Lecture No.

05 1|P ag e

Class: M.COM-2
Course Title: Corporate Law
Course Instructor: Zahid Hussain
Topics: Memorandum of Association
Relevant Provisions: Sections 27 to 35 of Companies Act, 2017

References: Students are advised to visit the following links:

1. https://en.wikipedia.org/wiki/Memorandum_of_association
2. www.secp.gov.pk
3. https://www.secp.gov.pk/laws/acts/

INTRODUCTION

The memorandum of association of a company is an important corporate document in

certain jurisdictions. It is often simply referred to as the memorandum. In the UK, it has
to be filed with the Registrar of Companies during the process of incorporating a
company. It is the document that regulates the company’s external affairs, and
complements the articles of association which cover the company’s internal
constitution. It contains the fundamental conditions under which the company is
allowed to operate. Until recently it had to include the “objects clause” which let the
shareholders, creditors and those dealing with the company know what is its permitted
range of operation, although this was usually drafted very broadly. It also shows the
company’s initial capital. It is one of the documents required to incorporate a company
in India, the United Kingdom, Ireland, Canada, Nigeria, Nepal, Bangladesh, Pakistan,
Afghanistan, Sri Lanka and Tanzania and is also used in many of the common law
jurisdictions of the Commonwealth. (Ref: https://en.wikipedia.org/wiki/Memorandum_of_association)

Contents of Memorandum of Association

According to the Companies Act, 2017 the Memorandum of Association of a company

must contain the following clauses:

Prepared by: Zahid Hussain, Advocate (LL.M) Updated on: September, 2020
Lecture No.05 2|P ag e

1. Name Clause
2. Situation Clause
3. Objects Clause
4. Liability Clause
5. Capital Clause
6. Subscription Clause

MEMORANDUM OF ASSOCIATION

Section 27. Memorandum of company limited by shares.

In the case of a company limited by shares-

(A) the memorandum shall state—

(i) the name of the company with:

 the word “Limited” as last word of the name in the case of a public
limited company,
 the parenthesis and words “(Private) Limited” as last words of the
name in the case of a private limited company, and
 the parenthesis and words “(SMC-Private) Limited” as last words
of the name in the case of a single member company;

(ii) the Province or the part of Pakistan not forming part of a Province, as
the case may be, in which the registered office of the company is to
be situate;

(iii) principal line of business:

Provided that—

(a) the existing companies shall continue with their existing

memorandum of association and the object stated at serial
number 1 of the object clause shall be treated as the principal
line of business;
(b) if the object stated at serial number 1 of the object clause is not
the principal line of business of the company, it shall be required
to intimate to the registrar their principal line of business
within such time from commencement of this Act and in the

Prepared by: Zahid Hussain, Advocate (LL.M) Updated on: September, 2020
Lecture No.05 3|P ag e

form as may be specified. A revised copy of the memorandum of

association indicating therein its principal business at serial
number 1 of the object clause shall also be furnished to the
registrar; and
(c) the existing companies or the companies to be formed to carry on
or engage in any business which is subject to a licence or
registration, permission or approval shall mention the
businesses as required under the respective law and the rules
and regulations made thereunder;

(iv) an undertaking as may be specified;

(v) that the liability of the members is limited; and

(vi) the amount of share capital with which the company proposes
to be registered and the division thereof into shares of a fixed
amount;

(B) no subscriber of the memorandum shall take less than one share;
and

(C) each subscriber of the memorandum shall write opposite to his name
the number of shares he agrees to take.

Section 28. Memorandum of company limited by guarantee.—

(1) In the case of a company limited by guarantee the memorandum shall

state—

(a) the name of the company with the parenthesis and words
"(Guarantee) Limited" as last words of its name;

(b) the Province or the part of Pakistan not forming part of a

Province, as the case may be, in which the registered office of
the company is to be situate;

(c) principal line of business:

(d) an undertaking as may be specified;

(e) that the liability of the members is limited; and
(f) such amount as may be required, not exceeding a specified
amount that each member undertakes to contribute to the assets

Prepared by: Zahid Hussain, Advocate (LL.M) Updated on: September, 2020
Lecture No.05 4|P ag e

of the company in the event of its being wound up while he is a

member or within one year afterwards for payment of the debts
and liabilities of the company contracted before he ceases to be
a member and of the costs, charges and expenses of winding up
and for adjustment of rights of the contributories among
themselves.

(2) If the company has a share capital, the memorandum shall also state
the amount of share capital with which the company proposes to be
registered and the division thereof into shares of a fixed amount and the
number of shares taken by each subscriber.

Section 29. Memorandum of unlimited company.—

(1) In the case of an unlimited company the memorandum shall state—

(a) the name of the company with the word “Unlimited” as last words of its
name;
(b) the Province or the part of Pakistan not forming part of a Province, as
the case may be, in which registered office of the company is to be
situate;
(c) principal line of business:
(d) an undertaking as may be specified;
(e) that the liability of the members is unlimited.

