An alteration of the Articles of Association is governed by Section 14 of the Companies Act, 2013. The default rule is a special resolution, followed by MGT-14 filing. The default is displaced in two situations: where the articles contain an entrenchment provision under Section 5(3), and where the alteration touches a matter that requires NCLT or Board approval under a specific provision.
The Special Resolution Default
Section 14(1) permits a company to alter its articles by a special resolution. The alteration must be within the memorandum and the Act. The special resolution is passed at a general meeting (or through postal ballot where permitted), and the MGT-14 is filed with the resolution and the revised articles. The alteration is effective from the date of the special resolution, subject to any specific approval requirement.
Entrenchment Overrides the Default
Where the articles contain an entrenchment provision under Section 5(3), the specified clause can be altered only if the stricter conditions in the entrenchment clause are satisfied—conditions more restrictive than a special resolution. This means a special resolution alone is not sufficient for an entrenched clause. The entrenchment can be built in at incorporation or added later: in a private company, adding entrenchment later requires the agreement of all members; in a public company, a special resolution. The entrenchment provision must be notified to the ROC under Section 5(5).
The NCLT and Board Approval Boundaries
Certain alterations require approval beyond the shareholders. A conversion of a public company into a private company requires NCLT approval under Section 14 read with Section 18. A variation of class rights requires the consent of three-fourths of the affected class under Section 48. A reduction of share capital requires NCLT approval under Section 66. A scheme of arrangement or amalgamation requires NCLT approval under Sections 230–232. The articles cannot bypass these statutory approvals; a clause that purports to do so is void to that extent.
The Filing and Effectiveness
The alteration is not complete until MGT-14 is filed and the revised articles are placed on record. A company that alters its articles by special resolution but does not file MGT-14 has an internal resolution that is not reflected in the public record. The revised articles should be aligned with any shareholders’ agreement, and the entrenchment notice under Section 5(5) should be filed where applicable.
Call to Action: We advise companies on AOA alterations, entrenchment provisions and the NCLT/Board approvals that bound article amendments. For an AOA-review engagement, contact office@anujdesaiassociates.com, Ph No. 9619456656, Website https://anujdesaiassociates.com, LinkedIn linkedin.com/in/ca-anuj-desai-122547230.