Shubhkamna Private limited has registered its articles along with memorandum at the time of registration of company in 2010. Now directors of the…
CA Intermediate · Corporate and Other Laws · MTP · September 2025
Shubhkamna Private limited has registered its articles along with memorandum at the time of registration of company in 2010. Now directors of the company are of the view that provisions of articles regarding forfeiture of shares should not be changed except by a resolution of 90% majority. While as per section 14 of the Companies Act, 2013 articles may be changed by passing a special resolution only. One of the directors said that they cannot make a provision against the Companies Act. You are required to advise the company on this matter.
Suggested Answer and Working Notes:
As per section 5 of the Companies Act, 2013 the article may contain provisions for entrenchment to the effect that specified provisions of the articles may be altered only if more restrictive conditions than a special resolution, are met. The provisions for entrenchment shall only be made either on formation of a company, or by an amendment in the articles agreed to by all the members of the company in the case of a private company and by a special resolution in the case of a public company. Where the articles contain provisions for entrenchment, whether made on formation or by amendment, the company shall give notice to the Registrar of such provisions in prescribed manner. In the present case, Shubhkamna Private Limited is a private company and wants to protect provisions of articles regarding forfeiture of shares. It means it wants to make entrenchment of articles, which is allowed. But the company will have to pass a resolution taking permission of all the members and it should also give notice to Registrar of Companies regarding entrenchment of Articles.
Topics: Incorporation of Company and Matters Incidental Thereto
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