Memorandum of Association

● According to section 2(56), “memorandum” means memorandum of association of

the company as originally framed and altered from time to time and registered under
the Act.
● In the absence of clear definition of Memorandum under the Companies Act,
memorandum can defined as:
- It is the charter of the company
- It is the constitution of the company
- It gives the fundamental conditions under which a company is incorporated
- It defines the objects of the company
- It specifies the scope of power of the company

● Every company registered under the Act must have a memorandum of association
● Anything done beyond the scope of the memorandum is ultra virus and cannot be
ratified even by the whole body of shareholders
● Purpose of Memorandum
● It enables the investor to know the purpose for which his money will be used by the
company, and the extent of risk he takes while making investments
● Anyone dealing with the company will know without doubt, the contractual powers
and limitations of the company
● Form of Memorandum: [sec.4]
● The memorandum of association should be in the following forms specified in
Schedule-1 depending on the type of the Company
● Table A - for companies limited by shares
● Table B - for companies limited by guarantee and not having share capital
● Table C - For company limited by guarantee and having share capital
● Table D - for unlimited companies and not having share capital
● Table E - for unlimited companies and having share capital
● A company may either adopt the model form as specified or may prepare it on its
own
● Contents of Memorandum
● According to Section 4(1), the memorandum of a company must state -
a) Name Clause
b) Situation clause of Registered office clause
c) Objects clause
d) Liability Clause
e) Capital Clause
f) In the case of One person Company, the name of the person who, in the
event of the death of the subscriber, shall become the members of the
company
● The above clauses are compulsory and are designated as “conditions” prescribed by
the Act, on the basis of which a company is incorporated
● It is to be noted that the Companies Act 2013 shall override the provisions in the
memorandum of a company, if the latter contains anything contrary to the provisions
in the Act (section 6)
a) Name clause (section 4(1)(a))
● The name of the company shall end with “limited” in case of public company and with
the words “private limited” in case of private company. These words can be
dispensed with in case of section 8 companies
● The names of the company should be one which is not undesirable and should not
be similar or identical with that of an existing company or misleading names
● While designing the name clause, the provisions of the Emblems and Names
(PRevention of Improper Use) Act 1950 and guidelines of MOCA should be complied
with
● The central government prohibited the use of the names and emblems by companies
in trademarks and patents; name and emblems of the international organisations, the
indian national flag, the official seal and emblems of the government, the name and
pictorial representation of national leaders
● Further, as per sect 4(2) any word that gives the impression that the company is
connected with the government, or any local authority, corporation of government,
shall not be used.
b) Situation clause or registered office clause (sec 12)
● It shall give the name of the state in which the registered office of the company is to
be situated. The actual situation of registered office can be filed with the ROC within
30 days of incorporation.
c) Objects Clause:
● It may be divided into the following three categories -
- The main objects of the company to be pursued after its incorporation
- The objects incidental or ancillary to the attainment of the main objects
- Other objects of the company not included in the sub clauses state above

● As per sec 4(1)(c) division of the objects as above not necessary. State the objects
for which the company is proposed to be incorporated and any matter considered
necessary
d) Liability Clause: (section 4(1)(d))
● The memorandum of a company limited by shares or by guarantee shall also state
that the liability of its members is limited. In case of unlimited company the
memorandum shall state the liability of the members shall extent to the entire debts
and liabilities of the company. In case of a company limited by guarantee, mention
the amount upto which each member under takes to contribute in the event of
winding up of the company
e) Capital Clause: (section 4(1)(e))
● This clause must state the amount of capital with which is to be registered unless the
company is an unlimited company. The shares into which the capital is divided and
the nominal value of each share should be specified. Also state the number of shares
which the subscribers to the memorandum agree to subscribe which shall not be less
than one share.
● In case of OPC mention the name of the person, who is the event of death of the
subscriber, shall become the member of the company
● Description For Subscription
● The statutory requirements regarding subscription of memorandum are that -
- Each subscriber must take at least one share
- Each subscriber must write opposite his name the name of shares which he
agrees to take (section 4(1)(e))
● Signing of Memorandum (rule 13 companies (incorporation) Rules, 2014)
● The memorandum and AOA shall be signed by each subscriber, who shall add his
name, address, description and occupation, if any, in the presence of at least one
witness
● Where the subscriber to the memorandum is a body corporate, the MOA and AOA
shall be signed by director, officer of the body corporate duly authorised by a
resolution of the BOD
● Where the subscriber is a LLP, it shall be signed by a partner of the LLP, duly
authorised by a resolution approved by all the partners of the Limited Liability
Partnership.

