MEMORANDUM OF ASSOCIATION & ARTICLES OF

ASSOCIATION

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Memorandum of Association

The first step is the formation of a company is to prepare

memorandum of association.
• This is also known as constitution of the company.

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What is Memorandum of Association of a company?

• Is the constitution or charter of the company and contains the powers

of the company.
• No company can be registered under the Companies Act, 1956
without the memorandum of association.
• Under Section 2(28) of the Companies Act, 1956 the “Memorandum
means the memorandum of association of the company as originally
framed or as altered from time to time in pursuance with any of the
previous companies law or the Companies Act, 1956.”

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CONTENTS OF MEMORANDUM OF ASSOCIATION

Six Clauses

Name Registered
Objects
office

Association
Liability Capital or subscription
1. Name Clause[ section 13(1)(a)]

• The memorandum must state the name of the company with limited
as the word ,in case of a public limited company and with ‘private
limited', in the case of a private limited company .
• The company is free to choose any name but it must not be
undesirable or must not resemble the name of any other registered
company.

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2.Registered office clause [section 13(1)(b)]

• The state in which the registered office of a company will be situated

is mentioned in this clause .
• The registered office of the company is the official address of the
company where the statutory books and records must normally be
kept

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3. Object Clause section 13(1)(c)&(b)]

This clause is quite important and must be very carefully drafted as it

determines the activities of the company.

Main object:- this sub-clause contains the main objects of the company
to the pursued on its incorporation  
Objects incidental or ancillary :- it covers the objects which are
incidental or ancillary to the attainment of the main object
Other objects :- this sub-clause will cover any objects which are not
included in the ‘main objects ‘
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4. Liability Clause[section 13(2)]
 This clause states the nature of liability of the members of the
company .in the case of a company limited by share or by guarantee
the fact that the liability of its members is limited must be made
absolutely clear . In case of a company limited by shares the liability of
a member is limited to the nominal value of the share held by him .if
the share are fully paid up his liability is nil. But in case of partly paid-up
shares the liability is limited to the amount which is unpaid.
 In case of a company limited by guarantee ,the liability clause must
state the amount which every member undertakes to contribute to the
assets of the company in the event of its winding up

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5. Capital Clause[section 13(4)(a)]
• This clause states that amount of the capital with which the
company is to be registered .this clause should also state the
number and face value of shares into which the capital of the
company is divided
• The capital with which the company is ‘registered’ or ‘nominal’ or
‘authorized’

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6. Association clause [section 13(4)(c)]
• The association clause states – in this cause , the subscribes declare
that they desire to be formed into a company and agree to take the
shares stated against their names .the names ,address and
occupation of the subscribers must be given each subscriber must
sign in the presence of at least

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Case: Company for Restaurant
• Husband and wife, Niraj and Seema Mishra, based in Mumbai, are
forming a company. They want a short name for the company with
their surname in it. The company is being formed to run a restaurant.
They project they would need 20 lakhs as the capital of the company.
Immediately, the husband would contribute Rs. 2,00,000 to the share
capital of the company and wife Rs. 10. Mr. Mishra hopes to find
others, after the company is formed, to take the shares of the
company. They also contemplate occasionally hiring out the car they
would buy for the company. Develop a Memorandum of Association for
the Company.

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Memorandum of Association of the Mishra private limited
1. The name of the company is Mishra Private Limited
2. The registered office of the company will be situated in the state of
Maharashtra.
3. The objective for which the company is begin established are as follows:
a. Main object: running of restaurants
b. Ancillary object : opening bank accounts, hiring premises an running of
bakery
c. Other objects: Hiring out of vehicles
4. The liability of the members is limited
5. The authorized share capital of the company is RS.20,00,000,divided into
2,00,000
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S.NO Name & Addresses No . Of equity Signature of Name /
description & shares taken by subscriber address
occupation of each subscriber description
subscribers and
occupation of
witness

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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.
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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

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 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. Notice of new location to ROC within 30 days.

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 CHANGE OF REGISTERED OFFICE

From one state to another state

1. Special Resolution
2. Confirmation of Central Govt.
3. For certain Purposes only

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 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
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 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.

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 ALTERATION OF CAPITAL CLAUSE

• To increase the authorized share capital

• To convert shares into stock
• To cancel shares not taken up

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 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.

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Articles Of Association
• A document that specifies the regulations for a
company's operations. The articles of association define the
company's purpose and lays out how tasks are to be accomplished
within the organization, including the process for appointing directors
and how financial records will be handled.

