STUDY MATERIAL: COMPANY LAW

TOPIC : MEMORANDUM OF ASSOCIATION

 MEMORANDUM OF ASSOCIATION

• It is the charter of the company. It contains the fundamental conditions upon which the
company can be incorporated

• It contains the objects of the company’s formation. The company has to act within
objects specified in the MOA. It defines as well as confines the powers of the company

• The outsider have to transact looking into the MOA.

 The Compulsory Clauses in MOA :

• The Name Clause – it decides on the name of the company based on the capital involved.
• The Registered Office Clause- where it has registered its head office and other branch
office (The registered office can be changed with the permission of the ROC).
• The Object Clause- Main object, ancillary object and the other objects of the company
are clearly specified
• The Liability Clause- What is the liability of its members.. limited by shares or guarantee
or unlimited, there can be alteration in the liability clause.
• The Capital Clause - The amount of the nominal capital of the company, number of
shares in which it is to be divided… alteration of the capital clause etc.

NOW LETS DISCUSS THE CLAUSES ONE BY ONE :

• Name Clause: The name clause sets out the name of the proposed company. The name should
not be identical to another company (Sec 4(2)).

• The use of the word “limited” : Whatever is the name of the company; if the liability of the
members is limited– the last word to be used is “limited” and in case of Private Limited
Company “ Private Limited”.

• Company may change its name by passing a special resolution (Section 13 (2-3) ).

 Registered Office Clause: The MoA mist specify the registered office in which the company
is situated.

• Within 30 days of commencement of business/incorporation; the notice of location of the

company must be given to the Registrar.

• Alteration of Registered Office Clause: Sec. 13(4)-6.

 Objects Clause :

• The third clause must state the objects for which the company is proposed to be established. The
choice of objects lies with the subscribers. However, the objects must not be contrary to the law
of the land and the provisions of the Companies Act.

• This clause gives a certain degree of protection to the shareholders and creditors by ensuring that
the funds of the company are utilized for a particular purpose as stated in the objects.

“Doctrine of Ultra Vires”

• The powers exercisable by the company are to be confined to
the objects specified in the MOA. It is thus better to define and
include the provisions regarding the acquiring of business,
sharing of profits, promoting company and other financial,
gifts , political party funds etc. in the objects.
• If the company acts beyond the powers or the objects of the
company that is specified in the MOA, the acts are considered
to be of ultra vires

CASE LAW : Ashbury Railway Carriage & Iron Co. Ltd vs.
Riche
• The object of the company was "to make and sell, or lend on
hire, railway carriages and wagons and all kinds of railway
plant, fittings, machinery and rolling stock and to carry on the
business of mechanical engineers and general contractors; to
purchase, lease, work and sell mines, minerals, lands and
buildings; to purchase and sell any such materials on
commission or as agents; to acquire, purchase, hire, construct
or erect works or buildings for the purpose of the company
and to do all such other things as are necessary, contingent or
conducive to all or any of such objects. "The company
contracted for the financing of the construction of a railway
line in Belgium. Held that the contract was ultra vires the
company and observed that the Memorandum "states
affirmatively the ambit and extent of vitality and power which
by law are given to the corporation and it states negatively that
nothing shall be done beyond that ambit and that no attempt
shall be made to use the corporate life for any other purpose
than that which is so specified."