2. Memorandum of Association
The first step is the formation of a company is to
prepare memorandum of association. This is
also known as constitution of the company.
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3. What is Memorandum of Association of a
company?
• Is the constitution or charter of the company
and contains the powers of the company. No
company can be registered under the Companies
Act, 2013 without the memorandum of
association. Under Section 2(56) of the
Companies Act, 2013 the “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;
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4. Six Clauses
CONTENTS OF MEMORANDUM OF
ASSOCIATION
Name Registered
office
Liability Capital
Association
or subscription
Objects
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5. 1. Name Clause
• The memorandum must state the name of the
company with ‘limited ‘ as the word ,in case of a
public limited company and with ‘private
limited', in the case of a private limited company
• the company is free to choose any name but it
must not be undesirable or must not resemble
the name of any other registered company.
• i.e. President, Prime Minister, Govt. etc
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6. 2.Registered office clause [section 13(1)(b)]
• The state in which the registered office of a
company will be situated is mentioned in this
clause
• The registered office of the company is the
official address of the company where the
statutory books and records must normally be
kept
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7. 3. Object Clause section 13(1)(c)&(b)]
This clause is quite important and must be very carefully
drafted as it determines the activities of the company. In
the object clause each and every detail of activities of the
business to be carried out must be laid down.
Main object:- this sub-clause contains the main objects
of the company to the pursued on its incorporation
Objects incidental or ancillary :- it covers the
objects which are incidental or ancillary to the
attainment of the main object
Other objects :- this sub-clause will cover any objects
which are not included in the ‘main objects ‘
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8. 4. Liability Clause[section 13(2)]
This clause states the nature of liability of the members of
the company
In the case of a company limited by share or by guarantee the
fact that the liability of its members is limited must be made
absolutely clear . In case of a company limited by shares the
liability of a member is limited to the nominal value of the
share held by him
If the share are fully paid up his liability is nil. But in
case of partly paid-up shares the liability is limited to
the amount which is unpaid.
In case of a company limited by guarantee, the liability clause
must state the amount which every member undertakes to
contribute to the assets of the company in the event of its
winding up
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9. 5. Capital Clause[section 13(4)(a)]
• This clause states that amount of the capital with
which the company is to be registered
• This clause should also state the number and
face value of shares into which the capital of the
company is divided
• The capital with which the company is
‘registered’ or ‘nominal’ or ‘authorized’
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10. 6. Association clause [section 13(4)(c)]
• The association clause states – in this cause , the
subscribes declare that they desire to be formed
into a company and agree to take the shares
stated against their names.
• The names, address and occupation of the
subscribers must be given each subscriber must
sign in the presence of at least
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11. Case: Company for Restaurant
• Husband and wife, KAMAL and ASHA RASTOGI,
based in DELHI, are forming a company. They want
a short name for the company with their surname in
it. The company is being formed to run a
SHOPPING MALL. They project they would need 2
Crore as the capital of the company. Immediately,
the husband would contribute Rs. 2,00,00,000 to
the share capital of the company and wife Rs. 10.
Mr. RASTOGI hopes to find others, after the
company is formed, to take the shares of the
company. They also contemplate occasionally hiring
out the car they would buy for the company. Develop
a Memorandum of Association for the Company.
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12. Memorandum of Association of the
RASTOGI private limited
I . The name of the company is RASTOGI Private
Limited
II. The registered office of the company will be
situated in the state of Delhi.
III. The objective for which the company is begin
established are as follows:
a. Main object: running of shopping mall
b. Ancillary object: opening bank accounts, hiring
premises an running of mall
c. Other objects: Hiring out of vechicles for
advertisement
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13. IV. The liability of the members is limited
v. The authorized share capital of the company is
RS.2,00,00,000,divided into 20,00,000
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S.NO Name &
Addresses
description &
occupation of
subscribers
No . Of equity
shares taken
by each
subscriber
Signature
of
subscribe
r
Name
/
addres
s
descri
ption
and
occupa
tion of
witnes
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14. • Special Resolution.
