Moa & Aoa O A C: F Ompany

IMT Nagpur - 2012 - 14 (Sec B, D & E)
MOA & AOA OF A COMPANY
FORMATION OF COMPANIES
Memorandum of Association:
MOA is a document which sets out the constitution of the Co. and as such is the foundation on which the structure of the Co. stands. It defines the scope of the Co. and its relation to the outside world.
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Its purpose is to enable the shareholders, creditors and those who deal with the Co. to know what is the permitted range of activities. The Co. cannot depart from the provisions of the MOA however great the necessity may be.
If it enters into contract or engages in any trade or business which is beyond the powers conferred on it by the MOA, then such a contract or the act shall be ultra vires the co. and hence void. The Cos Act shall override the provisions of the MOA of a Co., if the latter contains anything contrary to the provisions in the Act.
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Contents of Memorandum of Association:
1st Clause Name Clause:
Name of the Company.
2nd Clause Registered Office Clause: Name of the State in which the Regd. Office will be situated. But the exact address of the registered office is not required to be stated therein.
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3rd Clause
Object Clause A. Main Objects of the Co. to be pursued upon incorporation of the company; B. Objects incidental and ancillary to the attainment to the main objects; C. Other Objects (which may be pursued by the company at any time in future);
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Object Clause
B. Objects incidental and ancillary to the attainment to the main objects;
Eg.,
The production of by products is incidental to the manufacture of the main products. 2. The power to borrow money.
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4th Clause
Liability Clause:
A statement that the liability of its members are limited, in case the company is a limited by shares or by guarantee.
5th Clause
Capital Clause:
It must state the amount of share capital with which the company is registered.
It is described as Nominal Capital, Authorized Capital or Registered Capital
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5th Clause
Capital Clause:
The amount of Nominal capital is determined as per the present and future requirements of the company. Usual way to state the capital in the MOA is:
The Authorized Share Capital of the company is Rs. 30,00,000 divided into 2, 00,000 Equity Shares of Rs. 10 each and 1,00,000 Preference Shares of Rs. 10 each.
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6th Clause:
Association Clause: We the several persons whose names and addesses are subscribed below are desirous of being formed into a Company in pursuance of this Memorandum of Association and we respectively agree to take the number of shares in the Capital of the Company set opposite to our respective names.
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Doctrine of Ultra Vires:
1. Whatever is not stated in the MOA as the objects or powers is prohibited by the doctrine of Ultra Vires. 2. An act which is ultra vires is void, and does not bind the company. 3. Neither the Co. nor the other contracting party can sue on it.
4. The Co. cannot make it valid, even if every member assents to it.
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5. An act which is intra vires the Co., but outside the authority of the Directors may be ratified by the Co. in proper form.
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Protection to Shareholders and Creditors 6. The doctrine prevents the Co. to employ the money of the investors for a purpose other than those stated in the objects clause. 7. This doctrine protects the creditors by ensuring them that the funds of the Co. are not dissipated in unauthorized activities.
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Consequences of an Ultra Vires Act:
1. The company cannot sue any person for enforcement of any of its rights and vice versa. 2. The directors of the company may be held personally liable to outsiders for an ultra vires act.
Ashbury Railway Carriage.xlsx

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Articles of Association (AOA): The AOA of a Co. are its by-laws or rules or regulations that govern the management of its internal affairs and the conduct of its business.
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Articles of Association (AOA): MOA is the area beyond which the action of the Co. cannot go; inside that area shareholders may make such regulations for their own governance as they think fit.
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Articles of Association (AOA): They are subordinate to and are controlled by the MOA.
Companies Act, 1956

