Memorandum of Association 

Introduction
Meaning of Memorandum of Association
What is the charging section of the 'Memorandum of Association'?
What are the components of the 'Memorandum of Association'?
Conclusion

The Memorandum of Association is a document that governs the relations of a  company with the outside world. It is one of the most important documents needed for the incorporation of a company. 

The Memorandum of Association is charged under Section 399 of the Companies Act, 2013

The MoA is considered as the constitution of the company. It provides the foundation to the structure or the building of the company. The MoA is defined as a company's charter. It defines the limitation of the company's powers.

Particular parts of the memorandum can be altered whenever and however required. The MoA enables the shareholders, creditors and investors to know the permitting range of the company. It regulates

 the company's external affairs.

Importance of Memorandum

• It defines the limitation of a company.
• The whole structure of a company is built on the basis of a memorandum.
• It defines the scope of activities of a company.
• ZIts sets out a company's written goals.

Clauses of Memorandum

The Name Clause

A company is a separate legal entity having its name. The name should be unique and should not resemble the name of allowing any other company. It should not contain names like queen, king, emperor or the names of any government bodies.

A public company is required to have a suffix limited at the end  of its name.

A private company must have the suffix of private limited at the end.

The name of the company should be pasted outside every place where business of a company is carried out.

Registered office clause

Every company must have a Registered office. Location of office can be intimated to the Registrar within 30 days of incorporation. With the intimation to the registrar, a company can change its place in the same town. 

However, for the change of the place to a different town in the same state, a special resolution must be passed. To change the location of office from one state to another, various reforms are needed to be performed in the memorandum.

Object Clause

It determines the rights, powers and sphere of the activities of a company. It should be defined carefully as it is difficult for the clause to be altered later on. The company cannot incorporate any activity which is not mentioned in the object clause. Shareholders are protected by the object clause as it ensures that the funds raised for the undertaking are used for the undertaking (not any other business).

Liability clause

It states the liability of the shareholders. It can be limited or unlimited.The shareholders are liable to pa the unpaid balance of the shares. The liability of the members may be limited by a guarantee. It also contains amount that every member of the company shall contribute to the assets of the company in the event of winding up.

Capital Clause

It states the total capital of the proposed company. The total number of each company should be presented in the capital clause. The exact nature of any special rights and privileges enjoyed by any shareholder must be mentioned in the capital clause.

Association Clause

The name and signatures to the Memorandum of Association is contained in this clause. 

At least seven members are required in the case of a public company.

At least two members are required in the case of a private company.

Doctrine of Ultra-Vires

A company can invoke all its powers allowed by the Companies Act, 1956. Everything else is ultra-vires i.e. beyond the power of the company. A company acting ultra-vires means it is acting illegally in the eyes of law.

Ultra Vires by Directors 

If the transaction is made by the directors beyond the power of the Directors but within the powers of a company. The shareholders of a company can rectify it in the general meetings. 

Any irregularities can be cured by the consent of the shareholders. If the Act is within the reach of the company.

 

Exception to the doctrine of Ultra vires

1. The shareholders can ratify an act which is ultra vires the powers of the directors.

2. An act which is ultra vires the Articles can be ratified by altering the Articles.

3. The third party can be sued for the restitution where the property involved in ultra vires transaction exists in species or can be traced.

4. The company can recover money advanced on the basis of ultra vires lending.

5.If the rights independently arise, they are not affected though the act is ultra vires.

6. In case, an ultra vires loan, taken by the company is used payment of its intra vires, the lender of ultra vires loan can recover the money.

7. If the company has taken an ultra vires loan through some misrepresentation of the fact by the directors, the lender has the right to make the directors of fact by the directors, the lender the right to make directors personally liable on the ground of breach of implied warranty of authority.

Conclusion

From the above discussion we find that memorandum of association is a vital part of the establishment of a company. It is with this that the investors get to know the basic provisions related to a company before investing their capital.

Sample Memorandum of Association