MEMORANDUM OF ASSOCIATION

➢ Clauses
➢ Alteration
➢ Doctrine of ultra vires
Meaning
Memorandum of Association is the main document of a company which
defines its objects. It lays down the fundamental conditions upon which
alone the company is allowed to be formed. It may be termed as the
charter or the constitution of the company since it governs the
relationship of the company with outside world.
According to Section 2(56) of Companies Act, Memorandum means
"Memorandum of Association as originally framed or as altered from
time to time in pursue of any previous companies law, or of this Act".
Any provisions contained in the Memorandum of Association will be
void to the extent to which they are repugnant to the provisions of the
Companies Act.
According to Palmer, the Memorandum of Association contains the
objects for which the company is formed, and therefore identifies the
possible scope of its operations beyond which its actions cannot go. It
defines as well as confines the power of the company. If anything is
done beyond these powers that will be ultra vires the company and
therefore void.
Purposes of Memorandum
A memorandum serves two important purposes:
(i)It enables the intending shareholder to know the field of activity or to
what purpose his money is going to be used by the company, and what
risk he is taking in making the investment.
 (ii) Similarly, anyone who is dealing with the company, for example,
the sup- plier of goods or money, will know whether the transaction
he intends to make with the company is within the objects of the
company, and not ultra vires its objects.
The memorandum is required to be printed, divided into paragraphs,
numbered consecutively and signed by at least seven persons (two in
case of a private company) in the presence of at least one witness, who
will attest the signatures. The particulars about the signatories to the
memorandum as well as the witness, as to their address, description,
occupation etc., must also be entered
A Public Document
Memorandum of Association is a public document, therefore, every
person who deals with the company is presumed to have sufficient
knowledge of its contents. It is open for public inspection.
A company, on being required by a member, is bound to supply to him
with a copy of its memorandum on payment of the prescribed fee. The
copy must be sent within seven days. In case the company makes
default in complying with this requirement, the company, and every
officer of the company who is in default shall be punishable for each
offence, with a fine of 1000 per day till the default continues or 1 lakh
whichever is less (Sec. 17). However, the right to obtain copy has not
been given by law to a person other than a member.
Clauses of Memorandum of Association [Sec. 4]
Memorandum must have the following clauses:
(1) Name Clause
(2) Situation Clause
(3) Objects Clause
(4) Liability Clause
(5) Capital Clause
(6) Association Clause or Subscription Clause
Name Clause
A company being a distinct legal entity must have a name of its own in
order to establish its separate identity. The general rule is that a
company can be registered with any name it likes subject to the
following restrictions:
(a) The last words of the name must end with the words 'limited' or
'private limited' as the case may be. In case of a One Person Company
'OPC' is to be mentioned below the name of the company. It is not
necessary that the word 'company' should form part of the name.
(b) As per Section 4(2) no company can be registered with a name,
which in the opinion of the Central Government is undesirable. If a
name is
dentical with, or closely resembles the name of an existing company, it
may be deemed to be undesirable by Central Government.
(c) The name adopted by the company should not violate the provisions
of the Emblems and Name Act, 1950.
(d) The name should not connote Government participation or
patronage unless circumstances justify the usage of such words. It
should not include the word co-operative, bank, banking, insurance,
investment unless the circumstances justifies.
Requirements
As per Section 12(3) every company should
◆Paint or affix its name, outside its registered office, and outside every
place where it carries on business, in a conspicuous position, in legible
letters and in the language in general use in the locality;
◆Have its name engraved in legible characters on its seal
◆Get its name, address of its registered office and corporate identity
num- ber along with telephone number, fax number, if any, e-mail and
website addresses, printed in all its business letters, letter papers,
billheads and in all its notices and other official publications; have its
name printed on hundies, promissory notes, bills of exchange.
Default
If there is any default in compliance it will lead to a fine of 1000 per day
on the company and every officer of the company who is in default till
the default continue but not exceeding one lakh rupees.
Situation Clause
Memorandum of Association must state the name of the State in which
the registered office of the company is to be situated. The registered
office clause is important for two reasons:
(i)Firstly, it determines the domicile of the company. This in turn
establishes the jurisdiction of the High Court of the State in which
the registered office is situated.
(ii) And secondly, it is at the registered office where the company's
statutory books are normally kept, and to which notices and other
communication can be sent.
Registered office of a company is the place of its residence of the
