Articles and Memorandum of association
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Articles and Memorandum of association

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breif discription on memorandum of association and article of association

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    Articles and Memorandum of association Articles and Memorandum of association Document Transcript

    • Subject- Business Law Topic- Articles and Memorandum of association AyushTaparia
    • Memorandum of association The memorandum of association of a company, often simply called the memorandum (and then often capitalized as an abbreviation for the official name, which is a proper noun and usually includes other words), is the document that governs the relationship between the company and the outside. It is one of the documents required to incorporate a company in the United Kingdom, Ireland, India, Bangladesh, Pakistan and Sri Lanka, and is also used in many of the common lawjurisdictions of the Commonwealth. CONTENTS OF MEMORANDUM OF ASSOCIATION 1.Name 2.Object 3. Registered office clause 4.Liability Clause 5.Capital clause 6.Association or subscription 1. Name Clause[ section 13(1)(a)]:-The memorandum must state the name of the company with „limited „ as the word ,in case of a public limited company and with „private limited', in the case of a private limited company .the company is free to choose any name but it must not be undesirable or must not resemble the name of any other registered company. 2.Registered office clause [section 13(1)(b)]:-The state in which the registered office of a company will be situated is mentioned in
    • this clause .the registered office of the company is the official address of the company where the statutory books and records must normally be kept. 3. Object Clause section 13(1)(c)&(b)] :-This clause is quite important and must be very carefully drafted as it determines the activities of the company. In the object clause each and every detail of activities of the business to be carried out must be laid down.  Main object:- this sub-clause contains the main objects of the company to the pursued on its incorporation  Objects incidental or ancillary :- it covers the objects which are incidental or ancillary to the attainment of the main object  Other objects: - this sub-clause will cover any objects which are not included in the „main objects „. 4. Liability Clause[section 13(2)]:-This clause states the nature of liability of the members of the company .in the case of a company limited by share or by guarantee the fact that the liability of its members is limited must be made absolutely clear . In case of a company limited by shares the liability of a member is limited to the nominal value of the share held by him .if the share are fully paid up his liability is nil. But in case of partly paid-up shares the liability is limited to the amount which is unpaid.In case of a company limited by guarantee ,the liability clause must state the amount which every member undertakes to contribute to the assets of the company in the event of its winding up. 5. Capital Clause[section 13(4)(a)] :-This clause states that amount of the capital with which the company is to be registered .this clause should also state the number and face value of shares into which the capital of the company is divided. The capital with which the company is „registered‟ or „nominal‟ or „authorized. 6. Association clause [section 13(4)(c)] :-The association clause states – in this cause , the subscribes declare that they desire to be
    • formed into a company and agree to take the shares stated against their names .the names ,address and occupation of the subscribers must be given each subscriber must sign in the presence of at least Requirements While it is still necessary to file a memorandum of association to incorporate a new company, it no longer forms part of the company‟s constitution and it contains limited information compared to the memorandum that was required prior to 1 October 2010. The Companies (Registration) Regulation 2008 in fact included pro-forma Memoranda. It is basically a statement that the subscribers wish to form a company under the 2006 Act, have agreed to become members and, in the case of a company that is to have a share capital, to take at least one shares each. It is no longer required to state the name of the company, the type of company (such as public limited company or private company limited by shares), the location of its registered office, the objects of the company, and it‟s authorized share capital. Companies incorporated prior to 1 October 2009 are not required to amend their memorandum. Those details which are now required to appear in the Articles, such as the objects clause and details of the share capital are deemed to form a part of the Articles.
