The Articles of Association may contain provisions for entrenchment.

Section 5(3) of the Companies Act, 2013 has prescribed that the Articles may contain provisions for entrenchment to the effect that specified provisions of the articles may be altered only if conditions or procedures that are more restrictive than those applicable in the case of a special resolution, are met or complied with. The Companies Act 2013, recognizes an interesting concept of entrenchment. Essentially, the entrenchment provisions allow for certain clauses in the articles to be amended upon satisfaction of certain conditions or restrictions greater than those prescribed under the Companies Act, 2013 (such as obtaining 100% consent). This provision acts as a protection to the minority shareholders and is of specific interest to the investment community. This shall empower the enforcement of any pre-agreed rights and provide greater certainty to investors, especially in joint ventures. Section 5(4) of the Companies Act, 2013 provides that the provisions for entrenchment referred to in Section 5(3) of the Companies Act, 2013, 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. Section 5(5) of the Companies Act, 2013 read with Rule 10 of the Companies (Incorporation) Rules, 2014 stipulates that, where the articles contain provisions for entrenchment, the company shall give notice to the Registrar of Companies of such provisions in web-form SPICE+ [Simplified Proforma for Incorporating company Electronically Plus: (INC-32)], along with specified fees at the time of incorporation of the company or in case of existing companies, the same shall be filed in Form No.MGT.14 within 30 days from the date of entrenchment of the articles, as the case may be, along with the specified fees. The statement is true .