Legal Aspects of

Business
Memorandum of association and articles of association.

MEMORANDUM OF ASSOCIATION
The memorandum of association is a document of great
importance in relation to the proposed company.
It defines the raison detre (the reason of existence of
the company).
Regulates the external affairs of the company with
respect to the outsiders.
Gives the scope of the company apart from stating the
reason for the company to run.

Purpose of memorandum
The prospective shareholders shall know the field in, or
the purpose for , which their money is going to be used
by the company and what risk they are undertaking in
making the investment.
The outsiders dealing with the company shall know with
certainity as to what the objects of the company are
and as to whether the contractual relation into which
they contemplate to enter with the company is within
the objects of the company.

Contents of the memorandum

Name clause
Registered office clause
Objects clause
Capital clause
Liability clause
Association clause

Name clause
Name should end with Limited in case of a public
limited company and end with Private Limited in case
of a private limited company. Special cases when the
company is related to art or science or religion then the
words limited are foreseen.
Central government decides the authenticity of the
companys names.
Misleading names, names similar to a competitor should
be avoided.
Injunction should be obtained in case of identical
names.

Use of key words and authorised

capital required to obtain the names
Number

Key words

Required authorised
capital

Corporation

5 crore

International, Continental, Universal

1 crore

Hindustan, Bharat

50 lakhs

Usage of number 2 within the name of the

company

50 lakhs

Usage of number 3 within the name of the

company

5 lakhs

Industries, Udyog

1 crore

Enterprises, Products, Business, Manufacturing

10 lakhs

Registered office clause

All companys should have a registered office from the
ay it functions or as from the 30th day after the date of
its incorporation.
All communications shall be addressed to the registered
office.
Penalty is huge, 50 lakh for every day of having an
unregistered office if found out.

Objects clause
Defines the scope of the companys power.
PURPOSE
To enable subscribers to the memorandum to know the
uses to which their money may be put
To enable the creditors and persons dealing with the
company to know what its permitted range of enterprise
or activities is.

Contents of the object clause

Main Objects of the company to be pursued by the
company on its incorporation and objects incidental or
ancillary to the attainment of the main objects.
Other objects of the company are objects not included
in the previous clause

Capital Clause
The Memorandum of a company, having a share capital,
shall state the amount of the share capital with which
the company is to be registered and the division thereof
into shares of a fixed amount.
The capital with which a company is registered is called
registered, authorised, nominal capital.
A company cannot issue more shares than that are
authorised in the memorandum.

Liability and association clause

The memorandum of a company limited by shares or by guarantee
shall also state that the liability of its members is limited.
This means that the members can only be called upon to pay the
company at any time the uncalled or unpaid amount on the shares
held by them, or up to the maximum of the amount which they
have guaranteed.
Association clause statement We, the several persons whose
names an addresses are subscribed, are desirous of being formed
into a company in pursuance of the memorandum of association,
and we respectively agree to take the number of shares in the
capital of the company set opposite our respective names.

Articles of association
The Articles of association or just Articles are the rules,
regulations and bye-laws for the internal management
of the affairs of a company.
They are framed with the object of carrying out the aims
and objects as set out in the memorandum of
association.
States fundamental conditions upon which alone a
company is allowed to be incorporated.

Contents of articles
Share capital
Lien on shares
Calls on shares
Transfer of shares
Transmission of shares
Forfeiture of shares
Conversion of shares into stock
Share warrants
Alteration of capital

Contents of articles
General meeting and proceedings
Voting rights of members, voting and poll, proxies
Directors, their appointment
Manager
Secretary
Dividends and reserves
Accounts, audit ad borrowing powers
Capitalisation of profits
Winding up

Memorandum of association

Articles of association

It is the charter of the company indicating

the nature of its business, its nationality,
capital.

They are regulations for the internal

management of the company. They are a
subsidiary to the MoA.

It defines the scope of activities of the

company.

It determines the rules for carrying out the

objects of the company.

It is like the constitution of the company

and is the supreme document.

It is a subordinate document.

There are stringent limitations and it cannot They can be altered by a special set of
be altered and alteration can be done only
resolutions.
by sanctions to the Company Law Board.
Every company must have its own
memorandum.

A company limited by shares need not have

articles of its own.

Thank You