Memorandum of Association Article of Association
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Contents of Articles of Association : AOA set out the rules and regulations framed by the Co. for its own working. It contains generally: 1. Issue of Preference Shares; 2. Allotment of Shares; 3. Calls on Shares; 4. Lien on Shares; 5. Transfer and Transmission of Shares; 6. Nomination; 7. Forfeiture of Shares;
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Contents of Articles of Association : 8. Alteration of Capital; 9. Buy Back; 10. Borrowing Power 11. Share Certificates; 12. Dematerialization; 13. Rematerialization 14. Voting Rights and Proxies; 15. Shareholders, Director & Committee Meeting; 16. Directors, their appt. and delegation of power; 17. Nominee Director, Additional Director; 18. Common Seal.
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Difference between MOA and AOA:
Memorandum of Association Article of Association
1. Charter of the Co. & defines the 1. Defines the Rules and fundamental conditions and Regulations for the internal objects of the Co. management of the Co. 2. Clauses of the MOA cannot be 2. Clauses of AOA can be altered easily altered. by Special Resolution. 3. MOA cannot include any clause 3. AOA cannot include any clause contrary to the Co. Act. contrary to the Co. Act & MOA
4. Acts done by the Co. beyond the 4. Acts of the Directors beyond the scope of the MOA are void & Ultra AOA can be ratified by the Vires & cannot be ratified by even shareholders. by all the Shareholders.
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Doctrine of Constructive Notice :
MOA & AOA are public documents and can be inspected by anyone on payment of nominal fees.
Hence, every person who enters into a contract with a Co. is presumed to know, not only the exact powers of the Co. but also the extent to which these powers have been delegated to the directors. Every person dealing with the Co. is deemed to have a constructive notice of the contents of its MOA/AOA.
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Constructive Notice of MOA & AOA : Consequently, if a person enters into a contract which is beyond the powers of the Co., as defined in the MOA, or outside the limits set on the authority of the Directors, he cannot acquire any rights under the contract against the Co.
Kotla Venkataswamy V. Rammurthy.xlsx

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Doctrine of Constructive Notice :
So, the Doctrine of Constructive Notice operates in favour of the company against the outsiders.
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Doctrine of Indoor Management : While persons contracting with the Co. are presumed to know the provisions of the contents of the MOA/AOA, they are entitled to assume that the provisions of the AOA have been duly observed by the officers of the Co. It is not their duty to see that the Co. carries out its own internal regulations. Royal British Bank V. Turquand.xlsx
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Doctrine of Indoor Management :
So, the Doctrine of Indoor Management operates in favour of the outsiders against the company.
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CAPITAL STRUCTURE OF A COMPANY

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FINANCIAL STRUCTURE
CAPITAL
Loan Capital or Borrowed Capital
Own Capital or Share Capital
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FINANCIAL STRUCTURE
Share Capital
Contribution of the shareholders or owners of the company.
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Classification of Share Capital
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FINANCIAL STRUCTURE
Share Capital
Authorized
Issued
Subscribed
Called Up
Uncalled Up
Paid Up
Unpaid
Reserve
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CLASSIFICATION OF SHARE CAPITAL

