Chapter :-2

Memorandum of Association &

Articles of Association

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 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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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, 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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 CONTENTS OF MEMORANDUM OF
ASSOCIATION

Six Clauses

Name Registered
Objects
office

Association
Liability Capital or subscription
 1. Name Clause[ section 13(1)(a)]
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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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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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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 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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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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 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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 Case: Company for Restaurant
Husband and wife, Niraj and Seema Mishra, based in
Mumbai, 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 restaurant. They
project they would need 20 lakhs as the capital of the
company. Immediately, the husband would contribute Rs.
2,00,000 to the share capital of the company and wife Rs.
10. Mr. Mishra 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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 Memorandum of Association of the
Mishra private limited

I . The name of the company is Mishra Private Limited

II. The registered office of the company will be situated
in the state of Maharashtra.
III. The objective for which the company is begin
established are as follows:
a. Main object: running of restaurants
b.Ancillary object : opening bank accounts, hiring
premises an running of bakery
c. Other objects: Hiring out of vechicles

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IV. The liability of the members is limited
v. The authorized share capital of the company is
RS.20,00,000,divided into 2,00,000

S.NO Name & No . Of equity Signature of Name /

Addresses shares taken by subscriber address
description & each subscriber descripti
occupation of on and
subscribers occupati
on of
witness

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 ALTERATION OF NAME CLAUSE

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.

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 CHANGE OF REGISTERED OFFICE

From one premises to another premises in the

same city, town or village

By passing a resolution of Board of Directors

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 CHANGE OF REGISTERED OFFICE

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.

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 CHANGE OF REGISTERED OFFICE

From one state to another state

1. Special Resolution
2. Confirmation of Central Govt.
3. For certain Purposes only

(As given in section 17)

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 ALTERATION OF OBJECTS CLAUSE

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 18
 ALTERATION OF LIABILITY CLAUSE

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.

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 ALTERATION OF CAPITAL CLAUSE

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 .
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 DOCTRINE OF ULTRA VIRES

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.

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 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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 Items covered by the Articles of
Association include :-
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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 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.
 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.
 Doctrine Of Ultra Vires
Ultra vires to the articles of association
Ultra vires the memorandum of Association

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 Alteration of Articles
Articles may be altered by a company by
passing special resolution at a general body
meeting of shareholders
 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.
 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 Can be altered by special resolution.

sanction of central govt./ tribunal.

It define the relationship between the It define the relationship between

company & the outsiders company & its staff and between
members & members interests