2. 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. Is the constitution or charter of the company and
contains the powers of the company. No company
can be registered under the Companies Act, 1956
without the memorandum of association. Under
Section 2(28) of the Companies Act, 1956 the
“Memorandum means the memorandum of
association of the company as originally framed or
as altered from time to time in pursuance with any
of the previous companies law or the Companies
Act, 1956.”
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4. Six Clauses
CONTENTS OF MEMORANDUM OF
ASSOCIATION
Name Registered
office
Liability Capital
Association
or subscription
Objects
5. 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.
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6. 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. 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. 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. 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. 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. • 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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12. 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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13. 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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14. 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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15. 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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16. • 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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17. • 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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18. 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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19. 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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20. The important
Powers, duties, rights and liabilities of Directors
Powers, duties, rights and liabilities of members
Rules for Meetings of the Company
Dividends
Borrowing powers of the company
Calls on shares
Transfer & transmission of shares
Forfeiture of shares
Voting powers of members
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21. 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.
22. 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.
23. Ultra vires to the articles of association
Ultra vires the memorandum of Association
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24. Articles may be altered by a company by
passing special resolution at a general
body meeting of shareholders
25. 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.
26. 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
