1998, 2000, 2006/A)
1. Introduction:
Memorandum of association is regarded as an unalterable document of a company. the companies ordinance Sec 21 prohibits any alteration of the conditions in the memorandum of association except as is expressly permitted by the later sections of the ordinance.
2. Alteration of memorandum of association:
Any clause in the memorandum of association may be altered by following the conditions laid down in the ordinance. the procedure for alteration of each clause varies.
3. Procedure to make alteration in memorandum of association:
Alterations in the memorandum of association may be made by.
(i) Passing a special resolution and
(ii) Obtaining where necessary the sanction of commission.
4. Object clause of a memorandum of association:
The statement objects defines the sphere of the company's activities. it determines and restricts the powers of the company. this clause is considered the essence of memorandum of association. any business activity carried out side the territories specified in the object clause is ultra vires and void. object clause is the most important part of the memorandum of association it should be drafted very carefully.
5. Non-existence of main object:
If he main object of the company is gone, the company may be wound up.
6. Alteration of objects:
A company can alter its objects.
(i) Confirmation:
A company can not change its object clause without the confirmation of commission.
7. Limits with in which a company can alter its object clause:
Alteration is made with in the following limits:
(a) To carry on its business more economically or more efficiently. OR
(b)To attain its main purpose by new improved means. OR
(c) To enlarge or change to local areas of its operation. OR
(d) To carry on some other business which may be conveniently combined with its own. OR
(e) To restrict or abandon any of its own objects. OR
(f) To sell its undertaking.
(g) To amalgamate with another company.
8. Procedure for alteration of objects:
I. Notice:
A sufficient notice must be given to all persons whose interests are likely to be affected by the proposed alteration.
II. Hearing of object:
Commission will hear the objections of any of the creditors of the company.
III. Power of commission to dispense with the notice:
Commission is empowered to dispense with the notice on sufficient reasons.
IV. Power of commission when confirming alteration:
The commission may make an order confirming the alteration either wholly or in part, and on such terms and conditions as it thinks fit, and make such order as to costs as it thinks proper.
V. Procedure on confirmation of the alteration:
A certified copy of the order confirming the alteration, together with a printed copy of the memorandum as altered, in the office of registrar.
VI. Time of filing:
Such copy will be filed within ninety days from the date of the order by the company.
VII. Certificate of registration:
Registrar will issue a certificate of registration will be conclusive proof of alteration and validity.
9. Legal effect of not to follow the procedure:
The procedure as laid down in companies ordinance must be complied with, otherwise the alterations in object clause become null and void.
10. Conclusion:
To conclude I can say, that the object clause is the most important part of the memorandum of association. companies ordinance 1948 provides a procedure to alter the objects of the company. the alteration in object clause is made with the confirmation of securities and exchange commission of Pakistan.