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

Mehta Traders Pvt Ltd alters its articles after which they no longer contain the restrictions and limitations that the Act requires in the articles of a private company. What is the legal consequence under Section 14?

The company ceases to be a private company from the date of the alteration. Under the first proviso to Section 14(1), removing the restrictions and limitations that the Act requires in a private company's articles automatically ends its private status as from that date.

  1. AThe alteration is void and the company stays private
  2. BThe company ceases to be a private company from the date of the alterationCorrect
  3. CThe company ceases to be private only after one year
  4. DThe company must be wound up

Explanation

The first proviso to Section 14(1) says that if a private company alters its articles so they no longer include the mandatory private company restrictions, it ceases to be a private company as from the date of alteration. The alteration is not void.

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