MOA

Definition Of Memorandum Of Association

• According to sec(56) of the companies Act,2013
Memorandum means “Memorandum of association of a
company as originally framed or altered from time to time
in pursuance of any previous Companies Law or of this
act”.
• According To Cairns
Memorandum of Association of a company is its charter
and defines the limitations of the powers of a Company.
Meaning
• Memorandum of association is one of the documents which has to be filed
with the registrar of the companies at the time of incorporation of a
company. The memorandum of association contains the fundamental
conditions upon which alone the company has been incorporated.
• Hence MOA contains the objects for which the company is formed and
therefore identifies the possible scope of its operations beyond which its
actions cannot go.
Importance of memorandum
• The memorandum of association is an extremely important document in relation to the
affairs of the company
• It is a document which sets out the constitution of the company
• It contain the fundamental conditions upon which alone the company is allowed to be
incorporated
• A company can pursue only such objects and exercise such powers as are conferred
expressly in memorandum or by implication
• A company cannot depart from the provisions contained in its memorandum. If it does it
would be ultra vires the company and therefore wholly void.
• It defines its relations with the outside world and the scope of its activities.
• After registration of the company the memorandum becomes a public document.
Purpose of Memorandum
• The memorandum of association is a public document available for inspection it
serves two purposes
• 1) the intending shareholder who contemplates the investment of his capital shall
know within what field it is to be put at risk .thus he can find out from the
memorandum the purpose for which his money is going to be used by the
company and what risk he is taking in making the investment
• 2) anyone who deals with the company shall know without reasonable doubt
whether the contractual relation into which he contemplates entering with the
company is one relating to a matter within its corporate objects .thus a suppliers
goods or money will know the transaction he intends to make with the company I
within the objects of the company or not
Forms of memorandum U/s 4 and 5

• The memorandum of association of a company shall be such one of

the forms in Tables A,B,C,D and E in Schedule 1 to the
Companies Act,2013 as may be applicable in case of the company
Table A It is form memorandum of association of a
company limited by shares.

Table B It is a form for memorandum and articles of

association of a company limited by guarantee
and not having a share capital
Table C It is a form for memorandum and articles of
association of a company limited by guarantee
and having a share capital
Table D It is a form for memorandum and articles of
association of an unlimited company and not
having share capital
Table E It is a form for memorandum and articles of
association of an unlimited company and
having share capital
Copies of Memorandum and Articles of the
Company
• Copies of Memorandum and Articles of the Company must be given to a
member on token charge of Re. one. Further copies of all agreements and
resolutions which are required to be filled u/s 162 are required to be given
to members on payment of one rupee.
• Failure to give copy within seven days will involve fine which may extend up
to Rs 1000 per day during which the default continues but not exceeding Rs
1 lac [Section 17]
Contents of Memorandum
• According to sec 4 the memorandum of association
of every company must contain the following
clauses:
1) The name of the company with “limited” in case of
public company and with “Private Limited” as the
last word in the case of a private limited company.
One person company shall also describe as “one
Person Company”
 2) The name of the state in which the registered office of
the company is to be situated.
3) The objects of the company to be classified as-
i) Objects for which the company is proposed to b
incorporated
ii) Any matter considered necessary in furtherance
thereof
4) In the case of companies (other than trading
corporations ) with objects not confined to one State
,the States to whose territories the objects extend
5) The liability of the members is limited if the company is
limited by shares or by guarantee]
6) In the case of a company having a share capital the
amount of share capital with which the company
proposes to be registered and its divisions into shares
a fixed amount.
The memorandum shall conclude with an ‘association
clause’ which must state the desire of the subscribers
to be formed into a company.
An unlimited need not include clause 5 and 6 in its
memorandum
 Contents of MOA

SUBSCRIPTION
NAME CLAUSE CLAUSE

REGISTERED OFFICE
CAPITAL CLAUSE
CLAUSE

OBJECT CLAUSE LIABILITY CLAUSE

 Name Clause
A company must have a name of its own, as the name of the company is a symbol of its independence. The company may adopt
any name which is not undesirable.
What can be termed as undesirable ?
i) Section 4(2) states that the name shall not be identical or resemble too nearly the name of an existing company, or will
constitute an offence under any law or is undesirable in the opinion of government.
ii) Section 4(3) states that a company shall not be registered with a name which is likely to give an impression that the
company is in any way connected to the central government or state government or any local authority unless the
previous approval of central government is taken.
iii) Company is not allowed to use a name which is prohibited under Emblems and Names Act.