● Alteration of Memorandum: (section 13)

● Alteration of name clause:
- Change of name by company voluntarily (sec 13)
- Change of name by order of the registrar (sec 4(5))
- Change of name by order of the tribunal (Sec 7(7)(a))
- Change of name when incorporated with similar or identical name of an
existing company (sec 16)

● Publication of Name: sec 12(3) : where a company has changed its name during
the last two years, it shall affix or print or paint, along with its name, the former name
or
names so changed during the last two years

● Change of Situation or Registered Office Clause (sec 12 & 13):

● Shifting from one plate to another place in the same city, town or village
● Shifting to a place outside the city, town or village in the same state
● Shifting from the place under jurisdiction one of ROC to another ROC in the same
state
● Shifting of Registered office from one state to another state (sec 12(4 to 7))
● Procedure requirements :
- Board resolution in board meeting
- Special resolution of members in general meeting (sec 13(1))
- Approval by the central government (sec 13(4))

● Restriction on shifting of registered office:

● The shifting of registered office shall not be allowed if any inquiry, inspection of
investigation has been initiated against the company or any prosecution is pending
against the company under the Act
● Filing with Registrar:
● The certified copy of the order of the central government, approving the alteration of
the memorandum for transfer of registered office of the company from one state to
another within 30 days from the date of receipt of certified copy of the order

● Alteration of Objects clause (Sec 13):

● The alteration of objects clause by special resolution of members of the company.
The Act impose restrictions on on the alteration of objects clause of the company,
which has raised money from the public for one or more objects mentioned in the
prospectus and has any unutilized money
● The Act itself specifies that along with obtaining an approval by way of a special
resolution, a company would be required be ensure following if it intends to alter its
objects clause:
- Publish the notice of the aforesaid resolution stating the justification of
variation in 2 newspapers, one in English and one in vernacular language at
the place of registered office of the company
- Exit option is given to dissenting shareholders by the promoters and
shareholders having control in accordance with the regulations to be specified
by the SEBI

● Alteration of Liability Clause (sec 13(1)):

● A company can change the liability clause of its memorandum of association by
passing a special resolution and the resolution must be filed with Registrar within 30
days

● Alteration of Capital Clause (sec 61):

● A limited company having a share capital may make the following types of alterations
in its memorandum by an ordinary resolution, if so authorised by its articles, at its
general meeting to -
- Increase its authorised share capital by such amount as it thinks expedient;
- Consolidate and divide all or any of its share capital into shares of a larger
amount that its existing shares;
- Convert all or any of the its fully paid-up shares into stock, and reconvert that
stock into fully paid-up shares of any denomination;
- Sub-divide its shares into shares of smaller amount that is fixed by the
memorandum
- Cancel shares which, have not been taken or agreed to be taken by any
person and diminish the amount of its share capital by the amount of the
shares so cancelled

● These alterations are, however required to be notified and a copy of the resolution
should be filed with the registrar within 30 days of the passing of the resolution along
with an altered memorandum (sec 64(1))

● Articles of Association: (section 5,10 and 14)

● According to section 2(5), articles means ‘articles of association of a company as
originally framed or altered from time to time under the Companies Act’
● The articles of association (AOA) of a company are its bye-laws or rules and
regulations, that govern the management of its internal affairs and the conduct of its
business
● The articles mostly deal with the rights of the members with that of the company and
the rights of members inter-se
● The articles are subordinate to the Companies Act and also the memorandum. Thus,
the memorandum lays down the scope and powers of the company, the articles
govern the method in which the objects are to be achieved.
● The articles must be printed and be divided into paragraphs, consecutively
numbered, stamped and signed by each subscriber of the memorandum duly
witnessed and should be filed along with the memorandum
● In case of a public company limited by shares, it may have its own registered articles
or alternatively adopt Table F of the Schedule I as its registered articles.
● In case of a private company it must have its own registered articles specifying the
restrictive clauses in its articles. Similarly, a company limited by guarantee or an
unlimited company must also have its own registered articles.
● The articles shall be in respective forms specified in tabled F, G, H, I and J in
Schedule I. A company may adopt all or any of the regulations contained in the
model articles applicable to such company.
● Every type of company whether public or private and whether limited by shares or
limited by guarantee having a share capital or not having a share capital or an
unlimited liability company register its articles of association.

● Contents of articles (section 5)

● Matters relations to shares: allotment of shares, calls on shares, lien on shares,
transfer and transmission of shares, forfeiture of shares, alternations of share capital,
share certificate, conversion of shares into stock etc.
● Directors: appointment, disqualification, share qualification, vacation of office,
removal, resignation, etc.
● Powers of directors , managing director and limitations on powers.
● Conduct of meetings: boards and general meeting, notices, quorum, chairman,
proxies, voting rights, minutes, constitution of committees, etc.
● Financial matters: dividends including interim dividend, issues of bonus shares,
accounts and audit, borrowing powers, etc.
● Other clauses - common seal, company secretary, indemnity, winding-up etc.

● Alteration of articles of associations: ( sections 14)

● Any provision in the articles can be altered by passing a special resolution in the
general meeting of the company.
● File with the ROC, within 15 days of passing the special resolution together with
altered copy of the articles of registration.
● If the shares of the company are listed on the Stock Exchanges, the alteration should
be informed to the Stock Exchanges concerned within 30 days as per the listing
agreement.

● Legal effect of MOA and AOA

● The MAO and AOA, when registered, bind the company and its members to the
same extent as if they have been signed by the company and by each member to
observe and be bound by all the provisions of MOA and AOA.
● Also, all monies payable by any member to the company under the MOA or AOA
shall be a debt due from him to the company (section 10)
● The extent to which the MOA & AOA bind:
a) The members of a company :
 - Boreland’s Trustee V. Steel Brother and Co. Ltd (1901)
b) The company to the members
c) The members inter se
d) The company to outsiders
Eley V. Positive Life Insurance Co. (1876)