3. Memorandum of Association
Main document of the company.
It defines its objects.
Lays down the conditions upon which alone the
company allowed to be formed.
Charter of the constitution of the company.
It defines the scope of its activity and also states
that anything beyond it is unauthorized and
illegal.
4. Memorandum of Association
A public document binding on the company
and the members.
It specifies the scope of the activities of the
company and also anything beyond which is
illegal or unauthorized.
The memorandum shall be one of the forms
given in Tables B, C, D and E in schedule 1
of the Act.
5. How Moa Looks?
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 lease one witness who is to
attest the signature.
6. Clauses of Moa
Name clause.
Registered office or Situation clause.
Object clause.
Liability clause.
Capital clause.
Subscription clause.
7. 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,
Undesirable,
or which will mislead the public.
its use has been, therefore, prohibited by the
Government under the Emblems and Names
(Prevention of Improper Use) Act, 1950.
The company can change its name by passing a
special resolution and obtaining he approval of the
Central Government.
8. 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.
9. Registered Office Clause
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.
10. 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.
11. Object Clause
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.
12. 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.
13. 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’.
14. 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.
16. (1)
A company altered Its Memorandum of Association according to the
procedure laid down by law and the alteration was also confirmed by
the Company Law Board. A certified copy of the order of the
Company Law Board was filed 4-months after the order was passed
by the Company Law Board. Can the Registrar register the
alteration?
17. Solution
Yes. He can do so as per provisions mentioned under Sec.18.
As per Section 18 company shall file with the Registrar, a
certified copy of the order of the company law board
confirming the alteration within 3 months of the order. The
registrar shall register the same and certify the registration
within 1 month from the date of filing such documents.
However the company can be allowed the extension of time if
the company law board thinks fit.
18. (2)
A company was started with the object of building 'a hall with shops'.
The building was destroyed by fire and the company wanted to alter
the objects clause in the Memorandum by substituting the words 'a
hall with shops' with the words 'shops, dwelling houses and
warehouses for letting purposes.' Should this alteration be allowed?
19. Solution
No,
As the alteration exceeds object mentioned
by the company on its incorporation.
(Strathspey Public Assembly etc. Hall Co.
Ltd. v. Anderson's Trustees, (1934) S.C.
385).
20. (3)
X Mining Co. Ltd. applied to the Company Law Board for permission
to add the following objects in its Memorandum of Association, which
earlier stated mining as its main purpose : (a ) To sell goods on hire-
purchase basis ; (b) To do all kinds of fabrication works of steel,
aluminum, copper, zinc, and alloys ; (c) To buy and sell land,
buildings, hotels, restaurants and business premises ; and (d) to
enter in to contracts for construction of building with private people or
government. Will the Company Law Board approve this alteration?
21. Solution
No,
The Company Law Board will only approve
the alteration if the incidental objects are in
alignment of the main purpose for which the
company is established.
22. (4)
A Ltd. applies to the Company Law Board for approving an alteration in
situation clause of its Memorandum and thus permitting it to change its
registered office from Calcutta to Delhi. The Government of West Bengal
requests the Company Law Board not to allow this change, for it would
lead to a loss of revenue of the Government. Decide.
23. Solution
No, The request of Government of West Bengal won’t be
considered.
The change will be allowed if it is warranted by the interests of
the company [Rank Film Distributors of India Ltd. v.
Registrar of Companies]
The court observed that the state has no statutory right to
oppose the shifting of the registered office from one state to
another. Members of the company will decide whether the
registered office of the company is to be transferred from one
state to another. Moreover the shifting should be in the
interest of the company.
24. (5)
A company put up telephone wires in a certain area. There was no
power in the Memorandum to put up wires there. The defendants cut
them down. Can the company sue for the damage done to the wires?
25. Solution
Yes
In case National Telephone Co. v. St Peter Port
Constables, it was held that company being a corporate
person should not be fined or punished for its own act or the
act of its agents unless the authority conferred on the
company by the Memorandum, the whole transaction would
be altered by doctrine of ultra vires and it would be void.
Moreover there is nothing to prevent the company from
protecting its property.
26. (6)
The Memorandum of Association of a company formed to Improve
and encourage the breeding of poultry contained a provision that no
remuneration should be paid to the members of the governing body
of the company. But the company owing to Its Increase in the
business passed a special resolution providing for equitable
remuneration to such members for services rendered, Can this
alteration of the Memorandum be confirmed? If so, state why and
when.
27. Solution
Yes
It was decided that alteration is valid as it
will help to carry the business more
economically or more efficiently and any
resolution passed will be within the scope of
MOA. [Scientific Poultry Breeders' Assn.
Ltd.].
28. (7)
X Ltd a cotton textile company, enters into a contract with A Ltd,
adjacent cotton textile mills, to supply electricity from their power
generation plant. After the supplies have been made for 3 months it
is discovered that this activity is beyond the scope of the object
clause of memorandum of association of X Ltd. Shareholders of X
Ltd ratify the above contract in their general body meeting. Can A
Ltd. which refuses to make payment on the ground that the contract
is wholly null and void be legally compelled to make payment?
29. Solution
No, as the transaction is ultra vires X
Ltd.
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.
