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

Sagar Pharma Limited raised funds through a prospectus for setting up a plant and still holds an unutilised part of the money. It now wants to change the objects for which the money was raised. Which requirement applies?

A company with unutilised prospectus money can change the objects only by special resolution, publishing prescribed details with justification in one English and one vernacular newspaper and on its website if any, and giving dissenting shareholders an exit opportunity as per SEBI regulations.

  1. AA special resolution, with details published in one English and one vernacular newspaper at the registered office place and on the company website if any, and an exit opportunity for dissenting shareholdersCorrect
  2. BA board resolution alone, because the money is unutilised
  3. CAn ordinary resolution with intimation to the Registrar within 30 days
  4. DA special resolution only, with no publication or exit opportunity

Explanation

Where a company has raised money from the public through a prospectus and has an unutilised amount, it cannot change those objects unless it passes a special resolution, publishes the prescribed details in one English and one vernacular newspaper and on its website if any, and gives dissenting shareholders an exit opportunity. A bare special resolution is therefore inadequate.

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