According to Rule 8 of the companies (Incorporation) Rules,2014 a proposed name is considered to be undesirable if it is identical
with or too nearly resembling with:
i) Name of a company in existence or,
ii) A registered trade- mark or a trade mark which is subject of an application for registration of any other person under the Trade
Marks Act,1999
iii) The name shall also be considered undesirable if
• It attracts the provisions of sec 3 of the Emblems and Names (Prevention and Improper Use) Act,1950
• It includes any word or words which are offensive to any section of the people
• Ewing v. buttercup Margarine co. ltd. 1917
• The plaintiff carried the name of the Buttercup dairy co. obtained an injunction against the defendant “Buttercup margarine co.
Ltd”
• The ground of getting the injunction successful was that the public might feel that the two businesses were connected .
• Society of Motor Manufacturers and traders v. Motor Manufacturers and traders mutual assurance ltd.
1925
• Companies were in different business
• Case Dismissed
• Executive board of Methodist church in india v. union of india 1985 BHC.
• 'Methodist Church in India Trust Association defendant
• Same name company in Calcutta
• The former secretary of the latter association informed the Registrar that the said company had not functioned since 1970; that no
annual report or minutes has been filed with the Registrar since 1970; and that some directors died and some had left.
• Held: If a company is practically defunct, it is not a bar to registration of a new company with a similar name
• Dunlop Pneumatic Tyre Co. Ltd vs Dunlop Motor Co. Ltd [1907] AC 430 (HL)
• Held: The companies were in different businesses with the first dealing in tyres and the second in motor-repair therefore confusion
was not likely to arise so an injunction will not be granted
• K.G. Khosla Compressors Ltd vs Khosla Extraktions Ltd (1986) 1 Com LJ 211
• Held: A person cannot be permitted to name a company even after his personal name if that name resembles that of an existing
company.
• Turton vs Turton (1889) 42 Ch. D 128
• The plaintiffs carried on business under the firm name of Thomas Turton & Sons and had carried on business for many years. The
defendant, whose name was in fact John Turton, together with sons commenced a similar business as John Turton & Sons. The
plaintiffs sought to restrain them from using the name.
• Held: John Turton had the right to use his own name. The mere fact that it was commercially injurious to the first firm was not
enough reason to restrain him from using it however, where the evidence shows that the new comer is deliberately making a false
suggestion or that his name cannot be used in connection with particular goods without representing that they are the goods of his
better known rival, an injunction will be granted.
 Registered Office Clause
In this clause the name of the state is mentioned , the exact address of
the registered office is not required to be stated therein.
However within 15 days of the incorporation, the company must have a
registered office and the company must also furnish verification of the
registered office within 30 days of the incorporation in form no. INC 22
Along with Form no. INC 22 following documents to be attached :
i) Title deed of the property or the lease deed.
ii) If leased , authorisation of the owner to use it
iii) Copy of any bill i.e. electricity or telephone bill
• Verification of RO Sec. 12
 • Publication of Name Sec 12
Every company is required to state its name and address in legible
letters in conspicuous position outside its registered office and all other
offices where work is carried on and in all its business letters , bill heads
, letter paper.
Where a company has changed its name in the previous 2 years , the
company must state its former name along with its new name.
Object Clause
The object clause is of great importance as this is the clause which decides the scope of the
company or we can say that it determines the capacity of the company. It clearly states the
ambit of the company and beyond which nothing should be done.
Another purpose of this clause is to enable the investors to know the range of company’s
activities beyond which it can not go and if it acts beyond its ambit then that act will be an
ultra vires act and will be considered void.
• Implied powers:
• Simpson v. West Minister Palace Hotel 1860 (court used first time the doctrine of
ultravires)
• In this case, A minority argued that a decision to lease a major portion of the hotel as
offices was not within the objects of the hotel company and therefore was ultra vires. The
court held that a single member can maintain a suit for declaration.
• Oak bank oil company v. crum 1982 (its a public document)
• Not Implied powers: Limitations
Doctrine of Ultra Vires
• The term Ultra Vires means ‘Beyond Powers’.
• In legal terms, it is applicable only to the acts performed in excess of the legal powers of the doer. This works on an assumption that the powers are
limited in nature. Since the Doctrine of Ultra Vires limits the company to the objects specified in the memorandum, the company can be:
• Restrained from using its funds for purposes other than those specified in the Memorandum
• Restrained from carrying on trade different from the one authorized.
• The company cannot sue on an ultra vires transaction. Further, it cannot be sued too. If a company supplies goods or offers service or lends money
on an ultra vires contract, then it cannot obtain payment or recover the loan.
• Ashbury railway carriage and iron co v. riche (1875)
• Objective of Co:‘to make or sell, or lend, or hire, railway carriages and waggons, and all kinds of railway plants, fittings,
machinery and rolling stock; to carry on the business of the mechanical engineers and the general contractors; to purchase and
sell, as merchants, timber, coal, metals, or other materials; and to buy and sell any such materials on commission, or as agents.’
• The directors entered into an agreement for financing the construction of a railway line in Belgium with Mr. Riche. with SH
Agreement
• Into Consideration:
• To make, sell or give on hire railway carriages and wagons (Clause 3); and
• To carry on the business of mechanical engineers and general contractors (Clause 4).

