A

PROJECT ON

COMPANY LAW

“MEMORANDUM OF ASSOCISTION”

CONTENTS

1. Introduction
2. Necessity of memorandum of association
3. Contents of memorandum of association
4. Form of memorandum
5. Printing and signing of memorandum of association
6. Alteration of memorandum
7. Doctrine of ultra vires
8. Conclusion
9. Bibliography

1
INTRODUCTION
According to Palmer, the Memorandum of Association is a document of great importance in
relation to the proposed company. It contains the objects for which the company is formed
and therefore identifies the possible scope of its operations beyond which its actions cannot
go. It defines as well as confines the powers of the company. If anything is done beyond
these powers that will be ultra vires the company and be void.

According to 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 is a document of prime importance for a company. It depicts

the objectives, extent of authority, competency, liabilities and legal rights of the company.
The memorandum acts as a legal code or constitution for a company and regulates the
relationships between the company and its shareholders, investors, beneficiaries and other
members.

In the celebrated case of Ashbury Railway Carriage and Iron Co. Ltd. v. Richie 1875 LR
(7)HL. Lord Carins Observed that the Memorandum of Association of a company defines the
limitation on the powers of the company… it contains in it both that which is affirmative and
that which negative. It states affirmatively the ambit and extent of vitality and power which
by law are given to the corporation and it states, if it is necessary to state, negatively that
nothing shall be done beyond that ambit.

2
NECESSITY OF MEMORANDUM OF ASSOCIATION

A memorandum of association allows people like the shareholders, creditors, investors and
other members of a company to know the purpose for which a company has been formed. It
allows them to know the range of activities that the company is permitted to be involved in
and authorises them to learn about the company’s objectives.

The memorandum of association also curbs the company’s flexibility by preventing it from
getting involved in any kind of activities other than the ones mentioned in the memorandum
while the company is in its initial stages of formation.

CONTENTS OF MEMORANDUM OF ASSOCIATION

Under Section 4 of the Companies Act 2013, a Memorandum of Association should comprise
of the following clauses as discussed below:

 Name Clause: It is mandatory to mention the name of the company while drafting
the Memorandum of Association. A company may select any name that it prefers but
it should not be identical to an existing company. The chosen name of the company as
it appears in the Memorandum of Association should be exactly the same as the one
approved by the Registrar of Companies. A Public Limited Company should end with
the word “Limited” and likewise, a Private Limited Company should end with the
words “PrivateLimited”. A company should restrain from using words like “King,
Queen, Emperor, Government Bodies and names of World Bodies like U.N.O.,
W.H.O., World Bank etc”. In order not to mislead the public a company must not use
a name which is prohibited under the Emblems and Names (Prevention of Improper
Use) Act of 1950. A company is restricted from using any name which may connect it
to the government of the state, without obtaining prior permission from the
government.

Case: Methodist church V. UOI (1985) 57 company cases 443 Bombay: The court was
held that while approving the name of a company the registrar must may preliminary
inquiry to insure that the name allot by him is not misleading or intended to deceive with
reference to the object clause of the memorandum.

 Situation Clause: The Memorandum of Association of a company must contain

the name of the state where the company operates and the jurisdiction of the Registrar

3
 of Company must be specified. It is mandatory for the company to have the registered
office within 15 working days. Likewise, the verification of the registered office must
be completed in 30 days. This procedure is done to fix the domicile of the company
which may or may not be the place where the company is operating. In the event of a
change in location of the registered office the memorandum needs to be altered.

 Object Clause: The objective for which the company is formed must be mentioned
in the Memorandum of Association. It is one of the key clauses and should be drafted
carefully mentioning all the types of businesses that the company may possibly
engage in the future. A company is legally prohibited from carrying out any activity
that is not specified in the object clause. The objects are classified as ‘Main Objects’,
‘Ancillary Objects’ and ‘Other Objects’. The objects must be stated articulately and
must not be ambiguous in nature. The objects must not also be illegal or against the
prohibition of the Act or the public policy of the country.

Case:Dr. Lakshmana Swami Mudaliar V. LIC 1963 CLJ 243: The Memorandum of
Association is the LakshmanRekha for a company and act beyond the objects mention in
the memorandum in ultra vires and void and cannot be justified.

 Liability Clause: The liabilities of the members of the company must be clearly
stated in the Memorandum of Association. They may be limited by shares or by
guarantee. In case of unlimited liability company, the entire clause can be
eliminated. When a company is limited by shares, the liability of its members remains
limited to any unpaid amount on the shares owned by them. When it is limited by
guarantee the members of the company are liable to pay the amount stated in the
memorandum at the time of liquidation of the company. In case of unlimited
companies, the liability of the members is unlimited, involving personal assets.

 Capital Clause: The maximum amount of authorised capital that can be generated
by the members of the company is ought to be specified in the Memorandum of
Association. Stamp duty is applicable on this amount. Although there is no legal limit
to the maximum amount of capital that can be raised by a company, it cannot increase
the authorised share capital once it has been incorporated. The denomination for each
such share has to be either Rs 10 or Rs 100 in case of equity and preference shares
respectively. A company should make sure that the raised authorised capital is
sufficiently high for further expansion of business in the future. All other rights and
privileges, as agreed upon by shareholder, creditors, and investor and other members
of the company may also be specified in this charter. It is not mandatory for an

4
 unlimited company having an authorised share capital to mention it in the
memorandum.

