Memorandum of Association• Memorandum of Association is the main document of the company, which defines its constitution and objects and lays down the fundamental conditions upon which alone the company is allowed to be formed.• It is correctly termed as the charter of the constitution of the company as he defines the scope of its activity and also states that anything beyond it is unauthorized and illegal.
• According to Section 2(28) of the Companies Act, Memorandum of Association is defined as "Memorandum of Association as originally framed or as altered from time to time in pursuance of any previous Companies Law or of this Act.“• Thus Memorandum of Association is a public document binding on the company and the members specifying the scope of the activities of the company and also anything beyond which is illegal or unauthorized.
• The Memorandum of Association must be printed, divided into paragraphs, numbered consecutively and signed by each subscriber (seven or more in case of a public company), who must add his name, address and description in the presence of at least one witness who is to attest the signature.
Clauses of Memorandum of Association Memorandum of Association must have the following clauses:• 1.Name clause.• 2.Registered office or Situation clause.• 3.Object clause.• 4.Liability clause.• 5.Capital clause.• 6.Subscription clause.
1. Name Clause• The Company is a legal entity. Therefore, it must have its name to establish its identity.• The name of the company should not be similar to the name of the another company nor in the opinion of Central Government be undesirable or which will mislead the public and its use.• Therefore, prohibited by the Government under the Emblems(symbolic representation) and Names (Prevention of Improper Use) Act, 1950.• The companys name must display prominently the suffix Ltd. Or ‘Pvt. Ltd. However the company can change its name by passing a special resolution and obtaining the approval of the Central Government.
2. Registered Office Clause• Memorandum of Association must state the name of the State in which the registered office of the company is situated.• This clause is important as it mentions the residence for the purpose of the communication with the company.• It determines the jurisdiction of the company and also mentions the place where all the records of company are maintained.• Where the company wants to change its registered office from one state to another then it can do so by passing a special resolution as well as by confirmation of Company Law Board.• Such confirmation will be given provided debenture holders and creditors are satisfied and such alteration is fair.
3. Object Clause• It is the most important clause in the Memorandum of Association. It defines and limits the scope and sphere of the operation of the company.• It explains to the members the scope of activities of the company. It affords protection of its funds. It states the main objects as well as incidental objects of the company.• The transaction which does not fall within the scope of the main objects of the company will not be valid and binding on the company simply because it is not beneficial for the company.• As regards to the alteration of object clause a special resolution must be passed and the confirmation by the Company Law Board must also be obtained.• The alteration is done to obtain a main purpose by new means or to enlarge the area of its operation, or to restrict the objects or sell or dispose of or amalgamate the undertaking.
4. Liability Clause• The liability clause states that the member or the shareholder will be liable to pay only the unpaid value of shares held by him.• If it is a company limited by guarantee, Memorandum of Association must further state that each member undertakes to contribute to the assets of the company at the time of the winding up while he is a member.• Ordinarily this clause cannot be altered except that the liability of the directors may be made unlimited under certain circumstances.
5. Capital Clause• Amount of share capital with which the company is to be registered and its division into shares of a fixed amount must be stated in the Memorandum of Association of a company limited by shares.• Capital clause can be varied or capital can be reduced (by special procedure) or the rights of the shareholders are varied or create reserve liability.
6. Subscription Clause• Maximum seven members in a public company and two members in a private company are shown in a Memorandum.• A declaration is to be given. Such declaration is to be signed by a member in presence of a witness.• Moreover the details as regards to name, address, age, and business of the promoters are also recorded under this clause.