MEMORANDUM OF ASSOCIATION

Definitions

Memorandum of Association of a
company as originally framed or as altered
from time to time in pursuance of any
previous companies law or of this Act

Sec.2 (28)
MEMORANDUM OF ASSOCIATION

Memorandum of Association of a
company is its charter & defines the
limitations of the powers of a company. It
contains the fundamental condition upon
which alone the company is allowed to be
incorporated

- Lord Cairns
MEMORANDUM OF ASSOCIATION

The purpose of Memorandum of

Association is to enable the share
holders, creditors and those who deal
with the company to know what its
permitted range of enterprise is.

- Lord Macmillan
FORM OF MEMORANDUM OF
ASSOCIATION

Form as given in table B, C, D, & E in

Schedule I
Printed
Divided into paragraphs
Numbered consecutively
Signed by at least 7 persons for public & 2 for
private company. Signatures attested by one
witness. Subscribers shall at least take one
share
CONTENTS OF MEMORANDUM OF
ASSOCIATION

Six Clauses :

1. Name
2. Registered office
3. Objects
4. Liability
5. Capital
6. Association or subscription
DOCTRINE OF ULTRA VIRES

The words :
Ultra means beyond
Vires means the powers
Ultra Vires means beyond the powers

A company which owes its incorporation to

statutory authority cannot effectively do
anything beyond the powers expressly or
impliedly conferred upon it by the statute or
Memorandum of Association.
ASHBURV RAILWAY CARRIAGE & IRON
COMPANY LTD. Y. RICHE

The company has been formed with the object

:
To make and sell, or lend or hire railway
carriage and wagons and all kinds of railway
plants, to carry on the business of mechanical
engineers and general contractors etc.
The company contracted with Riche to finance
the construction of Railway line in Belgium.
The company repudiated the agreement and
was sued for breach of contract.
ASHBURV RAILWAY CARRIAGE & IRON
COMPANY LTD. Y. RICHE

Rich Contended :
Firstly, that the contract in question came well
within the meaning of the words general
contractors, and, was therefore, within the
powers of the company, secondly, that the
contract was ratified by the majority of the
shareholders.
EFFECTS OF DOCTRINE OR ULTRA
VIRES

Void Ab Initio
Injunction
Personal Liability of Directors
Acquisition of Property that is Ultra
Vires
Directors personally liable to third parties
ALTERATION OF NAME CLAUSE

Special Resolution.
Written Approval of Central Government.
No Approval of Central Government is
necessary if the change of name involves
only the addition or deletion of the word
Private.
Change by ordinary resolution and approval
of Central Government when name is
identical or too closely resembles the name
of an existing company.
CHANGE OF REGISTERED OFFICE

From one premises to another

premises in the same city, town or
village
By passing a resolution of Board of
Directors
CHANGE OF REGISTERED OFFICE
From one town or city or village to
another town or city or village in the same
state
1. Special Resolution.
2. Confirmation of Regional Director
when jurisdiction of Registrar of
companies is changed.
3. Copy of (i) & (ii) to be filed with
ROC.
4. Notice of new location to ROC within
30 days.
CHANGE OF REGISTERED OFFICE

From one state to another state

1. Special Resolution
2. Confirmation of Central Govt.
3. For certain Purposes only (As
given in section 17)
ALTERATION OF OBJECTS CLAUSE
A. Special Resolution
B. Alteration is sought on any of these grounds:
To carry on its business more economically & 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
To restrict or abandon any of the objects specified in the
memorandum
To sell or dispose off the whole or any part of the
undertaking
To amalgamate with any other company
C. Copy of (A) is filed with ROC within 30 days
ALTERATION OF LIABILITY CLAUSE

The liability of a member of a

company cannot be increased unless
the member agrees in writing.

From unlimited liability, it can be

made limited by re-registration of
the company.
ALTERATION OF CAPITAL CLAUSE

Increase of authorized share capital.

Consolidation and subdivision of
shares.
Conversion of shares into stock &
vice versa.
Diminution of share capital.
ARTICLES OF ASSOCIATION

Definition

Article means the articles of association of

a company as originally framed or as altered
from time to time in pursuance of any
previous companies laws or of this Act

Sec.2 (2)
ARTICLES OF ASSOCIATION

. The articles proceed to define the duties,

the right and the powers of the governing body
as between themselves and the company at large
and the mode and form in which the business of
the company is to be carried on and the mode
and form in which changes in the internal
regulations of the company may from time to
time be made.

- Lord Cairns
CONTENTS OF ARTICLES

1. The extent to which Table A is applicable

2. Different classes of shares and their rights
3. Procedure of making an issue of share capital
and allotment thereof
4. Procedure of issuing share certificates and share
warrants
5. Forfeiture of shares and the procedure of their
re-issue
CONTENTS OF ARTICLES

6. Procedure for transfer and transmission of shares

7. The time lag in between calls on shares
conversion of shares into stock
8. Directors, their appointment, remuneration,
qualifications, etc.
9. Account and audit
10. Lien of shares
11. Payment of commission on shares and
debentures to underwriters
12. Rules for adoption for preliminary contracts if
any
CONTENTS OF ARTICLES

13. Re-organization and consolidation of shares

capital
14. Alteration of share capital & Buyback of shares
15. Borrowing power of directors
16. General meeting, proxies and polls
17. Voting rights of members
18. Winding up
ALTERATION OF ARTICLES (SEC 31)

Procedure :

Alteration by passing a special resolution.

Copy of resolution to be sent to registrar
within 30 days.
Copy of altered articles to be registered
within 3 months of passing of resolution.
LIMITATIONS REGARDING ALTERATION
OF ARTICLES

1. Alteration should not be inconsistent with

1. Provisions of Company Act or any other
statute
2. Conditions contained in memorandum
2. Approval of govt. to be obtained in certain cases
3. Alteration must not deprive any person of his
rights under a contract
4. Alteration must not constitute a fraud on the
minority
5. Alteration must be bonafide for the benefit of the
company as a whole
BINDING FORCE OF MEMORANDUM AND
ARTICLES (SEC 36)

The following are the legal implications:

Company is bound to its members

Each member is bound to the company
Each member is bound to other members
in exceptional case only
Neither the company nor the members are
bound to outsiders
Memorandum of Articles of Association
Association
Charter of Company Regulations for interal
management
Defines the scope of the Rules for carrying out the objects
activities of company.
Supreme document Subordinate to the memorandum.
Must for every company Company limited by shares need
not have it (Table A applies)
Strict restrictions, alteration only Can be altered by special
with sanction of central govt./ resolution.
tribunal.
Act, Ultra Vires is wholly void Act Ultra Vires (but intra vires
& cannot be ratified. the memorandum) can be
ratified.
DOCTRINE OF CONSTRUCTIVE NOTICE

Documents are open & accessible to all.

Presumption that any outsider dealing with
company has read & understood the
documents.
It is a negative doctrine, acting only against
the outsiders & not the company.
DOCTRINE OF INDOOR MANAGEMENT

Persons dealing with the company in good faith

have a right to assume that the internal requirements
prescribed in public documents have been observed
Persons are not bound to enquire into regularity of
internal proceedings

Exceptions :

Knowledge of irregularity
Negligence on part of the outsider
Forgery
Acts outside scope of apparent authority