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MEMORANDUM OF ASSOCIATION

"THE MEMORANDUM OF ASSOCIATION", as observed by Palmer, "is a document of great importance in relation to the proposed company".

The Memorandum of Association is a document that specifies the constitution of a company and hence it is the foundation on which the company’s structure is built.

It states the scope of the company’s activities and also its relations with the outside world. Formation of Memorandum of Association is the first step when the company is being registered.

While formation of company its necessary to members to subscribe to memorandum of association. To subscribe means to make one’s signature or mark a document as an approval or attestation of its contents.

The memorandum of association of a company contains the objects of the company which it shall do. It not only shows the objects of formation of the company but also determines the scope of its authority to operate.

MOA and AOA of a Company under Companies Act - Memorandum of Association

CLAUSES UNDER MEMORANDUM OF ASSOCIATION

1. NAME CLAUSE

A company being a legal entity shall have a name of its own to known its separate identity. The name of the public company shall end with word ‘Limited’ and in case of private company the name of the company shall end with the word ‘Private Limited’. Section 4(1) of the Companies Act, 2013 says that the name of the company is a symbol of its independent corporate existence. This is not applicable in case of the company is Section 8 Company.

The name of the company shall not give any expression or word which is connected with Central Government or State Government or any Local Authority.

As per Section 4(2), the name shall not be such that its use will constitute an offence under any law or is undesirable in the opinion of Central Government.
The promoter of the company has to make application to the Registrar for reservation name. The Registrar reserves the name of the company for a period of 60 days from the date of application for reservation of name.

2. SITUATION CLAUSE

The state in which the Register Office of the company is situated must be given in Memorandum. According to Section 12 of the Act, within 15 days of the Incorporation of the company, the company must have Registered Office to which all communication and notice may be sent.

The company shall paint or affix its name and address of its registered office on the outside of every office or place in which its business is carried on.

3. OBJECT CLAUSE

The Memorandum of Association must specify the object for which the company is proposed to be incorporated and any matter considered necessary in furtherance thereof. The company cannot act beyond the power of its Memorandum of Association.

Any act which is beyond the Memorandum is called Ultra Vires transaction, which are void ab initio.

 

4. LIABILITY CLAUSE

The liability of member of the company, whether limited or unlimited must specify it in Memorandum of Association under Liability clause. In case of company limited by shares, the liability of member is limited up to the amount unpaid on shares held by its member.

In case of a guarantee company, the Memorandum must specify the amount up to which each member undertake to contribute to the assets or the company in the event of its being wound up.

5. CAPITAL CLAUSE

This clause shall state the capital amount with which the company is being registered.

Nominal value of the share is the shares into which the capital is divided and of a fixed value. The capital can be known as "nominal", "authorized" or "registered". This amount lays down the maximum limit beyond which the company cannot issue shares without altering the memorandum.

6. SUBSCRIPTION CLAUSE

Subscribers to the Memorandum agrees to subscribe prescribed number of shares stated against their names in the Memorandum of Association.

The subscribers to the Memorandum of the company has to take at least one share. Each subscriber must write opposite his name the number of shares that he agrees to take.

ARTICLE OF ASSOCIATION

Article of Association of company are its bye laws or also rules and regulations that governs or control the management of its internal affairs and conduct its business.

The Article of Association of company are subordinate to the Memorandum of Association and are also governed by the Memorandum of Association.

It is mandatory for every company to have its own Article of Association.

As per Section 5 of the Companies Act, 2013 states entrenchment provision provides that provision of Article can also be altered only if the more restrictive condition or procedure are comply with.

 

CONTENTS OF ARTICLE OF ASSOCIATION

The articles set out the rules and regulations framed by the company for its own working. The articles should contain generally the following matters: Exclusion wholly or in part of Table F.

  1. Adoption of preliminary contracts.
  2. Share Capital, variation of rights, Number and value of shares.
  3. Issue of preference shares.
  4. Allotment of shares.
  5. Calls on shares.
  6. Lien on shares.
  7. Transfer and transmission of shares.
  8. Forfeiture of shares.
  9. Alteration of capital.
  10. Buy back.
  11. Share certificates.
  12. Conversion of shares into stock.
  13. Voting rights and proxies.
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