Memorandum and Articles of Association under CA,2013

Introduction:

Memorandum of association is the charter of the company and defines the scope of its activities. An article of association of the company is a document which regulates the internal management of the company.

Memorandum of association defines the relation of the company with the rights of the members of the company interest and also establishes the relationship of the company with the members.

Definition- Memorandum:

As per Section 2(56) of the Companies Act,2013 “memorandum” means the memorandum of association of a company as  originally framed or as altered from time to time in pursuance of any previous company law or of this Act.

Memorandum Of Association:

Section 4 of the Companies Act,2013 deals with MOA. The Memorandum of a company shall contain the following;

1. Name Clause:

The name of the company with the last word “Limited” in the case of a public limited  company, or the last words “Private Limited” in the case of a private limited company.

2. Situation Clause:

The State in which the registered office of the company is to be situated.

3. Object Clause:

The objects for which the company is proposed to be incorporated and any matter  considered necessary in furtherance thereof.

4. Liability Clause:

The liability of members of the company, whether limited or unlimited, and also state,—

(i) in the case of a company limited by shares- liability of its members is limited to the amount unpaid, if any, on the shares held by them; and

(ii) in the case of a company limited by guarantee-the amount up to which each member undertakes to contribute—

(A) to the assets of the company in the event of its being wound-up while he is a member or within one year after he ceases to be a member, for payment of the debts and liabilities of the company or of such debts and liabilities as may have been contracted before he ceases to be a member,as the case may be; and

(B) to the costs, charges and expenses of winding-up and for adjustment of the rights of the contributories among themselves;

5. Capital Clause:

(i) 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 which the subscribers to the memorandum agree to subscribe which shall not be less than one share; and

(ii) the number of shares each subscriber to the memorandum intends to take, indicated opposite his name;

In the 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.

Identical/undesirable names;

The name stated in the memorandum shall not—

(a)be identical with or resemble too nearly to the name of an existing company registered under this Act or any previous company law; or

(b) be such that its use by the company—

(i) will constitute an offence under any law for the time being in force; or

(ii) is undesirable in the opinion of the Central Government

A company shall not be registered with a name which contains—

(a) any word or expression which is likely to give the impression that the company is in any way connected with, or having the patronage of, the Central Government, any State Government, or any local authority, corporation or body constituted by the Central Government or any State Government under any law for the time being in force; or

(b) such word or expression, as prescribed in the Companies (Incorporation) Rules, 2014.

unless the previous approval of the Central Government has been obtained for the use of any such word or expression.

Reservation of name:

A person may make an application in Form No. INC.1 along with the fee as provided in the Companies (Registration offices and fees) Rules, 2014 to the registrar for the reservation of a name set out in the application as-

(a) the name of the proposed company; or

(b) the name to which the company proposes to change its name

The Registrar may, on the basis of information and documents furnished along with the application, reserve the name for a period of sixty days from the date of the application.

Penalty:

If the company has not been incorporated, the reserved name shall be cancelled and the person making application shall be liable to a penalty which may extend to Rs.1,00,000/-

Action:

If the company has been incorporated, the Registrar may, after giving the company an opportunity of being heard—

- either direct the company to change its name within a period of three months, after passing an ordinary resolution;

- take action for striking off the name of the company from the register of companies; or

- make a petition for winding up of the company.

Form of Memorandum:

The memorandum of a company shall be in respective forms as outlined below

Any provision in the memorandum or articles, in the case of a company limited by guarantee and not having a share capital, purporting to give any person a right to participate in the divisible profits of the company otherwise than as a member, shall be void

MOA- CA2013 Vs CA1956:

Articles of Association:

Definition –Articles:

As per Section 2(5) of the Companies Act,2013  “articles” means the articles of association of a company as originally framed or as altered from time to time or applied in pursuance of any previous company law or of this Act.

Section 5 of the Companies Act,2013 deals with AOA.

The articles of a company shall contain the regulations for management of the company.

 The articles shall also contain such matters, as may be prescribed.

It shall be not prevent a company from including such additional matters in its articles as may be considered necessary for its management.

Provisions for Retrenchment:

The articles may contain provisions for entrenchment to the effect that specified provisions of the articles may be altered only if conditions or procedures as that are more restrictive than those applicable in the case of a special resolution, are met or complied with.

The provisions for entrenchment shall only be made by

Notice to Registrar:

Where the articles contain the provisions for entrenchment, the company shall give notice to the Registrar of such provisions in Form No.INC.2 or Form No.INC.7, as the case may be, along with the fee as provided in the Companies (Registration offices and fees) Rules, 2014 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 thirty days from the date of entrenchment of the articles, as the case may be, along with the fee as provided in the Companies (Registration offices and fees) Rules, 2014

Form of Article:

The articles of a company shall be in respective forms as outlined below;

A company may adopt all or any of the regulations contained in the model articles applicable to such company.

In case of any company, which is registered after the commencement of this Act, in so far as the registered articles of such company do not exclude or modify the regulations contained in the model articles applicable to such company, those regulations shall, so far as applicable, be the regulations of that company in the same manner and to the extent as if they were contained in the duly registered articles of the company.

Nothing in this section shall apply to the articles of a company registered under any previous company law unless amended under this Act

AOA- CA,2013 Vs CA,1956:

Disclaimer:

The entire contents of this document have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation. Though utmost efforts has made to provide authentic information, it is suggested that to have better understanding kindly  cross-check  the relevant sections, rules under the Companies Act, 2013

CS M.KurthalaNathan

Practising Company Secretary

csmknathan.blogspot.in