After 1st April I found that there are many advisory’s circulating on Whats up, Facebook & on all social media’s as to what is instantly required to be done by the existing companies in order to comply with CA 2013. One such common advise is to amend the Articles.
Section 5 & Tables under Schedule I of Companies Act 2013 prescribes for the provisions for the Articles of Association of the Company. The said provisions are applicable to the Companies to be formed under the new Act after 1.4.2014. New Companies are required to prepare their articles by following these rules. On close scrutiny I found that following are the major provisions under the CA 2013, which are required to be reflected through Articles of the Company.
1. Number of Members increased to 200. This is effective through prescription in the Articles. Old Articles prescribes for maximum number of members to 50 for private company.
2. Prohibitory clause of acceptance of deposits is removed from the definition of Private Company. The said clause was added through amendment in the year 2000.
3. Entrenchment Provisions can now be made in the Articles providing more stricter compliance for approving the reserved items in the Articles of JV company. Existing Companies have to amend their Articles to adopt this.
Further articles is a set of regulations for management of the Company and is a public document available to all.
In view of the above I feel that there many not be any dire need to amend the articles to align it with the Schedule I and provisions of the CA 2013.
However if the company wants to take the benefit of increased number of members or entrenchment clause or if the internal management of the Company is highly dependent upon the frequent references from the Articles, then it would be better to amend it quickly at the first EGM opportunity. Otherwise I suggest to amend the Articles in the coming AGM.
Amendment to the existing Articles needs a deep study of new provisions and requirements of the Company. It can not just adopt all the provisions of applicable Table under Schedule I. Professional help would be needed to undertake Article amendment exercise. It would always be better to adopt the entire new set by obtaining the approval of the shareholders by special resolution.
MCA has recently put an interesting advisory on its portal to file new set of Articles for incorporation of the Company. It seems that we are yet to be out of 1956 coma.
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