“main objects rule” of construction.

Lord Cairns “it would authorise the making of contract of any and every description and the memorandum in place of specifying the particular
kind of business, would virtually point to the carrying on of the business of any kind whatsoever and would, therefore, be altogether
unmeaning“.
• The first time the concept of ultra vires was accepted in India was through the
case: Jahangir R. Modi V Shamji Ladha, 1866.
• Objective: memorandum of the Company, did not include dealing in shares nor the purchase of the Company’s
own shares.
• Plaintiff was foreign investor through Financial Association of Europe and India (Limited)
The plaintiff prayed for the following;

1. Defendants to be held accountable for all dealings in shares purchased on behalf of the Company and pay all the losses
incurred by the Company.
2. Defendants to repay to the Company all the monies of the Company spent by them in the purchase of the Company’s
shares.
3. Shares of the Company so purchased to be entered in the register of the Company in the defendants’ names.
• the Bombay High court held that a shareholder can maintain an action against the directors to compel them
to revive the funds, they utilized in transactions that they had no authority to enter into.
• Just in case of deliberate misapplication, criminal action also can be taken for fraud.
• However, a distinction must be drawn between transactions which are ultra vires the corporate and therefore
the transactions which are ultra vires the directors.
• Where the directors of Company exceed their authority, it could also be ratified by the overall body of the
shareholders. Provided the corporate has the capacity to try to that transaction as per its Memorandum of
association.
Lakshmanaswami Mudaliar v. LIC AIR 1963 SC
1185
• United India Life Assurance Company Ltd.
• In meeting decided to donate Rs. 2,00,000 from the
shareholders’ dividend fund in 1955.
• the directors of the corporate were authorised “to make
payments towards any charitable objects or any benevolent
object or for any general public or useful object’’.
• In 1956, LIC Act came into force & regulated life insurance
business by restricting object clause.
• This kind of donation was not allowed.
• Court said that, Company law allows companies to alter its
objects, as defined in its memorandum, after incorporation.
•
• Thus it became ultra vires.
 Classification of ultra vires act
Ultra vires to the Companies Act,2013: Act is considered as void-ab-initio. If act is ultra vires the Companies Act,2013 so

even though memorandum or articles of company authorised it, cannot be ratified in any circumstances and vice-versa to it.

Ultra vires the memorandum of company: Any action or activity which is beyond the scope of memorandum is ultra vires.

There can be a situation where part of action can be within the authority then only that part will be considered as intra vires and

rest will be ultra vires.

Ultra vires the Articles but intra vires the company: Any action taken outside the scope of articles of company is intra vires

to the company and can be ratify by making variations in articles.

Ultra vires the directors but intra vires the company: Any action made by the directors in excess of power provided to them

