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Microlesson · 5-min read

Change of Objects after Raising Money from Public (Section 13(8))

# Change of Objects after Raising Money from Public through Prospectus

## The Concern

When a company raises money from the public via a prospectus, investors subscribe relying on the stated objects. If unutilised money still lies with the company, allowing a casual change of objects could amount to a betrayal of investor trust. Section 13(8) therefore imposes special safeguards.

## Conditions to Change Objects

A company that has raised money from the public through a prospectus and still has any unutilised amount out of such money:

1. Special Resolution through Postal Ballot must be passed.

2. Newspaper Publication: Details of the resolution must be published in two newspapers — one in English and one in the vernacular language — circulating at the place of the registered office.

3. Website Posting: Same details must be placed on the company's website (if any), with justification for the change.

4. Exit Opportunity to Dissenters: The promoters and shareholders having control shall give the dissenting shareholders an opportunity to exit, in accordance with SEBI regulations.

## Registration of the Alteration (Section 13(9))

The Registrar shall register any alteration of the memorandum with respect to the objects, and certify the registration within 30 days from the date of filing of the special resolution.

## Effect (Section 13(10))

No alteration under Section 13 has any effect until it has been registered in accordance with the provisions of this section.

## Guarantee Companies Without Share Capital (Section 13(11))

In a company limited by guarantee not having a share capital, any alteration of the memorandum intending to give any person a right to participate in divisible profits otherwise than as a member, shall be void.

Worked example

### Example 1

Example — Tech Start-up: XYZ Tech Ltd raised ₹100 crore through an IPO to set up a chip-design facility. Two years later, ₹40 crore remains unspent. The Board now wishes to enter EV-charging infrastructure. To change objects, the company must (a) pass a special resolution through postal ballot, (b) publish details in one English and one vernacular newspaper at the place of the registered office and on its website with justification, and (c) provide an exit opportunity to dissenting shareholders per SEBI regulations. Simply passing a special resolution at the AGM is not sufficient.

⚠️ Common exam mistakes

  • Assuming any special resolution suffices — postal ballot is mandatory when unutilised IPO money exists.
  • Forgetting that the dissenting shareholders' exit must follow SEBI regulations, not the company's own terms.
  • Confusing the trigger: it is unutilised public money, not merely the act of being a listed company, that activates Section 13(8).
  • Forgetting the 30-day timeline for the Registrar to certify the registration of the change of objects.
Bare-Act text Section 13(8)-(11) · Companies Act, 2013 · click to expand
(8) A company, which has raised money from public through prospectus and still has any unutilised amount out of the money so raised, shall not change its objects for which it raised the money through prospectus unless a special resolution is passed by the company and— (i) the details, as may be prescribed, in respect of such resolution shall also be published in the newspapers (one in English and one in vernacular language) which is in circulation at the place where the registered office of the company is situated and shall also be placed on the website of the company, if any, indicating therein the justification for such change; (ii) the dissenting shareholders shall be given an opportunity to exit by the promoters and shareholders having control in accordance with the regulations to be specified by the Securities and Exchange Board.
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