PRESENTATION OF
COMPANY LAW
Given by-
KETAN
B.COM (H) - (II)
SECTION - B
BCH23095
MEMORANDUM OF
ASSOCIATION
MEMORANDUM OF
ASSOCIATION
MEMORANDUM
OF ASSOCIATION
1. The memorandum of association of a company is
also called its charter of the company.
2. It is fundamental document, which defines the
principal conditions on which the company is
incorporated.
3. If a person makes a contract with the company
about something which is beyond or contrary to
what is defined in the company’s memorandum of
association, the company is not bound by such
contract.
4. The main purpose of the memorandum of
association is to inform the shareholders, creditors,
and other dealing with the company about the spear
of the company’s business.
DEFINITION OF
MEMORANDUM OF
ASSOCIATION
According to section 2 (56) of the COMPANIES ACT, 2013
Memorandum means the memorandum of association as originally framed or as altered from time to time in
pursuance of any previous companies, law or of this act.
PURPOSE AND IMPORTANCE OF
MEMORANDUM OF ASSOCIATION
1. It is a fundamental document.
2. It can be altered under the provisions of company’s act.
3. It defines the limitation of the company’s operation.
4. It forms the basis of relationship between the company and
outsiders.
5. It contains clauses, give important information about the
company.
LEGAL REQUIREMENTS OF
MEMORANDUM OF
ASSOCIATION
As per the provisions of the companies act, the memorandum of
association shall-
1. Be printed and divided into paragraphs consecutively.
2. Be signed by each subscriber, who shall add his address,
description and occupation.
3. Be signed in the presence of at least one witness, who shall
attest the signature, and shall likewise add his address,
description and occupation.
The witness can be the same for all members of the company,
but one member cannot be a witness for another.
A minimum of seven members of a public company and two
members of a private company must be the signatory to the
memorandum of association
CLAUSES OF MEMORANDUM OF
ASSOCIATION
A. Name clause
B. Situation clause
C. Object clause
D. Liability clause
E. Capital clause
F. Association clause
NAME CLAUSE
SECTION 4 (1) (A)
Name clause states that name of company, which should be unique, different,
should not be undesirable and not similar to any existing company name. It
also specifies the word Private limited in case of private company, and Limited
in case of public company.
Name of company must indicate its principal object. Company name should
not include enemy’s country name. It should also not include a name which is
prohibited under the Emblems and Names Act 1930.
CASE: NORTH CHESHIRE AND
MANCHESTER BREWERY
CO. VS. MANCHESTER BREWERY CO.
In this case, Manchester Brewery Co. Ltd. had been trading for many years.
Another company-North Cheshire Brewery Co. Ltd-wanted to change its name to
North Cheshire and Manchester Brewery Co. Ltd., which was opposed by
Manchester Brewery Co. Ltd. It was held that North Cheshire Brewery Co. Ltd.
could not adopt the new name because it would lead to confusion among the
public about the company's identity and no company could be allowed to create
such confusion.
SITUATION CLAUSE
SECTION 4 (1) (B)
The memorandum of association of a company must contain the complete address of the registered office
of the company. In case it is not given in the memorandum of association, the relevant information must be
sent to the office of the Registrar of Companies within 30 days of the date of incorporation.
The registered office of the company is the place where all the legal documents and books of account of the
company are kept, and where the necessary legal notices or information can be sent to the company.
The company shall get its name, address of its registered office and the Corporate Identity Number (CIN)
along with telephone number, fax number if any, e-mail and web-site address, if any, printed in all its
business letters, bill-heads, letter papers and in all its notices and other official publications.
OBJECT CLAUSE
SECTION 4 (1) (C)
The most important clause of Memorandum of Association is the
object clause which actually establishes scope of its operations and the
basis of the relationship of the company with the outsiders.
The shareholders of the company must know that where the company
is going to Invest their money and what type of risks they are taking in
making the Investment in the company, and
The outsiders must know the area of operation. They are supposed to
know the scope of the company and any contract with the company
outside its scope shall not be binding on the company and they
themselves shall to responsible for the loss suffered by them on
account of such contracts.
EXAMPLE
A company's object clause defined its activity as manufacturing and selling
railway wagons. The directors of the company made a contract to construct
a railway track. The Board of Directors of the company, by a special
resolution, had authorised the company to undertake the construction of
the railway track.
It was held that the contract made by the company was void inspite of the
unanimous resolution of the Board of Directors since the objects clause did
not specify this activity as a part of the company's business.
The objects of the company should not be immoral, illegal, opposed to
public policy or against the provisions of the Companies Act.
For example, No company can be incorporated with the object of running a
gambling den or dealing with an enemy country.
LIABILITY CLAUSE
{SECTION 4(1)(D)}
The Memorandum of Association of the company states the liability of members of the
company is limited by shares or guarantee or the liability is unlimited.
In the case of companies limited by shares, the members are liable to the unpaid amount
due on the shares taken by them. Where the shares are fully paid up, the liability of the
shareholders shall be NIL.
A member of a company limited by guarantee, not having share capital, cannot be called
upon to contribute an amount more than his guarantee in the event of winding up of the
Company.
In case of unlimited liability companies, the members are personally liable ,if company
suffers any losses.
CAPITAL CLAUSE
SECTION 4 (1) (E)
In this clause the company must state the
amount of its authorised capital with which
the company is being registered.
It shall also state the kinds and amount of
nominal value of its shares. The company
shall not be allowed to issue shares more
than its authorised share capital and the
shares can be be equity shares and/or
preference shares.
ASSOCIATION
CLAUSE
The Memorandum of Association shall be signed
by at least 7 subscribers in the case of a Public
Company and at least by 2 members in the case of
a Private Company.
This should be followed by the names and
addresses of the subscribers and the number of
shares taken by each one of them. The signatures
of each subscriber shall be attested by at least one
witness. One subscriber cannot attest the signatures
of the other subscriber.