    • Capacities The memorandum no longer restricts what a company is permitted to do. Since 1 October 2009, if a company's constitution contains any restrictions on the objects at all, those restrictions will form part of the articles of association. Historically, a company's memorandum of association contained an objects clause, which limited its capacity to act. When the first limited companies were incorporated, the objects clause had to be widely drafted so as not to restrict the board of directors in their day to day trading. In the Companies Act 1989 the term "General Commercial Company" was introduced which meant that companies could undertake "any lawful or legal trade or business." This is prime document to form a Company Purpose The memorandum of association records the agreement of the first subscribers to form a company under the 2006 Act, to become members and, in the case of a company that is to have a share capital, to take at least one share each.
    • Case: Company for Restaurant Husband and wife, Niraj and Seema Mishra, based in Mumbai, are forming a company. They want a short name for the company with their surname in it. The company is being formed to run a restaurant. They project they would need 20 lakhs as the capital of the company. Immediately, the husband would contribute Rs. 2,00,000 to the share capital of the company and wife Rs. 10. Mr. Mishra hopes to find others, after the company is formed, to take the shares of the company. They also contemplate occasionally hiring out the car they would buy for the company. Develop a Memorandum of Association for the Company. CASE: ASHBURY RAILWAY CARRIAGE & IRON COMPANY LTD. Y. RICHE The company has been formed with the object: • To make and sell, or lend or hire railway carriage and wagons and all kinds of railway plants, to carry on the business of mechanical engineers and general contractors etc. • The company contracted with Riche to finance the construction of Railway line in Belgium. The company repudiated the agreement and was sued for breach of contract. Rich Contended: • Firstly, that the contract in question came well within the meaning of the words „general contractors‟, and, was therefore, within the powers of the company, secondly, that the contract was ratified by the majority of the shareholders.
    • Memorandum of Association of the Mishra private limited I. The name of the company is Mishra Private Limited II. The registered office of the company will be situated in the state of Maharashtra. III. The objective for which the company is begin established are as follows: a. Main object: running of restaurants b.Ancillary object : opening bank accounts, hiring premises an running of bakery c. Other objects: Hiring out of vechicles IV. The liability of the members is limited v.The authorized share capital of the company is RS.20,00,000,divided into 2,00,000 IV. The liability of the members is limited v. The authorized share capital of the company is RS.20,00,000,divided into 2,00,000
    • DOCTRINE OF ‘ULTRA VIRES’ The words : • Ultra means beyond • Vires means the powers • Ultra Vires means beyond the powers A company which owes its incorporation to statutory authority cannot effectively do anything beyond the powers expressly or impliedly conferred upon it by the statute or Memorandum of Association.
    • Articles of Association “The articles proceed to define the duties, the right and the powers of the governing body as between themselves and the company at large and the mode and form in which the business of the company is to be carried on and the mode and form in which changes in the internal regulations of the company may from time to time be made.” - Lord Cairns Items covered by the Articles of Association include:- • The important • Powers, duties, rights and liabilities of Directors • Powers, duties, rights and liabilities of members • Rules for Meetings of the Company • Dividends • Borrowing powers of the company • Calls on shares • Transfer & transmission of shares • Forfeiture of shares • Voting powers of members
    • Companies which must have Articles • Unlimited Companies: – The Articles of such a company must state: • Total number of members; and • Share capital. • Companies limited by Guarantee: – Articles of such company must state total number of members. • Private Companies limited by shares: – Must include requirements of Section 3(1)(iii). No Article Company • A publiclimited company having share capital may be registered without Articles. ALTERATION OF ARTICLES (SEC 31) Procedure: • Alteration by passing a special resolution. • Copy of resolution to be sent to registrar within 30 days. • Copy of altered articles to be registered within 3 months of passing of resolution.
    • LIMITATIONS REGARDING ALTERATION OF ARTICLES 1. Alteration should not be inconsistent with a. Provisions of Company Act or any other statute b. Conditions contained in memorandum 2. Approval of govt. to be obtained in certain cases 3. Alteration must not deprive any person of his rights under a contract 4. Alteration must not constitute a fraud on the minority 5. Alteration must be bonafide for the benefit of the company as a whole
    • DOCTRINE OF CONSTRUCTIVE NOTICE • Documents are open & accessible to all. • Presumption that any outsider dealing with company has read & understood the documents. • It is a negative doctrine, acting only against the outsiders & not the company. DOCTRINE OF INDOOR MANAGEMENT • Persons dealing with the company in good faith have a right to assume that the internal requirements prescribed in public documents have been observed • Persons are not bound to enquire into regularity of internal proceedings Exceptions : • Knowledge of irregularity • Negligence on part of the outsider • Forgery • Acts outside scope of apparent authority