MEMORANDUM OF ASSOCIATION
The Memorandum of Association of company is in fact its charter; it defines its constitution and the scope of the powers of the company with which it has been established under the Act. It is the very foundation on which the whole edifice of the company is built.
Object of registering a memorandum of association:
• It contains the object for which the company is formed and therefore identifies the possible scope of its operations beyond which its actions cannot go.
• It enables shareholders, creditors and all those who deal with company to know what its powers are and what activities it can engage in.
A memorandum is a public document under Section 399 of the Companies Act, 2013. Consequently, every person entering into a contract with the company is presumed to have the knowledge of the conditions contained therein.
• The shareholders must know the purposes for which his money can be used by the company and what risks he is taking in making the investment.
A company cannot depart from the provisions contained in the memorandum however imperative may be the necessity for the departure. It cannot enter into a contract or engage in any trade or business, which is beyond the power confessed on it by the memorandum. If it does so, it would be ultra vires the company and void.
As per Section 4, Memorandum of a company shall be drawn up in such form as is given in Tables A, B, C, D and E in Schedule I of the Companies Act, 2013.
Table A is a form for memorandum of association of a company limited by shares.
Table B is a form for memorandum of association of a company limited by guarantee and not having a share capital.
Table C is a form for memorandum of association of a company limited by guarantee and having a share capital.
Table D is a form for memorandum of association of an unlimited company.
Table E is a form for memorandum of association of an unlimited company and having share capital.
The memorandum and articles of a company must be as closed to model forms, as possible, depending upon the circumstances.
Content of the memorandum: The memorandum of a company shall state-
(a) the name of the company (Name Clause) with the last word “Limited” in the case of a public limited company, or the last words “Private Limited” in the case of a private limited company. This clause is not applicable on the companies formed under section 8 of the Act.
The name including phrase ‘Electoral Trust’ may be allowed for Registration of companies to be formed under section 8 of the Act, in accordance with the Electoral Trusts Scheme, 2013 notified by the Central Board of Direct Taxes (CBDT). For the Companies under section 8 of the Act, the name shall include the words foundation, Forum, Association, Federation, Chambers, Confederation, council, Electoral trust and the like etc. [The Companies (Incorporation) Rules, 2014].
As per MCA notification dated 5th June, 2015, a Government company’s name must end with the word “Limited”. In the case of One Person Company, the words “One Person Company”, should be included below its name.
(b) the State in which the registered office of the company (Registered office clause) is to be situated;
(c) the objects for which the company is proposed to be incorporated and any matter considered necessary in furtherance thereof (Object clause);
If any company has changed its activities which are not reflected in its name, it shall change its name in line with its activities within a period of six months from the change of activities after complying with all the provisions as applicable to change of name.
(d) the liability of members of the company (Liability clause), whether limited or unlimited, and also state,
• in the case of a company limited by shares, that the liability of its members is limited to the amount unpaid, if any, on the shares held by them; and
• in the case of a company limited by guarantee, the amount up to which each member undertakes to contribute—
- to the assets of the company in the event of its being wound-up while he is a member or within one year after he ceases to be a member, for payment of the debts and liabilities of the company or of such debts and liabilities as may have been contracted before he ceases to be a member, as the case may be; and
- to the costs, charges and expenses of winding-up and for adjustment of the rights of the contributories among themselves;
• (e) the amount of authorized capital (Capital Clause) divided into share of fixed amounts and the number of shares with the subscribers to the memorandum have agreed to take, indicated opposite their names, which shall not be less than one share. A company not having share capital need not have this clause.
(f) the desire of the subscribers to be formed into a company. The Memorandum shall conclude with the association clause. Every subscriber to the Memorandum shall take atleast one share, and shall write against his name, the number of shares taken by him.
In the case of OPC, the name of the person who, in the event of death of the subscriber, shall become the member of the company.
The memorandum must be printed, divided into paragraphs, numbered consecutively, and signed by at least seven persons (two in the case of a private company and one in the case of One Person Company) in the presence of at least one witness, who will attest the signatures. The particulars about the signatories to the memorandum as well as the witness, as to their address, description, occupation etc., must also be entered.
It is to be noted that a company being a legal person can through its agent, subscribe to the memorandum. However, a minor cannot be a signatory to the memorandum as he is not competent to contract. The guardian of a minor, who subscribes to the memorandum on his behalf, will be deemed to have subscribed in his personal capacity.
The above clauses of the Memorandum are called compulsory clauses, or “Conditions”. In addition to these a memorandum may contain other provisions, for example rights attached to various classes of shares.
The Memorandum of Association of a company cannot contain anything contrary to the provisions of the Companies Act. If it does, the same shall be devoid of any legal effect. Similarly, all other documents of the company must comply with the provisions of the Memorandum.