Alteration of Articles of Association companies
Alteration in the articles means adding a fresh rule or substitute or cancellation of a existing rule. According to Section 31(1) of the Indian Companies Act, company can alter its Articles at any time by a special resolution. Any such rule, which prohibits alteration in the articles, shall be illegal. Due to alteration in the Articles of the company, sometimes such stage takes place when the company’s contract with outsider terminates.
Restrictions and limitations relating to alteration of the Articles-There are the following restrictions regarding alteration in the Articles of the company under the Indian Companies Act-
(A) Statutory restrictions- (1) Acceptance must be obtained through a spedal proposal for alteration in the Article.
2. lated on account of alteration in the Article and the company must have not made any such attempt by the company which is restricted or prohibited by the Companies Act.
(3) Alteration regarding Articles must not be beyond the ruling of memorandum or it is irrelevant then it shall be presented beyond the jurisdiction of the company and shall be null and void.
(4) Alteration in the Articles must be bonafide and there must be no any such object therein by which the share- holders may get undue advantage or without their opinion they are being compelled for purchasing more shares or their liability is being increased.
(5) If some rulings of the Articles are there, cannot be altered without permission of the Central Government, for example, to increase the number of directors according to Section 259, to appoint or re-appoint a managing director according to Section 268 etc.
(6) If an order is given by the court for some alterations in the Articles of the company under Sections 397 and 398 of the Companies Act on account of injustice and mismanagement then in that case company cannot make anybsuch alteration which may be irrelevant to the said order of the court. It shall have to obtain permission of court or company law board.
(B) Judicial restrictions – (1) Alteration in the Article much not be such by which the minority members are being exploited by the majority members or doubling dealings are there with them.
(2) Alteration must not be as such so that the company may get right of refuting the indenture.
(3) Alteration of the Articles must be just and equitable
(4) Alteration must not be mandatory of illegal business
(C) Other restrictions – (1) A printed or typed copy of the alteration must be forwarded to the Registrar within 15 day from the date of approval of the special resolution for alteration of Article.
(2) According to Section 39 on request of the members, the copy of amended Article must be forwarded within seven days from the date of request, otherwise, the company and each guilty officer of the company can be penalised with an amount upto Rs. 50/- for each guilt.
(3) According to Section 40, after alteration each copy to be issued must be according to the alteration.