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CMA Intermediate · Business Laws and Ethics · Company Types, Promotion, Formation and Related Procedures

Which statement about entrenchment provisions in the articles is correct under the Companies Act, 2013?

Entrenchment provisions let specified articles be altered only if conditions or procedures more restrictive than those for a special resolution are met, as Section 5(3) provides. They must also be notified to the Registrar, and a private company's later amendment needs all members' agreement.

  1. AThey allow specified articles to be altered only on conditions more restrictive than for a special resolutionCorrect
  2. BThey allow articles to be altered by a simple majority only
  3. CThey can be inserted into a private company's articles after formation by a special resolution alone
  4. DThey need not be notified to the Registrar

Explanation

Section 5(3) allows entrenchment so that specified provisions can be altered only under conditions or procedures more restrictive than a special resolution. Section 5(4) requires all members' agreement for a private company amendment, and Section 5(5) requires notice to the Registrar.

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