will be ultra vires but intra vires the company. Company has a chance to ratify and make it valid which shall be binding later on.
Interpretation
• Bell House ltd. v,. City wall properties ltd. 1966
• the principal set out in the company's memorandum was the
development of housing estates. However, the objects clause
contained a clause which empowered the directors to pursue any
business they considered advantageous to the company.
• subjective objects clause: “directors of this company are hereby
empowered to carry out any trade or business whatsoever which in
their opinion may be advantageously carried on by the company.”
• The courts held that the clause was valid and this effectively signed
the death warrant for the ultra vires doctrine.
Companies Act 2013
Section 6(b) of the Act states that, save as expressly provided in the Act, any
provision contained in memorandum, articles, agreement or resolution shall to the
extent to which it is repugnant to the provision of this Act, become or be void.
Section 10(1) of the Act states that subject to the provisions of the Act, the
memorandum and articles shall, when registered, bind the company and members to
the same extent as if they respectively had been signed by the company and by each
member, and contained covenants on its and his part to observe all provisions of the
memorandum and of the articles. This means that subject to the provisions of the Act,
the memorandum and articles have absolute binding effect and both the company
and the member must operate within its provisions.
Section 245(1)(a) of the Act; the members and depositors of the company can file an
application before the Tribunal on behalf of the members or depositors for restraining
the company from committing an act which is ultra vires of the articles or
memorandum of the company.
Effects and consequences of ultra vires

1. Void ab initio
2. Injunction
3. Breach of warranty of authority
4. Personal liability of directors
5. Ultra vires contracts
6. Ultra vires acquired property
7. Ultra vires borrowings
8. Ultra vires torts
 Exceptions to the doctrine of ultra vires

1. An act which is intra vires the company but outside the authority of the
directors may be ratified by the shareholders in proper form
2. An act which is intra vires the company but done in an irregular manner
may be validated by the consent of all the shareholders.
3. If the company has acquired any property through an investment which
is ultra vires the company’s right over such a property shall still be
secured
4)When applying the doctrine of ultra vires ,the effects
which are incidental or consequential to the act shall not
be invalid unless they are expressly prohibited by the
companies act.
5)There are certain acts under the company’s law which
tough not expressly stated in the memorandum are
deemed impliedly within the authority of the company
and therefore not deemed ultra vires
6)If the act of the company is ultra vires the articles of
association the company can alter its articles in order to
validate that act
Attorney General v. Mersey Railway Co, (1907) 1 Ch. 81

A company was incorporated for carrying on a hotel business.

It entered into a contract with some third party for purchasing furniture, hiring servants and for maintaining omnibus.
The purpose or object of the company was only to carry on a hotel business and it was not expressly mentioned in
the objects clause of the memorandum of the company that they can purchase furniture or hire servants.
This deal was challenged and was sought from the court that this act of the directors be held as ultra vires.
Issue: Whether the transaction was ultra vires?
Decision: The court held that a company incorporated for carrying on a hotel could purchase furniture, hire servants
and maintain omnibus to attend at the railway station to take or receive the intending guests to the hotel because
these are reasonably necessary to effectuate the purpose for which the company has been incorporated and
consequently these are within the powers of the company, although these are not expressly mentioned in the objects
clause of the memorandum of the company, or the statute creating it.
Thus a company which has been authorized to deal with its property has implied power to pledge or Mortgage the
property for its debts. It is to be noted that if the act of the company is neither within the objects clause in its
memorandum or the statute creating it, nor necessary for or incidental to or consequential upon the attainment of
the objects stated in the objects clause of the memorandum.
 Question
Q1. The Memorandum of Association of Bull Marine Cargos Limited specifies the following objects:

● Make, sell or lend on hire, cargo carriages

● Carry on the business of mechanical engineers and general contractors for ships.
● Purchase and sell as merchants or agents, coal, timber, metals etc.

The directors of Bull Marine Cargos Limited enter into a contract with another company XYZ Limited for financing the construction of a Port in
Gujarat. Further, the company ratifies this act of the directors by passing a special resolution. Subsequently, the company repudiated the contract as
being ultra vires.

However, XYZ Limited sued Bull Marine Cargos Limited for damages for breach of contract since the contract was well within the meaning of the term
‘general contractors’ and the shareholders had ratified it. Is it a valid and legal contract?

Q2. Ultra Vires v. Illegal

Q3. Basic Principles of UV

Q4
A company was incorporated which engaged in the business of manufacturing chemicals.

The company’s object clause in the memorandum authorized the company to do “all such business and things as
may be incidental or conducive to the attainment of the objects of the company”.

By a resolution passed, the manufacturers of the company could distribute a certain sum of money out of the
surplus to universities in furtherance of scientific research and training.

The resolution was challenged on the grounds of it being the ultra vires the power of the company and beyond
the object clause of the memorandum.

The directors of the company contended that for the purpose of the trained people to be employed it was
difficult for the company to find such trained men in the field of scientific research and education, therefore, in
order to promote such field of education among people, the company had to pass such a resolution.

Issue: Whether the transaction is ultra vires.

