Companies Act 2013 Section 23
Companies Act 2013 Section 23 governs the alteration of the memorandum of association of a company.
Companies Act 2013 Section 23 deals with the alteration of the memorandum of association (MOA) of a company. The MOA is a fundamental document that defines the company’s constitution and scope of activities. Altering the MOA is a significant corporate action that impacts the company’s objectives and powers.
This section is crucial for directors, shareholders, and professionals to understand as it governs how companies can legally modify their foundational clauses. Compliance ensures that changes are valid, transparent, and in line with regulatory requirements, protecting stakeholders’ interests.
Companies Act Section 23 – Exact Provision
This provision allows companies to change their MOA if their articles of association permit it and if the alteration complies with the Companies Act, 2013. It ensures that the company’s constitution can evolve while maintaining legal safeguards.
Alteration must be authorized by the articles of association.
Changes must comply with the Companies Act, 2013.
Alteration affects the company’s objectives and powers.
Requires proper procedure and approvals.
Ensures transparency and legal validity.
Explanation of Companies Act Section 23
This section permits companies to alter their memorandum if allowed by their articles and the Act.
States that MOA alteration is conditional on articles of association.
Applies to all companies registered under the Act.
Requires compliance with procedural and substantive law.
Triggers when company seeks to expand or modify objectives.
Permits changes in name, objects, capital clause, etc., as per law.
Prohibits alterations that contravene the Act or public policy.
Purpose and Rationale of Companies Act Section 23
This section strengthens corporate governance by regulating how companies can change their foundational documents. It protects shareholders and stakeholders by ensuring alterations are lawful and transparent.
Ensures changes align with legal and regulatory frameworks.
Protects interests of shareholders and creditors.
Maintains clarity on company’s scope and powers.
Prevents arbitrary or fraudulent alterations.
When Companies Act Section 23 Applies
The section applies whenever a company seeks to alter its MOA, subject to its articles and the Act.
Applies to all companies under the Companies Act, 2013.
Triggered by board or shareholder resolution to alter MOA.
Requires special resolution in general meeting.
Must comply with procedural requirements and filings.
Exemptions may apply for certain minor alterations.
Legal Effect of Companies Act Section 23
This section creates a legal framework for valid alteration of the MOA. It imposes duties on companies to follow due process, obtain approvals, and file necessary documents with the Registrar of Companies (ROC). Non-compliance can render alterations invalid and attract penalties.
The provision impacts corporate actions by ensuring that any change in the company’s constitution is transparent and legally binding. It interacts with MCA rules on filings and disclosures, reinforcing corporate accountability.
Creates duty to comply with procedural and substantive law.
Requires approvals and filings for alteration validity.
Non-compliance may lead to invalidation and penalties.
Nature of Compliance or Obligation under Companies Act Section 23
Compliance is mandatory and conditional on the articles of association and the Act. It is a one-time obligation per alteration but may occur multiple times during a company’s life. Directors and officers must ensure proper approvals and filings.
This section impacts internal governance by requiring shareholder involvement and transparency in altering the MOA.
Mandatory compliance for valid alteration.
One-time obligation per alteration event.
Responsibility lies with directors and company officers.
Involves shareholder approval through special resolution.
Stage of Corporate Action Where Section Applies
This section applies primarily at the stage of decision-making for altering the MOA, including board and shareholder approvals, and subsequent filing stages.
Board decision to propose alteration.
Shareholder approval via special resolution.
Filing altered MOA with ROC.
Ongoing compliance with updated MOA.
Penalties and Consequences under Companies Act Section 23
Failure to comply with Section 23 can lead to penalties including fines on the company and officers responsible. Invalid alterations may be struck down, affecting corporate actions and contracts.
Monetary fines for non-compliance.
Potential invalidation of alteration.
Possible disqualification of officers for repeated violations.
Requirement to rectify filings and procedures.
Example of Companies Act Section 23 in Practical Use
Company X wanted to expand its business objectives to include renewable energy. The board proposed altering the MOA’s objects clause. After obtaining shareholder approval via a special resolution, Company X filed the altered MOA with the ROC. This ensured legal compliance and allowed the company to lawfully pursue new business activities.
Shows importance of following proper procedure.
Highlights role of shareholder approval and ROC filing.
Historical Background of Companies Act Section 23
The 1956 Act also allowed MOA alterations but with less clarity on procedural safeguards. Section 23 in the 2013 Act modernized and streamlined the process, emphasizing transparency and compliance.
Replaced earlier provisions under Companies Act, 1956.
Introduced clearer procedural requirements.
Aligned with modern corporate governance norms.
Modern Relevance of Companies Act Section 23
In 2026, digital filings via MCA portal simplify MOA alterations. The section supports governance reforms and compliance trends including ESG by allowing companies to update objectives accordingly.
Digital compliance through MCA e-filing.
Supports governance and transparency reforms.
Enables alignment with CSR and ESG objectives.
Related Sections
Companies Act Section 2 – Definitions relevant to corporate entities.
Companies Act Section 4 – Memorandum of Association.
Companies Act Section 13 – Alteration of Memorandum and Articles.
Companies Act Section 117 – Resolutions and agreements.
Companies Act Section 403 – Power of Central Government to remove difficulties.
SEBI Act Section 11 – Regulatory oversight for listed companies.
Case References under Companies Act Section 23
- Rajasthan State Industrial Development and Investment Corporation Ltd. v. Diamond & Gem Development Corporation Ltd. (1994)
– MOA alteration must comply with statutory provisions and not be ultra vires.
- Gherulal Parakh v. Mahadeodas Maiya (1959)
– Alteration of MOA must be bona fide for the benefit of the company.
Key Facts Summary for Companies Act Section 23
Section: 23
Title: Alteration of Memorandum
Category: Governance, Compliance
Applies To: All companies under Companies Act, 2013
Compliance Nature: Mandatory, conditional on articles and Act
Penalties: Monetary fines, invalidation of alteration
Related Filings: Altered MOA with ROC
Conclusion on Companies Act Section 23
Section 23 of the Companies Act, 2013 is a vital provision that governs how companies can alter their memorandum of association. It ensures that any change to the company’s fundamental constitution is done transparently, lawfully, and with proper approvals. This protects the interests of shareholders, creditors, and other stakeholders by preventing arbitrary or unauthorized alterations.
Understanding and complying with Section 23 is essential for directors, company officers, and legal professionals. It supports good corporate governance and helps companies adapt their objectives and powers to evolving business needs while maintaining legal certainty and accountability.
FAQs on Companies Act Section 23
What is the memorandum of association?
The memorandum of association is a legal document that defines a company’s constitution, including its objectives, powers, and scope of activities. It is fundamental to the company’s identity and operations.
Can a company alter its memorandum of association?
Yes, a company can alter its memorandum if its articles of association allow it and the alteration complies with the Companies Act, 2013, following proper procedures and approvals.
Who must approve the alteration of the memorandum?
The alteration must be approved by the company’s shareholders through a special resolution passed in a general meeting, as required under the Act.
What happens if a company alters its memorandum without following Section 23?
Such alteration may be invalid, and the company and its officers may face penalties, including fines and possible disqualification for repeated violations.
Is filing with the Registrar of Companies necessary after alteration?
Yes, the company must file the altered memorandum with the Registrar of Companies to make the change legally effective and public.