 Subscription Clause: The amount of authorised capital and the number of shares
owned by each member of the company should be mentioned in the Memorandum of
Association of the company. The subscribers to the memorandum must own a
minimum of one share each. Each subscriber must write the number of shares owned
by him and sign the memorandum in the presence of at least one witness who is
required to attest the signature.

FORM OF MEMORANDUM

The memorandum of a company should be formulated in accordance with the respective

forms as mentioned in the tables A, B, C, D & E under Schedule 1 of the Companies Act,
2013.

 Form in Table A is applicable to companies that are limited by shares.

 Form in Table B is applicable to companies that are limited by guarantee and do
not have an authorised share capital.
 Form in Table C is applicable to companies limited by guarantee and have an
authorised share capital.
 From is Table D is applicable to unlimited companies that do not have an
authorised share capital.
 Form in Table E is applicable to unlimited companies that have an authorised
share capital.

PRINTING AND SIGNING OF MEMORANDUM OF ASSOCIATION

 It is mandatory for every company to print its Memorandum of Association and have
it signed by each of its members. The address, occupation and shares held by each
member of the company must also be mentioned in this charter.
 For the formation of a Private Limited Company, a minimum of 2 members are
necessary. For a Public Company, it is 7. In case of a One Person Company, the
nominee has to be stated in the Memorandum of Association as in case of death of the

5
 founding member or his incapacity to perform, the legal rights of the company will be
transferred to him or her.

ALTERATION OF MEMORANDUM
A memorandum of association needs to be amended if any of the following changes occur in
the company:

 An alteration in the name of the business.

 A change in the office of registration.
 An alteration in the object clause of the business.
 An alteration in the authorised capital of the business.
 Any adjustments made in the legal liabilities of the members of the business.

The procedures for making any amendments in the Memorandum of Association as

prescribed under Section 13 of the Companies Act 2013.

Alteration of name clause:

 Special Resolution.
 Written approval of central government.
 No approval of central government is necessary if the name involves only the addition
or deletion of the word “private”.
 Change by ordinary resolution and approval of central government when name is
identical or too closely resembles the name of an existing company.

Alteration of liability clause

 The liability of a member of a company cannot be increased unless the member agrees
in writing.
 From unlimited liability, it can be made limited by re-registration of the company.

Alteration of capital clause

 A company can reduce share capital by first passing a special resolution for reduction
of capital but powers to reduce share capital must be guaranteed in the articles of the
company, otherwise the share capital can be altered by special resolution giving such
powers.

6
  The company can apply to the court by petition for getting confirmation from the
court for reducing the share capital. The main duty of the court is to look after the
interest of the creditors and the different classes of shareholders, and then decide
whether the company should be allowed to reduce share capital.

Alteration of object clause

 Special resolution
 Alteration is to sought on any of these grounds:
 To carry on its business more economically and more efficiently.
 To attain its main purpose by new or imposed means.
 To enlarge or change the local area of its operation.
 To carry on some business which under existing circumstances may
conveniently be combined with the business of the company.
 To restrict or abandon any of the objects specified in the memorandum.
 To sell or dispose of the whole or any part of the undertaking.

Change of registered office

From one premise to other premises in the same city, town or village:

 By passing a resolution of Board of Directors.

From one town or city or village to another town or city or village in the same state:

 Special resolution.
 Confirmation of regional director- when jurisdiction of registrar of companies is
changed.
 Copy of (i) and (ii) to be filed with ROC.
 Notice of new location to ROC within 30 days.

From one state to another state:

 Special resolution.
 Confirmation of central government.

DOCTRINE OF ULTRA VIRES

The word “Ultra” means beyond and “Vires” means powers that are Ultra Vires means
beyond the powers.

7
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.

It is the function of the Memorandum of Association to delimit and identify the objects in
such plain and unambiguous manner as that the reader can identify the field of industry
within which the corporate activities are to be confined. And it is the function of the courts to
see that the company does not movie in a director away from the field. That is where the
doctrine of ultra vires comes into play in relation to joint stock companies.

CONCLUSION

A Memorandum of Association is a document of vital importance in the incorporation of a

company. It should be drafted with utmost sincerity. To amend and alter the name of the
organisation, the office of registration, object clause, the authorised share capital of the
company and any other legal liabilities, the company is required to a follow a complicated
legal procedure as mentioned in the scope of this article. All other social responsibilities and
supporting activities and range of other related activities should also be clearly stated in the
Memorandum of Association to provide flexibility to undertake new projects as and when the
opportunities arise. Hence it is advisable to present the company’s scope of activities in a
more generic manner instead of mentioning any particular area of focus.

BIBLIOGRAPHY

https://blog.ipleaders.in/moa-companies-act/
https://taxguru.in/company-law/memorandum-articles-association-companies-act2013.html?
amp
https://www.lawteacher.net/free-law-essays/business-law/alteration-of-memorandum-of-
association-business-law-essay.php

8
9