Evans vs Brunner & Mond Co: (1921) 1 Ch 359: 90 LJ Ch 294

The court upheld the decision in the favour of the company by stating that the resolution
passed by the directors of the company cannot be held as ultra vires since the resolution was
ancillary/incidental or conducive to the attainment of the main object of the company.

It further explained that “Acts which are ancillary, or incidental are those acts which have a
proximate connection with the objects stated in the memorandum and which directly or
indirectly enables the company to promote its own business”.

And ‘gifts’ and ‘ex- gratia’ payments given to workers to induce them to work hard have been
upheld by the court.
Basic principles included the following:

1. An ultra vires to MOA, transaction cannot be ratified by all the shareholders, even if they wish
it to be ratified.
2. The doctrine of estoppel usually precluded reliance on the defense of ultra vires where the
transaction was fully performed by one party
3. A fortiori, a transaction which was fully performed by both parties could not be attacked.
4. If the contract was fully executory, the defense of ultra vires might be raised by either party.
5. If the contract was partially performed, and the performance was held to be insufficient to
bring the doctrine of estoppel into play, a suit for quasi contract for recovery of benefits
conferred was available.
6. If an agent of the corporation committed a tort within the scope of his or her employment,
the corporation could not defend on the ground the act was ultra vires.
d) Liability Clause [Section 4(1)(d)]

• This clause has to state the nature of liability that the members incur.
In the case of the company limited by shares the members are liable
only to the amount unpaid on the share as taken by them. if his
shares fully paid up his liability is nil. Where a shareholder holding a
Rs.10 share has paid Rs. 5 on it, he can be called upon to pay the
balance of Rs.5.
• In case he has paid the full value of Rs. 10 he cannot be
required to pay anything more even if the company owes
huge debts to its creditors.
• In case of a company limited by guarantee the members
are liable to the amount undertaken to be contributed by
them to the assets of the company.
• The liability clause is omitted from memorandum of
association of unlimited companies.
• Any alteration in the memorandum compelling a member
to take up more shares or which increases his liability,
would be null and void.
e) Capital Clause [Section (4)(1)(e)]
• The memorandum of a company limited by its shares must state the
authorized share capital, the different kinds of shares and the nominal
value of each share. Provisions as nature of these shares are more
properly to be made in the articles .
• The amount of share capital with which the company is to be
registered is left to the discretion of those promoting it.
f) Association or Subscription clause
[Section 13(4)(c)]
• This clause provides that those who have agreed o subscribe to the
memorandum must signify their willingness to associate and form a
company.
• Association clause generally runs in the following forms, “We the several
people whose name and address is a subscriber id of being formed into a
company the persons of the memorandum of association and we are
respectively agree to take the number of shares in the capital of the
company that operate a respective names”.
• The memorandum has to be signed by its
each subscriber in the presence of at least
one witness who can attest the signatures
one witness to all the signatures is sufficient .
• But a subscriber cannot attest the signatures
of another subscriber.
• No subscriber to the memorandum shall take
less than one share. This clause need not be
numbered.
g) Nomination or Succession Clause
(in case of One Person Company)
• In case of a one person company there is a requirement to have 7th
clause to describe the nominee in the event of the date that of the
subscriber.
• Prior written consent of nominee required to be obtained in form No.
INC 3. Nomination, in Form No. INC 2. along with written consent in
form No. INC 3shall be filed with ROC at the time of incorporation of
OPC along with the memorandum and articles
Printing and Signing of Memorandum Under Rule 13 of
Companies (incorporation ) Rules,2014

• U/S 3(1) of the companies act ,2013

• At least seven persons in case of a public company
• At least two persons in case of a private company
• At least one person in case of one person company (OPC)
must subscribe to the shares of the company.

continued…..
• In case of an literate subscriber to the memorandum ,the
thumb impression or mark duly attested by the person
writing for him should be given
• The memorandum shall be printed . Computer printing is
recognized for this purpose. It shall be divided into
paragraphs numbered consecutively and shall be signed
by each subscriber , with his address, description and
occupation added in the presence of at least one witness
who will attest the same
Alteration of MOA
• As per Section 2(3) of the Companies Act, 2013 (the Act) “alter” and
“alteration” shall include the making of additions, omissions and
substitutions.
• Following are the cases where a company has to alter its
Memorandum of Association (MOA) as per provisions of Section 13 of
the Act read with Companies (Incorporation) Rules, 2014 (the Rules)