purposes of delivering or addressing any communications, service of
any notice or process of Court of Law and for determining the
question of jurisdiction in any action against the company. A
company need not carry on its business at its registered office. Nor
there is any bar to having a registered office in one state and carrying
on business in another. But, every company must have a registered
office within 30 days of its incorporation.
Objects Clause
The most important clause in the memorandum of association of a
company is the object clause. It is object clause which lays down the
objects of the company. A company cannot do anything beyond or
outside its objects and any act done beyond them will be ultra vires
and void. A company can exercise only such powers as are either
expressly stated therein or as may be necessary in furtherance of its
objects.
According to Section 4(C) the Memorandum of Association of a
company must state the objects for which the company is proposed
to be incorporated and any matter considered necessary in
furtherance thereof
Liability Clause
Liability clause mentions the liability of members of the company. In
case of a company limited by shares, Memorandum of Association
must have a clause to the effect that the liability of the members is
limited to the extent of the amount of the unpaid portion of the
shares held by him. The Memorandum of Association a company
limited by guarantee must state the amount which each member
undertakes to contribute to the assets of the company in the event
of its being wound up. [Section 4(1)(d)]
In case of a company having a share capital [Sec. 4(1)(e)], the amount
of share capital with which the company is to be registered and the
division thereof into shares of a fixed amount and the number of
shares with the subscribers to the memorandum agree to subscribe
which shall not be less than one share and the number of shares
each subscriber to the memorandum intends to take indicated
opposite his name.
In case of One Person Company, the name of the person who, in the
event of death of the subscriber, shall become the member of the
company [Sec. 4(1)(f)].
Capital Clause
Memorandum of Association of a limited company having share
capital (ie. company limited by shares or company limited by
guarantee having share capital) must also state the amount of share
capital with which the company is to be registered which is usually
called authorized or nominal capital. Further, division of registered
share capital into shares of a fixed amount is also required to be
given in the memorandum. Each subscriber must take at least one
share and write opposite his name the number of shares he takes.
Association Clause
This clause states that the persons subscribing their signatures at the
end of the Memorandum are desirous of forming themselves into an
association in pursuance of the Memorandum. Memorandum of
Association must be signed by seven or more persons in the case of a
public company and by two or more persons in the case of a private
company. Signatures shall be attested by witnesses. There may be
one witness for all signatures but one subscriber cannot be a witness
to the signatures of another. Full description, address, occupation,
etc. of the subscribers and witnesses must be written. In the case of
a company having share capital, each subscriber is also required to
take at least one share and to write opposite his name the number of
 shares he agrees to take. Subscribers are required to pay for these
shares after the company is incorporated. They must also sign
articles of association of the company.
Alteration of Memorandum of Association
A company may alter the provisions of its memorandum by passing a
special resolution and after complying with the procedure specified in
the Act, (Sec. 13).
Alteration in the Name Clause [Sec. 13(2)]
1 .The name of a company can be changed any time by passing a
special resolution at the general meeting of the company, and getting
the approval of the Central Government in writing.

The change of name shall not be allowed to a company which has

default- ed in filing its annual returns or financial statements or any
document due for filing with the Registrar or which has defaulted
in repayment of matured deposits or debentures or interest on
deposits or debentures
[Companies (Incorporation) Rules, 2014]
2. A change of name which merely involves the deletion or
addition of the word 'private' on the conversion of a public
company into private of vice versa doesn't require the approval of
Central Government.

3. If, through inadvertence or otherwise, a company is registered

by a name which, in the opinion of the Central Government, is
identical with or too nearly resembles the name by which a
company in existence had been previously registered, it may direct
the company to change its name and the company shall change its
name or new name, as the case may be, within a period of 3
months from the issue of such direction, after adopting an
ordinary resolution for the purpose;
Where a company changes its name or obtains a new name, it
shall with- in a period of 15 days from the date of such change,
give notice of the change to the Registrar along with the order of
the Central Government,
who shall carry out necessary changes in the certificate of
incorporation and the memorandum.
It is to be noted that change of name will neither affect any rights
or obligation of the company nor render any legal proceedings by
or against the company defective in any way