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CS Executive · Company Law and Practice · Memorandum and Articles of Association and its Alteration

Lotus Educational Society Ltd, a company limited by guarantee without share capital, passes a special resolution amending its memorandum so that Mr Rao, a non-member financier, receives a share in the company's divisible profits. What is the legal position?

The alteration is void. For a company limited by guarantee without share capital, any memorandum alteration giving a person a right to share in divisible profits otherwise than as a member is void under section 13(11), regardless of registration or approval.

  1. AThe alteration is valid once registered with the Registrar
  2. BThe alteration is valid if the Central Government approves it
  3. CThe alteration is voidable at the option of members
  4. DThe alteration is voidCorrect

Explanation

Section 13(11) states that any alteration of the memorandum of a guarantee company without share capital purporting to give any person a right to participate in divisible profits otherwise than as a member is void. Registration or approval cannot cure it, and it is void rather than merely voidable.

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