Unit: 2

In this unit:

 The characteristics and content of the memorandum of association

 Corporate capacity
 The alteration of the memorandum of association

1. A Memorandum of Association (MOA) and its characteristics

A Memorandum of Association (MOA) is a legal document prepared in the formation and

registration process of a company to define its relationship with shareholders. The MOA is
accessible to the public and describes the company’s name, physical address of registered
office, names of shareholders and the distribution of shares. The MOA and the Articles of
Association serve as the constitution of the company.

Contents of the Memorandum of Association

a. Name clause
b. Situation clause
c. Object clause
d. Liability clause
e. Capital clause

Legal Name of the Company (name clause)

The name clause requires you to state the legal and recognized name of the company. You
are allowed to register a company name only if it does not bear any similarities with the
name of an existing company. Your company name must end with the word “limited”
because the preparation of an MOA is a legal requirement for limited liability companies
only.

Physical Address of the Registered Office (situation clause)

The registered office clause requires you to show the physical location of the registered
office of the company. You are required to keep all the company registers in this office in
addition to using the office in handling all the outgoing and incoming communication
correspondence. You must establish a registered office prior to commencing business
activities.

Objectives of the Company (object clause)

The objective clause requires you to summarize the main objectives for establishing the
company with reference to the requirements for shareholding and use of financial
resources. You also need to state ancillary objectives; that is, those objectives that are
required to facilitate the achievement of the main objectives. The objectives should be free
of any provisions or declarations that contravene laws or public good.

1
Liability of Shareholders (liability clause)

The liability clause requires you to state the extent to which shareholders of the company
are liable to the debt obligations of the company in the event of the company dissolving.
You should show that shareholders are liable only their shareholding and/or to their
commitment to contribute to the dissolution costs upon liquidation of a company limited by
guarantee.

Authorized Share Capital (capital clause)

The capital clause requires you to state the company’s authorized share capital, the
different categories of shares and the nominal value (the minimum value per share) of the
shares. You are also required to list the company’s assets under this clause.

Association and Formation of a Company

The association clause confirms that shareholders bound by the MOA are willingly
associating and forming a company. You require seven members to sign an MOA for a public
company and not less than two people for a MOA of a private company. You must conduct
the signing in the presence of witness who must also append his signature.

The alteration of the memorandum of association

A Memorandum of Association of any company is a legal document that consist
fundamental information required for the Incorporation of the company. It is also called the
Charter of the Company. Companies may need to bring changes in the clauses of the
company, for which alteration of Memorandum of Association is required. The MOA of a
company outlines the company’s name, the physical address of registered office, names of
shareholders, and distribution of shares.
Alteration in the Memorandum of Association can be carried out only by a special resolution
at the Shareholders meeting. This is a complicated and lengthy procedure. So Memorandum
must be very carefully prepared at the beginning itself.
The following are the provisions related to alteration in Name Clause, Objects Clause,
Liability Clause, Capital Clause and Subscription Clause.

1. Alteration of Name Clause in Memorandum of Association

A company may by passing a special resolution alter is name with the approval of the
Central Government. If the alteration involves change of the name to private limited or
public limited, permission of Central Government is not required.

In case a company has been registered with a name which resembles a name of an existing
company, the Central Government may ask it to change its name. In such case ordinary
resolution is sufficient.

2
The intimation of name change should be given to the Registrar who will issue a fresh
certificate of incorporation. Alteration of Situation clause

1. In case registered office has to be shifted within the same city, town or village, a
notice has to given to the Registrar within thirty day of the change.
2. In case registered office has to be shifted from one town to another town or one
village to another village, a special resolution has to be passed.
3. A company can change its registered office from one State to another State for the
following reasons:

a. to carry on business more efficiently and economically;

b. to achieve the important purpose of the company by sophisticated means;
c. to expand its operations in the current location;
d. to control any of the existing objects;
e. to sell whole or part of the business undertaking;
f. to merge with other business or person.
In case, registered office has to be shifted from one State to another State, a special
resolution has to be passed and approval from the Company Law Board has to be obtained
by the company. The altered memorandum should be filed with the Registrar of the State
from which the company is shifting and also to the Registrar of the State to which the
company is shifted.

2. Alteration of Objects Clause in Memorandum of Association

A company can alter is objects clause by passing a special resolution. Alteration of objects
clause can be done for the following reasons:

1. For the purpose of carrying on its business more economically and efficiently.
2. For the purpose of obtaining the main business of the company by new and
improved means
3. For the purpose of enlarging or changing the local area of its operations.
4. For the purpose of carrying on some business, which may be conveniently or
advantageously combined with the existing business.
5. For the purpose of abandoning any of the objects specified in the
memorandum.
6. For the purpose of selling the whole or any part of the undertaking.
7. For the purpose of amalgamating with any other company.
3. Alteration of Liability Clause in Memorandum of Association
The liability clause can be altered only when a public company is converted to a private
company.

4. Alteration of Capital Clause in Memorandum of Association

A company can alter its capital clause by passing an ordinary resolution in a general
meeting. Alteration of capital may relate to:

a. Sub division of shares

b. consolidation of shares
c. Conversion of shares into stock and cancellation of unsubscribed capital.

3
Within thirty days of passing a resolution, the altered Articles and Memorandum have to be
submitted to the Registrar.

5. Alteration of subscription clause in Memorandum of Association

The company can alter is subscription clause to make the liability of the directors appointed
subsequent to the alteration as unlimited.

Corporate Capacity
Corporate capacity means service as (i) a director of the Company or (ii) a director, officer,
trustee, general partner, manager, managing member, fiduciary, employee, agent or other
representative of any other domestic or foreign, for-profit or not-for-profit, corporation,
limited liability company, partnership, joint venture, trust, employee benefit plan or other
enterprise at the request or for the benefit of the Company.