• Written Approval of Central Government.
• No Approval of Central Government is
necessary if the change of 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 NAME CLAUSE
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15. From one premises to another premises in the
same city, town or village
• By passing a resolution of Board of Directors
CHANGE OF REGISTERED OFFICE
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16. From one town or city or village to another town
or city or village in the same state
1. Special Resolution.
2. Confirmation of Regional Director — when
jurisdiction of Registrar of companies is
changed.
3. Copy of (i) & (ii) to be filed with ROC.
4. Notice of new location to ROC within 30
days.
CHANGE OF REGISTERED OFFICE
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17. From one state to another state
1. Special Resolution
2. Confirmation of Central Govt.
3. For certain Purposes only
(As given in section 17)
CHANGE OF REGISTERED OFFICE
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18. A. Special Resolution
B. Alteration is sought on any of these grounds:
• To carry on its business more economically & more
efficiently
• To attain its main purpose by new or improved means
• To enlarge or change the local area of its operations
• To carry on some business which under existing
circumstances may conveniently or advantageously be
combined with the business of the company
• To restrict or abandon any of the objects specified in the
memorandum
• To sell or dispose off the whole or any part of the
undertaking
• To amalgamate with any other company
C. Copy of (A) is filed with ROC within 30 days
ALTERATION OF OBJECTS CLAUSE
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19. • 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 LIABILITY CLAUSE
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20. • 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.
• 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 different classes of shareholders, and then
decide whether the company should be allowed to reduce
share capital .
ALTERATION OF CAPITAL CLAUSE
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21. The words :
• Ultra means beyond
• Vires means the powers
• Ultra Vires means beyond the powers
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.
DOCTRINE OF ‘ULTRA VIRES’
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22. Articles Of Association
• A document that specifies the regulations for a
company's operations. The articles of association
define the company's purpose and lays out how
tasks are to be accomplished within the
organization, including the process for
appointing directors and how financial records
will be handled.
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23. Items covered by the Articles of Association
include :-
• Adoption of preliminary contracts.
• Number and value of shares
• Allotment of shares
• Calls on shares
• Transfer of shares
• Forfeiture, reissue, surrender of shares
• Alteration of share capital
• Share certificates
• Conversion of shares into stocks
• Meetings and proceedings
• Voting rights, proxies and polls
• Appointment , Remuneration, etc of Directors
• Borrowing powers
• Dividend and Reserves
• Accounts and audit
• Procedure of winding up
• Seal of the company
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24. Companies which must have Articles
• Unlimited Companies:
▫ The Articles of such a company must
state:
Total number of members; and
Share capital.
• Companies limited by Guarantee:
▫ Articles of such company must state
total number of members.
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25. Companies which must have Articles
…contd.
• Private Companies limited by shares:
▫ must include requirements of
Section 3(1)(iii).
No Article Company
• A public limited company having share
capital may be registered without
Articles.
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26. Doctrine Of Ultra Vires
• Ultra vires to the articles of association
• Ultra vires the memorandum of Association
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27. Alteration of Articles
• Articles may be altered by a company by
passing special resolution at a general body
meeting of shareholders
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28. Doctrine of Constructive Notice
• According to Section 610, every person
dealing with the company is deemed to have
read M/A and A/A and understood the
contents thereof in the correct perspective.
• Doctrine of Indoor
Management
• Rule of Indoor Management is an exception
to the Doctrine of Constructive notice.
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29. Memorandum of Association Articles of Association
Charter of Company Regulations for internal management
Defines the scope of the activities Rules for carrying out the objects of
company.
Supreme document Subordinate to the memorandum.
Must for every company Company limited by shares need not
have it (Table ‘A’ applies)
Strict restrictions, alteration only with
sanction of central govt./ tribunal.
Can be altered by special resolution.
It define the relationship between the
company & the outsiders
It define the relationship between
company & its staff and between
members & members interests
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