Memorandum of Association

The Memorandum of Association is the charter of the company, indicating the permitted range of its enterprise. It enables the outside world who deals with the company, to know about certain vital aspects about the company. Tables B, C, D, E in Schedule I give various forms of Memorandum. The Memorandum of Association of a company is required to be in one of those Forms applicable to the case of the company. A. Contents of Memorandum of Association The Memorandum shall a. Be printed b. Be divided into paragraphs numbered consecutively c. Be signed by each subscriber, in the presence of at least one witness The Memorandum shall contain the following clauses a. The Name Clause b. The Registered Office Clause c. The Objects Clause d. The Liability clause e. The Capital Clause a. The Name Clause The Memorandum must state the name of the Company. No company shall be registered by a name which in the opinion of the Central Government is undesirable. It is necessary that the word Limited must be mentioned as the last word of the name in the case of a public limited Company and the words Private Limited are to be used in the case of a Private Limited Company. Exceptions 1. When the Company is being formed for promoting commerce, art, science, religion, charity or if it intends to apply its profits in promoting its objects, and prohibits payment of dividend to its members, the central Government may authorise the companies not to use the words Ltd., or Unlimited. (Section 25 companies) 2. A company not having any limit on the liability of its members (Unlimited companies) is not required to use Limited or Private Limited as the last words of its name. Publication of name by company is mandatory. The company and its officers who make a default in fulfilling the duty are subject to punishment. b. The Registered Office Clause The Memorandum of every company must mention the state in which registered office of the company is situated. c. The Objects Clause The Memorandum of a company has to mention the objects of the company because a company cannot do acts which are outside its objects. 1

The memorandum should mention the main objects of the company and objects incidental to the attainment of the main objects. And the objects which are not included in the main clause shall be included as other objects. The Doctrine of Ultra Vires The Company is authorised to do only such acts which it has been authorised to do through the memorandum and it cannot do those acts which are outside its powers (ultra vires). Any ultra vires act done by the company is void. Ultra vires act cannot be ratified also. Ashbury Railway Carriage Company vs. Riche The Doctrine of Constructive Notice Memorandum is a public document open to public inspection. The persons dealing with the company are deemed to know the Memorandum and Objects of the company and they cannot be allowed to say that they were not actually aware of the objects of the company. Accordingly an ultra vires contract cannot be enforced. Courts interference Sometimes companies include a large number of objects, some of them not having even a remote relation with the main objects of the company. This defeats the very purpose of the objects clause. The acts which are neither covered under the main objects nor are incidental are declared by the courts as ultra vires. Lakshmanaswami vs. L.I.C When the main objects cannot be carried out Every company is formed for certain objects and the money of the shareholders shall be used only for such objects. When the company cannot carry out the objects for which the company is formed, its substratum is gone; it has to be wound up. German Date Coffee Co. Ltd Action by the company on an ultra vires contract A company cannot be made liable in respect of ultra vires contract. And a third party also cannot be made liable for ultra vires transaction. d. The Liability Clause The Memorandum of a company limited by shares or by guarantee shall state that the liability of the members is limited. e. The Capital Clause When the company is limited by shares, the Memorandum shall state the amount of share capital with which the company is to be registered and the division of the capital into shares of a fixed amount.

B. Alterations of Memorandum

Alteration of name of the company A company registered with a certain name can subsequently change the same. Such a change can be made by a special resolution and with the approval of the Central Government signified in writing. No such approval is required if change consist in merely the addition or deletion of the word private. When the company makes a change in the name, the Registrar shall enter the new name on the register and shall issue a fresh certificate of incorporation containing the changed name. The Registrar shall also make necessary alteration in the Memorandum of Association. Alterations of change of registered office and objects of the company The change in the place of the registered office of a company from one state to another state or change with respect to the objects of the company may be made for the following purposes: 1. 2. 3. 4. To carry on its business more economically or 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 5. To restrict or abandon any of the objects specified in the Memorandum 6. To sell or dispose of the whole or any part, of the undertaking of the company 7. To amalgamate with any other company or body of persons Alterations for change of office can be made by passing a special resolution and confirmation of the same by the Central Government. (Section 17) Before confirming the alteration, the Central Government must be satisfied that sufficient notice is given to the persons whose interests are likely to be affected by the alteration. Notice is also to be given to the Registrar to enable him to state his objection and suggestions. The central government may or may not confirm the alteration. It can also make an order confirming the alteration on such terms and conditions as it thinks fit. Registration of Alteration (Section 18) - Company has to file with the Registrar the order of the central government (within 3 months from the date of the order) and the special resolution passed by the company (within 1 month from the date of such resolution) together with the printed copy of the memorandum as altered. The Registrar shall certify the registration within one month of filing the documents. Failure to register within the time allowed will make the alteration inoperative at the expiry of such period. Change of registered office within a state (Section 17 A) An application has to be filed with Regional director and he shall convey his confirmation within 4 weeks. The company shall file with the Registrar a certified copy of the confirmation of the Regional Director within 2 months from the date of confirmation, together with a printed copy of the Memorandum as altered. The Registrar shall register the same and certify the registration within 1 month from the date of filing of such document.