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Items covered by the Articles of Association
include :-
• The important
• Powers, duties, rights and liabilities of Directors
• Powers, duties, rights and liabilities of members
• Rules for Meetings of the Company
• Dividends
• Borrowing powers of the company
• Calls on shares
• Transfer & transmission of shares
• Forfeiture of shares
• Voting powers of members

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Doctrine Of Ultra Vires

 Ultra vires to the articles of association

 Ultra vires the memorandum of Association

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Case Study
In Ashbury Railway Carriage and Iron Company Ltd v. Riche, (1875) L.R. 7
H.L. 653., In this case, the objects of the company as stated in the objects
clause of its memorandum, were ‘to make and sell, or lend on hire
railway carriages and wagons, and all kinds of railway plaint, fittings,
machinery and rolling stock to carry on the business of mechanical
engineers and general contractors to purchase and sell as merchants
timber, coal, metal or other materials; and to buy and sell any materials
on commissions or as agents.’ The directors of the company entered into
a contract with Riches for financing a construction of a railway line in
Belgium. All the members of the company ratified the contract, but later
on the company repudiated it. Riche sued the company for breach of
contract.
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Issue:
•Whether the contract was valid and if not, whether it could be
ratified by the members of the company?
The House of Lords held unanimously that:
•The contract was beyond the objects as defined in the objects
clause of its memorandum and therefore it was void.
•The company had no capacity to ratify the contract.

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Alteration of Articles
 Articles may be altered by a company by passing special resolution at
a general body meeting of shareholders
 Copy of resolution should be sent to registrar within 30 days
 Copy of altered articles to be registered within 3 months of passing of
resolution
BINDING FORCE OF MOA
• Company is bound to its members
• Members are bound to the company
• Each member is bound to other members
• Neither the company nor the members are bound to outsiders

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 DOCTRINE OF CONSTRUCTIVE NOTICE
 According to Section 610, every person dealing with
the company is deemed to have read M/A and A/A
and understood the contents
 Accessible to public

DOCTRINE OF INDOOR MANAGEMENT

 Rule of Indoor Management is an exception to the
Doctrine of Constructive notice.
 Memorandum of Articles of Association
Association
Charter of Company Regulations for internal management

Defines the scope of the activities Rules for carrying out the objects 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 with Can be altered by special resolution.

sanction of central govt./ tribunal.

It define the relationship between the It define the relationship between

company & the outsiders company & its staff and between
members & members interests
PROSPECTUS
• Document that described or issued as prospectus and includes any
notice, circular, advertisement or other document inviting deposits
from the public or inviting offers from the public for subscription of
any shares in , debentures.

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NECESSARY PRE-REQUISITES OF PROSPECTUS
• Must be dated: Date of issue and date of publication
• Must be signed: Signed by director or proposed director or by
their agent who have such authority in writing
• Must be registered: Registered with registrar of companies
• Must be issued within 90 days

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CONTENTS OF PROSPECTUS
1. Matter specified in part I of schedule II
• Includes general information of company

2. Matter Listed in part II schedule II

• It contains reports by auditors and accountants, consent of directors,
auditors and other statutory information
3. Matter given in part III schedule II
i. Company carrying business for less than 5 financial years
ii. If prospectus issued more than two years after the date at which company
is entitled, particulars of signatories to memorandum and shares
subscribed for by them and details of preliminary expenses need not be
given.
iii. Statements of experts like engineers, valuer, accountants in writing

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GOLDEN RULE OF PROSPECTUS
• Frank and honest disclosure of all facts in the prospectus
• There should not be error of commission(mis-statement) nor any
error of omission(non disclosure of relevant facts)
• True nature of the company venture to be disclosed.

DEEMED PROSPECTUS
• Company allots shares to public through medium of issue houses.

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MIS- STATEMENTS IN PROSPECTS AND
LIABILITY
• Any mis statement leads to the following liability
I. Civil:
liability against company and against directors,
promoters and experts
Rescission of contract, compensation

II. Criminal
• 50,000 fine or 2 year imprisonment or both
• If there is fraud, 1 lack fine with 5 years of imprisonment

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STATEMENT IN LIEU OF PROSPECTUS
• Public company does not invite public to subscribe shares
• Similar to prospectus
• Duly signed by all the directors
• Filed with registrar three days before
SHELF PROSPECTUS & INFORMATION
MEMORANDUM
• Issued by any financial institution or bank for issue of
securities
• Help to reduce the expenses of preparation

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RED HERRING PROSPECTUS
• Does not have details of either price or number of shares being
offered

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