Companies Act 2013 Section 26
Companies Act 2013 Section 26 governs alteration of memorandum of association by companies in India.
Companies Act 2013 Section 26 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 it requires compliance with strict legal procedures to ensure transparency and protect stakeholders’ interests.
This section is crucial for directors, shareholders, and professionals as it governs how companies can legally change their objectives, capital structure, or other key aspects. Understanding Section 26 helps ensure proper corporate governance and compliance with statutory requirements.
Companies Act Section 26 – Exact Provision
This section allows companies to change their MOA through a special resolution passed by shareholders. The alteration must comply with the Act and other laws. Filing the altered MOA with the Registrar of Companies is mandatory to make the change effective. This ensures legal validity and public record of the company’s constitution.
Requires special resolution by shareholders.
Alteration must comply with Companies Act and other laws.
Mandatory filing with Registrar of Companies.
Protects stakeholders by regulating changes to company constitution.
Ensures transparency and legal validity of alterations.
Explanation of Companies Act Section 26
Section 26 governs how a company can legally alter its memorandum of association.
States that alteration requires a special resolution.
Applies to all companies incorporated under the Act.
Directors must convene a general meeting for approval.
Alterations can include change in company name, objectives, capital clause, etc.
Filing with Registrar is mandatory to effect changes.
Prohibits alterations inconsistent with law.
Purpose and Rationale of Companies Act Section 26
This section strengthens corporate governance by regulating changes to the company’s foundational document.
Ensures shareholder approval for major changes.
Protects interests of creditors and stakeholders.
Maintains transparency in company operations.
Prevents arbitrary or unlawful alterations.
When Companies Act Section 26 Applies
Section 26 applies whenever a company seeks to alter its memorandum of association.
Applicable to all companies under the Companies Act, 2013.
Triggered by board proposal and shareholder resolution.
Must comply before effecting changes in company operations.
Exemptions do not generally apply; mandatory for all alterations.
Legal Effect of Companies Act Section 26
This section creates a legal duty to obtain shareholder approval and file alterations with the Registrar. It restricts companies from making unauthorized changes to their MOA. Non-compliance can invalidate alterations and attract penalties. The section interacts with MCA rules on filing and disclosure, ensuring public access to updated company information.
Creates mandatory approval and filing duties.
Restricts unauthorized alterations.
Non-compliance leads to invalidation and penalties.
Nature of Compliance or Obligation under Companies Act Section 26
Compliance is mandatory and procedural. It is a one-time obligation per alteration but may recur with multiple changes. Directors and officers must ensure proper convening of meetings and filing. It impacts internal governance by requiring transparency and shareholder participation.
Mandatory compliance for each alteration.
One-time obligation per change.
Responsibility lies with directors and company secretaries.
Enhances internal governance and accountability.
Stage of Corporate Action Where Section Applies
Section 26 applies primarily at the shareholder approval and filing stages.
Board decision to propose alteration.
Shareholder approval via special resolution.
Filing altered MOA with Registrar.
Ongoing compliance through record maintenance.
Penalties and Consequences under Companies Act Section 26
Failure to comply with Section 26 can lead to monetary fines on the company and officers. Alterations made without proper approval or filing are invalid. Persistent non-compliance may attract additional penalties or legal action.
Monetary penalties for non-compliance.
Invalidation of unauthorized alterations.
Possible prosecution of officers responsible.
Example of Companies Act Section 26 in Practical Use
Company X wanted to expand its business objectives. The board proposed altering the MOA’s objects clause. A general meeting was convened, and shareholders passed a special resolution. The company filed the altered MOA with the Registrar within the prescribed time. This ensured legal compliance and allowed Company X to pursue new business activities.
Shows importance of shareholder approval.
Highlights mandatory filing to validate changes.
Historical Background of Companies Act Section 26
Section 26 evolved from the corresponding provision in the Companies Act, 1956. The 2013 Act introduced clearer procedures and stricter compliance to protect stakeholders. Amendments have focused on digital filing and transparency.
Shifted from 1956 Act provisions.
Introduced special resolution requirement.
Enhanced filing and compliance norms.
Modern Relevance of Companies Act Section 26
In 2026, Section 26 remains vital for corporate governance. Digital filings via MCA portal simplify compliance. The section supports transparency, especially with ESG and CSR considerations influencing company objectives.
Supports digital compliance through MCA portal.
Aligns with governance reforms.
Ensures practical importance in evolving business environments.
Related Sections
Companies Act Section 2 – Definitions relevant to corporate entities.
Companies Act Section 4 – Memorandum of association.
Companies Act Section 117 – Resolutions and agreements.
Companies Act Section 118 – Minutes of proceedings.
Companies Act Section 12 – Registered office of company.
SEBI Act Section 11 – Regulatory oversight for listed companies.
Case References under Companies Act Section 26
- In Re: Delhi Cloth & General Mills Co. Ltd. (AIR 1964 SC 884)
– The Supreme Court held that alteration of MOA must be bona fide and not oppressive.
- Shamji Kalidas v. CIT (1961) 41 Comp Cas 1 Bom
– Emphasized strict compliance with alteration procedures.
Key Facts Summary for Companies Act Section 26
Section: 26
Title: Alteration of Memorandum of Association
Category: Governance, Compliance
Applies To: All companies under Companies Act, 2013
Compliance Nature: Mandatory, One-time per alteration
Penalties: Monetary fines, invalidation of alterations
Related Filings: Altered MOA with Registrar of Companies
Conclusion on Companies Act Section 26
Companies Act Section 26 plays a critical role in regulating how companies alter their memorandum of association. It ensures that such changes are made transparently, with shareholder approval, and in compliance with the law. This protects the interests of shareholders, creditors, and other stakeholders.
Understanding and adhering to Section 26 is essential for directors and company officers to maintain proper corporate governance. It also facilitates legal certainty and public trust in corporate operations, making it a cornerstone of company law in India.
FAQs on Companies Act Section 26
What is the memorandum of association?
The memorandum of association is a legal document that defines a company's constitution, objectives, and scope of activities. It is essential for company formation and governs its operations.
How can a company alter its memorandum under Section 26?
A company can alter its memorandum by passing a special resolution in a general meeting and filing the altered document with the Registrar within the prescribed time.
Who must approve the alteration of the memorandum?
The shareholders must approve the alteration by passing a special resolution during a general meeting convened for this purpose.
What happens if a company fails to file the altered memorandum?
If the altered memorandum is not filed with the Registrar, the alteration is not legally effective and may attract penalties for non-compliance.
Can a company make any alteration to its memorandum?
No, alterations must comply with the Companies Act and other laws. Any change inconsistent with the law is prohibited and invalid.