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Memorandum and articles


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Memorandum and articles

  1. 1. Memorandum of Association & Articles of Association 1
  2. 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. 2
  3. 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.” 3
  4. 4. Six Clauses CONTENTS OF MEMORANDUM OF ASSOCIATION Name Registered office Liability Capital Association or subscription Objects
  5. 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. 5
  6. 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 6
  7. 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 ‘ 7
  8. 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 8
  9. 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’ 9
  10. 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 10
  11. 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 11
  12. 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 12
  13. 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 13
  14. 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 14
  15. 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 15
  16. 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 16
  17. 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 17
  18. 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’ 18
  19. 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. 19
  20. 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 20
  21. 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. 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. 23.  Ultra vires to the articles of association  Ultra vires the memorandum of Association 23
  24. 24.  Articles may be altered by a company by passing special resolution at a general body meeting of shareholders
  25. 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. 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