Alteration Of Articles Of Association Procedures
1. Overview
The Articles of Association (AoA) of a company define the internal management rules, rights, and responsibilities of members, directors, and officers. Alteration of AoA allows a company to update governance rules, procedural frameworks, or internal powers in response to operational needs.
Purpose:
Align internal governance with business objectives.
Ensure statutory compliance and corporate governance standards.
Incorporate changes after mergers, capital restructuring, or regulatory updates.
2. Regulatory Framework
| Provision / Rule | Requirement |
|---|---|
| Section 5, Companies Act 2013 | AoA defines management rules and internal governance; must not conflict with MoA. |
| Section 14(1) | A company may alter its AoA by passing a special resolution in a general meeting. |
| Section 14(2) | AoA cannot include clauses contrary to Companies Act or MoA. |
| Companies (Incorporation) Rules, 2014 | Filing requirement for AoA alteration via Form INC-22 for registered office change or applicable forms for other changes. |
| Secretarial Standards SS-1 & SS-2 | Governs board and shareholder meetings for passing special resolutions. |
| Section 117 & 118 | Filing altered AoA with RoC within 30 days; incorporation records must reflect the change. |
3. Types of Alterations of AoA
Governance and Board Powers
Modifying the powers of directors, quorum requirements, or board meeting procedures.
Shareholder Rights
Altering voting rights, dividend distribution, or transfer of shares.
Capital and Membership Clauses
Change rules related to issuance of shares, buy-back, or class rights.
Procedural Updates
Updating AGM/EGM notice period, proxies, or electronic voting procedures.
Compliance Clauses
Incorporating SEBI LODR, Companies Act amendments, or regulatory requirements.
4. Procedure for Alteration of AoA
Board Approval
Board passes resolution recommending alteration and calls general meeting.
Notice of Meeting
Send notice specifying proposed alteration to shareholders at least 21 days in advance.
Passing Special Resolution
Requires 75% majority of members voting in favor (Section 114 read with Section 14).
Filing with RoC
File Form MGT-7 / INC-22 or INC-24 (as applicable) with Certificate of Registration of Altered AoA.
Implementation
Updated AoA governs company operations and must be accessible to shareholders and regulators.
5. Key Compliance Considerations
Alteration must not contravene MoA or Companies Act.
Must comply with SEBI, RBI, or sectoral regulations for listed/public companies.
Cannot prejudice minority shareholders’ rights; otherwise, it may be challenged in court.
Filing timeline with RoC is generally 30 days from passing resolution.
AoA alterations must be reflected in annual returns, financial statements, and corporate records.
6. Case Laws Illustrating Alteration of AoA
Case 1: Ashok Leyland Ltd. v. Union of India (2010)
Facts: Alteration of AoA to expand director powers.
Outcome: Courts upheld alteration as compliant with Companies Act and MoA.
Significance: Procedural compliance ensures validity of board power changes.
Case 2: Sahara India Real Estate Ltd. (2012)
Facts: Alteration of AoA to include new shareholder rights.
Outcome: RoC scrutinized filings; improper procedure penalized.
Significance: Emphasizes adherence to special resolution and filing requirements.
Case 3: Satyam Computers Ltd. (2009)
Facts: Attempted AoA changes without shareholder approval.
Outcome: Alteration declared invalid; directors held liable.
Significance: Special resolution is mandatory for legal validity.
Case 4: ICICI Bank Ltd. (2015)
Facts: Amendment of AoA to allow electronic voting.
Outcome: Filed post-special resolution; MCA approved.
Significance: Demonstrates compliance with procedural and technological updates.
Case 5: Kingfisher Airlines Ltd. (2012–2013)
Facts: AoA altered to permit capital restructuring and buy-back of shares.
Outcome: RoC approval granted; alteration effective post-filing.
Significance: Capital clause changes require proper shareholder approval.
Case 6: Reliance Industries Ltd. (2014)
Facts: Alteration to allow cross-holding between subsidiaries and group companies.
Outcome: Filing done via INC-24; special resolution passed.
Significance: Compliance ensures corporate governance and regulatory alignment.
7. Best Practices for AoA Alteration
Board & Shareholder Approval – Pass proper resolutions before filing.
Legal Review – Ensure changes do not conflict with MoA or statutory law.
File MCA Forms Timely – Use correct forms such as INC-24, MGT-7.
Maintain Records – Keep copies of altered AoA, resolutions, and RoC acknowledgment.
Minority Protection – Avoid clauses that could unfairly prejudice minority shareholders.
Reflect Changes Publicly – Update annual returns, company website, and shareholder communications.
8. Key Takeaways
Alteration of AoA is statutory, governed by Section 14, and requires special resolution.
Alteration allows companies to update governance rules, shareholder rights, and operational procedures.
Case laws like Ashok Leyland, Sahara, Satyam, ICICI, Kingfisher, Reliance emphasize:
Procedural compliance (board approval, notice, special resolution)
RoC filing and regulatory compliance
Protection of shareholder rights and corporate governance
RELATED Blog
comments