1967 (4) TMI 75 - HC - Companies Law

Memorandum of association Special resolution and confirmation by CLB required for alteration of

Summary

Issues:
Confirmation of alteration of the memorandum of association regarding substantial changes in the main clauses of the company and diversification of activities.

Analysis:
The petitioner sought confirmation of the alteration of the memorandum of association approved by the company in a meeting. The Registrar of Companies reported substantial changes in the main clauses of the company, indicating diversification of activities unrelated to the original objects. The Registrar highlighted specific objects in the memorandum that altered the company's phase and substratum significantly. The original intent of the company was the manufacture, purchase, and sale of metals and hardware materials. However, due to industrial advancements, the company proposed importing raw materials, manufacturing machinery, dealing in electric motors, and engaging in various businesses like air-conditioning and automobile sectors.

The court considered whether the proposed alterations were consistent with the company's primary business and shareholders' interests. It was noted that if changes aimed to enhance efficiency without oppressing shareholders or affecting their rights, such alterations should be sanctioned. The court emphasized that the interest of shareholders was crucial in amending a company's objects. In this case, the addition of new objects like manufacturing machinery was deemed non-prejudicial to the company's main business operations. The company's financial position, with assets exceeding liabilities, indicated no adverse impact on creditors by expanding activities with shareholder consent.

Referring to a previous case, the court highlighted that proposed businesses should be advantageous and combinable with the company's existing operations under current circumstances. Following this analysis, the court found the application maintainable and granted the prayer for confirmation of the alteration of the memorandum of association. The petitioner was instructed to produce a certified copy of the order before the Registrar within three months.

In conclusion, the court approved the alteration of the memorandum of association, considering the compatibility of the proposed businesses with the company's operations and the absence of prejudice to shareholders or creditors. The decision focused on balancing the company's evolution with shareholder interests and ensuring the amendments were beneficial and in line with the company's objectives.