Companies Act 2013 Section 31
Companies Act 2013 Section 31 governs the alteration of a company’s articles of association, essential for corporate governance and compliance.
Companies Act 2013 Section 31 deals with the alteration of a company’s articles of association (AOA). The articles are a key document that governs the internal management of a company. This section allows companies to modify their articles by passing a special resolution in a general meeting.
Understanding Section 31 is crucial for directors, shareholders, and professionals as it ensures that changes in governance, management rules, or shareholder rights comply with legal standards. Proper alteration helps maintain transparency and avoids disputes within the company.
Companies Act Section 31 – Exact Provision
This section empowers companies to change their articles of association through a special resolution passed by the shareholders. It ensures that any modification follows a formal process, protecting shareholders' interests and maintaining corporate governance standards.
Alterations require a special resolution in a general meeting.
Changes must comply with the Companies Act and other applicable laws.
Alterations can include changes to management structure, rights of members, or company objectives.
Altered articles must be filed with the Registrar of Companies (ROC).
Explanation of Companies Act Section 31
This section allows companies to legally modify their articles of association by passing a special resolution.
States that alteration is allowed only by special resolution.
Applies to all companies registered under the Act.
Directors and shareholders must approve the changes.
Alterations can be triggered by business needs or regulatory requirements.
Permits changes but prohibits alterations that contravene law or the company’s memorandum.
Purpose and Rationale of Companies Act Section 31
The section ensures that companies can adapt their governance framework while protecting shareholder rights and maintaining legal compliance.
Strengthens corporate governance by formalizing amendment procedures.
Protects shareholders by requiring special resolution approval.
Ensures transparency in changes to company rules.
Prevents arbitrary or unlawful alterations to articles.
When Companies Act Section 31 Applies
This section applies whenever a company seeks to change its articles of association, regardless of company size or type.
Applicable to all companies under the Companies Act, 2013.
Must be complied with before any alteration is effective.
Triggered by board or shareholder proposals for change.
Exceptions may apply if articles or law specify otherwise.
Legal Effect of Companies Act Section 31
Section 31 creates a legal duty to follow a prescribed process for altering articles. It requires passing a special resolution and filing the altered articles with the ROC. Non-compliance can invalidate the alteration and attract penalties.
The provision impacts corporate actions by ensuring that internal rules reflect shareholders’ approval and legal standards. It interacts with MCA rules on filing and disclosures.
Creates a mandatory approval and filing requirement.
Ensures alterations are legally valid and enforceable.
Non-compliance may lead to penalties and invalidation.
Nature of Compliance or Obligation under Companies Act Section 31
Compliance is mandatory and involves a one-time obligation each time articles are altered. Directors must convene a general meeting, and shareholders must pass a special resolution. The company must file the altered articles with the ROC.
This process impacts internal governance by ensuring transparency and shareholder participation in changes.
Mandatory compliance with special resolution procedure.
One-time obligation per alteration event.
Responsibility lies with directors and company secretarial staff.
Enhances internal governance and accountability.
Stage of Corporate Action Where Section Applies
Section 31 applies primarily at the stage of decision-making on company governance changes and subsequent filing.
Board decision to propose alteration.
Shareholder approval in general meeting.
Filing altered articles with ROC.
Ongoing compliance through updated governance documents.
Penalties and Consequences under Companies Act Section 31
Failure to comply with Section 31 can lead to monetary penalties on the company and officers responsible. The alteration may be deemed invalid. Persistent non-compliance can attract further legal action.
Monetary fines on company and officers.
Invalidation of unauthorized alterations.
Possible additional fees or remedial directions by ROC.
Example of Companies Act Section 31 in Practical Use
Company X decided to expand its business scope and needed to alter its articles to include new objectives. The board called a general meeting, and shareholders passed a special resolution approving the change. Company X filed the altered articles with the ROC, ensuring legal compliance and smooth business operations.
Shows importance of shareholder approval for changes.
Demonstrates filing requirement for legal validity.
Historical Background of Companies Act Section 31
Section 31 replaces similar provisions in the Companies Act, 1956, streamlining the process for altering articles. It was introduced to enhance corporate governance and align with modern business needs.
Shifted from 1956 Act’s provisions on articles alteration.
Introduced to formalize and clarify alteration process.
Major reforms to improve transparency and shareholder rights.
Modern Relevance of Companies Act Section 31
In 2026, Section 31 remains vital as companies frequently update governance documents to adapt to regulatory changes and business strategies. Digital filings via MCA portal simplify compliance. The section supports governance reforms and transparency.
Supports digital compliance and e-governance.
Enables timely governance reforms.
Ensures practical importance in dynamic business environment.
Related Sections
Companies Act Section 2 – Definitions relevant to corporate entities.
Companies Act Section 14 – Memorandum of Association.
Companies Act Section 117 – Resolutions and agreements.
Companies Act Section 118 – Minutes of proceedings.
Companies Act Section 134 – Financial statements and reports.
SEBI Act Section 11 – Regulatory oversight for listed companies.
Case References under Companies Act Section 31
- Gujarat State Financial Corporation v. Lotus Hotels Pvt. Ltd. (1994, AIR 1994 SC 997)
– The Supreme Court held that alteration of articles must comply with the Act and not be oppressive to minority shareholders.
- Shamji Kalidas v. K.K. Verma (1959, AIR 1959 SC 109)
– Established that alterations must be bona fide for the benefit of the company as a whole.
Key Facts Summary for Companies Act Section 31
Section: 31
Title: Alteration of Articles
Category: Governance, Compliance
Applies To: All companies registered under the Act
Compliance Nature: Mandatory special resolution and filing
Penalties: Monetary fines, invalidation of alteration
Related Filings: Altered articles with ROC
Conclusion on Companies Act Section 31
Section 31 is a cornerstone provision that enables companies to adapt their internal governance rules legally and transparently. By requiring a special resolution and proper filing, it protects shareholder interests and ensures that changes are made with due process.
Understanding and complying with this section is essential for directors and shareholders to maintain good corporate governance. It balances flexibility for companies with safeguards against arbitrary or unlawful alterations, supporting a stable business environment.
FAQs on Companies Act Section 31
What is the procedure to alter the articles of association under Section 31?
The company must pass a special resolution in a general meeting approving the alteration. Afterward, the altered articles must be filed with the Registrar of Companies to be effective.
Can any alteration be made to the articles under Section 31?
No, alterations must comply with the Companies Act and cannot contravene the company’s memorandum or any law. They must also be bona fide for the company’s benefit.
Who can propose an alteration to the articles?
The board of directors usually proposes the alteration, but shareholders can also suggest changes. Ultimately, shareholders must approve the alteration by special resolution.
Is filing the altered articles with the ROC mandatory?
Yes, filing the altered articles with the Registrar of Companies is mandatory for the alteration to be legally effective and enforceable.
What happens if a company alters its articles without following Section 31?
Such alteration is invalid and may attract penalties on the company and its officers. It can also lead to legal disputes and enforcement actions by regulatory authorities.