Companies Act 2013 Section 21
Companies Act 2013 Section 21 governs the alteration of a company's memorandum of association.
Companies Act 2013 Section 21 deals with the alteration of a company's memorandum of association (MOA). The MOA is a fundamental document defining the company's scope and objectives. This section allows companies to modify their MOA to adapt to changing business needs or legal requirements.
Understanding Section 21 is crucial for directors, shareholders, and professionals to ensure lawful amendments, maintain corporate governance, and comply with regulatory standards. Proper adherence prevents disputes and legal challenges related to company objectives and powers.
Companies Act Section 21 – Exact Provision
This provision empowers companies to change their MOA through a special resolution passed by the shareholders. The alteration must comply with the procedures and restrictions set out in the Companies Act and related rules.
Requires a special resolution by shareholders.
Alteration must align with Act and rules.
Applies to all types of companies.
Ensures changes are legally valid and registered.
Explanation of Companies Act Section 21
Section 21 authorizes companies to alter their MOA by following a formal process. It applies to the company and its shareholders primarily.
States that alteration is by special resolution.
Applies to all companies registered under the Act.
Mandates filing of altered MOA with the Registrar of Companies.
Triggers when company needs to change objectives, name, or capital clauses.
Permits addition, deletion, or modification of MOA clauses.
Prohibits alterations inconsistent with law or public policy.
Purpose and Rationale of Companies Act Section 21
This section strengthens corporate flexibility while maintaining legal safeguards. It balances company autonomy with shareholder rights and regulatory oversight.
Allows companies to adapt to business changes.
Protects shareholders by requiring special resolution.
Ensures transparency through mandatory filings.
Prevents arbitrary or unlawful changes to MOA.
When Companies Act Section 21 Applies
Section 21 applies whenever a company intends to modify its MOA. This can occur at various stages of corporate life.
Applicable to all companies irrespective of size.
Must comply before effecting changes legally.
Triggered by business expansion, diversification, or restructuring.
Exemptions are rare and subject to law.
Legal Effect of Companies Act Section 21
Section 21 creates a mandatory duty to obtain shareholder approval via special resolution before altering the MOA. It restricts unauthorized changes and requires filing with the Registrar of Companies. Non-compliance can invalidate alterations and attract penalties. The section interacts with MCA rules on filing and approval.
Creates duty for special resolution approval.
Requires filing altered MOA with ROC.
Non-compliance may lead to invalidation and penalties.
Nature of Compliance or Obligation under Companies Act Section 21
Compliance is mandatory and conditional upon the company’s decision to alter its MOA. It is a one-time obligation per alteration but may recur if multiple changes are needed. Directors must ensure proper procedure and filing. It impacts internal governance by involving shareholders directly.
Mandatory compliance when altering MOA.
One-time obligation per alteration.
Directors responsible for initiating process.
Shareholder approval essential.
Stage of Corporate Action Where Section Applies
Section 21 applies primarily at the stage of decision-making and formal approval of MOA changes. It also affects filing and ongoing compliance.
Board proposes alteration.
Shareholders approve by special resolution.
Filing with ROC after approval.
Ongoing compliance through updated MOA records.
Penalties and Consequences under Companies Act Section 21
Failure to comply with Section 21 can result in monetary penalties on the company and officers responsible. Alterations made without following procedure may be declared void. Persistent non-compliance can lead to further legal action and disqualification of directors.
Monetary fines on company and officers.
Invalidation of unauthorized alterations.
Possible director disqualification.
Example of Companies Act Section 21 in Practical Use
Company X wants to expand its business scope by adding new objectives in its MOA. The board calls a general meeting where shareholders pass a special resolution approving the alteration. Company X files the altered MOA with the Registrar of Companies, ensuring legal compliance and enabling the new business activities.
Shows importance of shareholder approval.
Demonstrates legal filing requirement.
Historical Background of Companies Act Section 21
Under the Companies Act, 1956, similar provisions existed but were less streamlined. Section 21 was introduced in the 2013 Act to clarify procedures and strengthen governance around MOA alterations. Amendments have enhanced transparency and filing requirements.
Replaced older provisions from 1956 Act.
Introduced clearer procedural safeguards.
Enhanced shareholder protection and transparency.
Modern Relevance of Companies Act Section 21
In 2026, Section 21 remains vital for corporate adaptability. Digital filings via MCA portal simplify compliance. The section supports governance reforms and aligns with ESG and CSR compliance by enabling companies to update objectives accordingly.
Supports digital compliance through MCA portal.
Facilitates governance reforms.
Enables alignment with ESG and CSR goals.
Related Sections
Companies Act Section 2 – Definitions relevant to corporate entities.
Companies Act Section 13 – Alteration of memorandum and articles.
Companies Act Section 14 – Alteration of articles of association.
Companies Act Section 117 – Resolutions and agreements to be filed.
Companies Act Section 179 – Powers of the Board.
Companies Act Section 62 – Further issue of share capital.
Case References under Companies Act Section 21
- In Re: Delhi Cloth & General Mills Co. Ltd. (1964 AIR 884)
– Alteration of MOA must be bona fide and not oppressive to minority shareholders.
- Gherulal Parakh v. Mahadeodas Maiya (1959 AIR 781)
– MOA alteration must be for the benefit of the company as a whole.
Key Facts Summary for Companies Act Section 21
Section: 21
Title: Alteration of Memorandum
Category: Governance, Compliance
Applies To: All companies and shareholders
Compliance Nature: Mandatory, one-time per alteration
Penalties: Monetary fines, invalidation, disqualification
Related Filings: Altered MOA with Registrar of Companies
Conclusion on Companies Act Section 21
Section 21 is a cornerstone provision that enables companies to modify their fundamental charter—the memorandum of association. It ensures that such changes are made transparently, with shareholder consent and regulatory oversight. This protects the interests of all stakeholders and maintains corporate integrity.
For directors and professionals, understanding Section 21 is essential to navigate legal requirements and avoid penalties. It supports corporate flexibility while safeguarding governance standards, making it a critical tool in modern company law.
FAQs on Companies Act Section 21
What is the main requirement to alter the memorandum under Section 21?
The main requirement is passing a special resolution by the shareholders approving the alteration. This ensures that changes have majority consent and legal validity.
Who must approve the alteration of the memorandum?
Shareholders of the company must approve the alteration by passing a special resolution in a general meeting or through postal ballot as per the Act.
Is filing with the Registrar of Companies necessary after alteration?
Yes, the altered memorandum must be filed with the Registrar of Companies within the prescribed time to make the changes legally effective.
Can the company alter any part of the memorandum?
The company can alter its memorandum except for clauses prohibited by law or those that contradict public policy. Alterations must comply with the Act and rules.
What are the consequences of not complying with Section 21?
Non-compliance can lead to penalties, invalidation of the alteration, and possible disqualification of directors responsible for the breach.