2. 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.
3. • 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.
4. • 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.
5. 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.
6. 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 company's 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.
7. 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.
8. 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.
9. 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.
10. 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.'
11. 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.