1. Nominal or Authorized or Registered Capital It is the maximum amount that the Co. is authorised to raise by issuing the shares.
This is the capital, on which, the co. has paid the prescribed fees at the time of registration. http://www.mca.gov.in/MCA21
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1. Nominal or Authorized or Registered Capital
Example: Rs. 10 lacs divided into 1 Lac equity Shares of Rs. 10 each. = 1,00,000 * 10 = Rs. 10,00,000
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2. Issued Capital
It is the part of the Nominal Capital which the Co. issues for the time being for public subscription and allotment.
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2. Issued Capital
Example:
Rs. 5 lacs divided into 50,000 equity Shares of Rs. 10 each. = 50,000 * 10 = Rs. 5,00,000
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3. Subscribed Capital
It is that portion of the Issued Capital which has been subscribed or taken up by the subscriber.
Entire issued subscribed.
capital
may
or
may
not
be
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3. Subscribed Capital
Example: Rs. 4 lacs divided into 40,000 equity Shares of Rs. 10 each. = 40,000 * 10 = Rs. 4,00,000
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4. Called Up Capital
It is that portion of the Subscribed Capital which has been called up on the shares by the Co.
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4. Called Up Capital
Example: Where Rs. 5 has been called up on each of 40,000 shares of a nominal value of Rs. 10 each. Called up Capital = 40,000 * 5 = Rs. 2,00,000
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5. Uncalled Up Capital It is the total amount not called up or demanded by the Co. on the shares subscribed, which the shareholders are liable to pay as and when called up.
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5. Uncalled Up Capital
Example:
Where Rs. 5 has not been called up on each of 40,000 shares of a nominal value of Rs. 10 each.
Uncalled up Capital = 40,000 * 5 = Rs. 2,00,000 Uncalled up Capital = Subscribed Called Up
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6. Paid Up Capital
It is the part of the total called up amount which is actually paid up by the shareholders.
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6. Paid Up Capital
Example: If only Rs. 1,90,000 is actually paid by the shareholders, the paid up capital is Rs. 1,90,000. = Rs. 2,00,000 10,000 = Rs. 1,90,000
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7. Unpaid Capital
It is the total of the called up capital remaining unpaid.
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7. Unpaid Capital
Example: Rs. 10,000 (Difference between the called up Capital and Paid up capital). Uncalled up Capital = Called Up Paid Up = 2,00,000 1,90,000 = Rs. 10,000
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8. Reserve Capital
It is that part of the uncalled capital of a Co. which the Ltd. Co. has decided by Special Resolution not to call except in the event and for the purpose of the Co. being wound up.
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8. Reserve Capital
Example: Of the Rs. 5 per share uncalled capital, Rs. 2 per share may be resolved to be kept as reserve capital. = 40,000 * 2 = Rs. 80,000
Reserve Capital should not be confused with capital reserve.
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Tata Steel AR-09-10.pdf wipro AR.pdf Leela AR.pdf
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THANK YOU
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Moa & Aoa O A C: F Ompany

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IMT Nagpur - 2012 - 14 (Sec B, D & E)

MOA & AOA OF A COMPANY

1st Clause Name Clause:

Name of the Company.

B. Objects incidental and ancillary to the attainment to the main objects;

IMT Nagpur - 2012 - 14 (Sec B, D & E)

It is described as Nominal Capital, Authorized Capital or Registered Capital

IMT Nagpur - 2012 - 14 (Sec B, D & E)

Ashbury Railway Carriage.xlsx

Companies Act, 1956

IMT Nagpur - 2012 - 14 (Sec B, D & E)

Kotla Venkataswamy V. Rammurthy.xlsx

IMT Nagpur - 2012 - 14 (Sec B, D & E)

CAPITAL STRUCTURE OF A COMPANY

Loan Capital or Borrowed Capital

Own Capital or Share Capital

Contribution of the shareholders or owners of the company.

Classification of Share Capital

IMT Nagpur - 2012 - 14 (Sec B, D & E)

CLASSIFICATION OF SHARE CAPITAL

CLASSIFICATION OF SHARE CAPITAL

CLASSIFICATION OF SHARE CAPITAL

CLASSIFICATION OF SHARE CAPITAL

CLASSIFICATION OF SHARE CAPITAL

Entire issued subscribed.

CLASSIFICATION OF SHARE CAPITAL

CLASSIFICATION OF SHARE CAPITAL

CLASSIFICATION OF SHARE CAPITAL

CLASSIFICATION OF SHARE CAPITAL

CLASSIFICATION OF SHARE CAPITAL

CLASSIFICATION OF SHARE CAPITAL

CLASSIFICATION OF SHARE CAPITAL

CLASSIFICATION OF SHARE CAPITAL

It is the total of the called up capital remaining unpaid.

CLASSIFICATION OF SHARE CAPITAL

CLASSIFICATION OF SHARE CAPITAL

CLASSIFICATION OF SHARE CAPITAL

CLASSIFICATION OF SHARE CAPITAL

Tata Steel AR-09-10.pdf wipro AR.pdf Leela AR.pdf

IMT Nagpur - 2012 - 14 (Sec B, D & E)

IMT Nagpur - 2012 - 14 (Sec B, D & E)

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