(2) If the company has a share capital, the memorandum shall also state the
amount of share capital with which the company proposes to be registered and
the number of shares taken by each subscriber.

Section 30. Borrowing powers to be part of memorandum.—

Notwithstanding anything contained in this Act or in any other law for the time being in
force or the memorandum and articles, the memorandum and articles of a company
shall be deemed to include and always to have included the power to enter into
any arrangement for obtaining loans, advances, finances or credit, as defined in
the Banking Companies Ordinance, 1962 (LVII of 1962) and to issue other securities
not based on interest for raising resources from a scheduled bank, a financial
institution or general public.

Prepared by: Zahid Hussain, Advocate (LL.M) Updated on: September, 2020
Lecture No.05 5|P ag e

Section 31. Memorandum to be printed, signed and dated.

Memorandum shall be:

(a) printed in the manner generally acceptable;

(b) divided into paragraphs numbered consecutively;
(c) signed by each subscriber, who shall add his present name in full, his
occupation, usual residential address and such other particulars as may be
specified, in the presence of a witness who shall attest the signature and shall
likewise add his particulars; and
(d) dated.

Section 32. Alteration of memorandum.—

(1) Subject to the provisions of this Act, a company may by special resolution
alter the provisions of its memorandum so as to—

(a) change its principal line of business; or

(b) adopt any business activity or any change therein which is subject to
licence, registration, permission or approval under any law.

(2) The alteration shall not take effect until and except in so far as it is confirmed
by the Commission on petition:

Provided that an alteration so as to change its principal line of business shall

not require confirmation by the Commission.

(3) A copy of the order confirming the alteration duly certified by an authorised
officer of the Commission shall be forwarded to the company and to the registrar
within seven days from the date of the order.

(4) A copy of the memorandum of association as altered pursuant to the order

under this section shall within thirty days from the date of the order be filed by
the company with the registrar, who shall register the same and issue a
certificate which shall be conclusive evidence that all the requirements of
this Act with respect to the alteration and the confirmation thereof have been
complied with and thenceforth the memorandum so filed shall be the
memorandum of the company:

Provided that the Commission may by order, at any time on an application by

the company, on sufficient cause shown extend the time for the filing of

Prepared by: Zahid Hussain, Advocate (LL.M) Updated on: September, 2020
Lecture No.05 6|P ag e

memorandum with the registrar under this section for such period as it thinks
proper.

(5) Where the alteration involves a transfer of registered office from the
jurisdiction of one company registration office to another, physical record of
the company shall be transferred to the registrar concerned of the
company registration office in whose jurisdiction the registered office of the
company has been shifted.

(6) Where the alteration involves change in principal line of business, the
company shall file the amended memorandum of association with the
registrar within thirty days, which shall be recorded for the purposes of this
Act.

Section 33. Powers of Commission when confirming alteration.—

The Commission may make an order confirming the alteration on such terms and
conditions as it thinks fit and make such order as to costs as it thinks proper.

Section 34. Exercise of discretion by Commission.—

The Commission shall in exercising its discretion under sections 32 and 33 have
regard to the rights and interests of the members of the company or of any class of
them, as well as to the rights and interests of the creditors and may, if it thinks fit, give
such directions and make such orders as it may think expedient for facilitating
or carrying into effect any such arrangement.

Section 35. Effect of alteration in memorandum or articles.—

Notwithstanding anything contained in the memorandum or articles of a company, no

member of the company shall be bound by an alteration made in the
memorandum or articles after the date on which he became a member if and so
far as the alteration requires him to take or subscribe for more shares than the
number held by him at the date on which the alteration is made or in any way
increases his liability as at that date to contribute to the share capital of or otherwise
to pay money to the company:

Provided that this section shall not apply in any case where the member agrees in
writing either before or after the alteration is made to be bound thereby.

Prepared by: Zahid Hussain, Advocate (LL.M) Updated on: September, 2020
Lecture No.05 7|P ag e

RELEVANT JUDGMENTS BY HONOURABLE COURTS IN

PAKISTAN

2015 SCMR 1494 Supreme Court of Pakistan

Lucky Cement Ltd VS. Commissioner Income Tax, Zone Companies, Circle-5, Peshawar

Ss. 15 to 25---Company---Memorandum of Association---Scope---Anything done

by a company which was beyond the scope of its Memorandum of Association
was ultra vires and thus could not be given any legal sanctity---Company could
not engage in a business which was not fairly covered by any of its independent
objects, or such objects which were ancillary and incidental to those for which a
company had been created and its Memorandum of Association was duly recognized
and accepted by the regulatory bodies meant for the incorporation of a company and
oversight thereof.

Prepared by: Zahid Hussain, Advocate (LL.M) Updated on: September, 2020