Unit 2- Documents

Memorandum Of Association
Memorandum of Association
⮚ MOA is a legal document which describes the purpose
for which the company is formed.

⮚ It defines the powers of the company and the conditions

under which it operates.

⮚ It is a document that contains all the rules and regulations

that govern a company’s relation with the outside world.
 Section 2(56) of the Companies Act 2013  defines
Memorandum of Association.
“Memorandum” means the Memorandum of Association of
a company as originally framed or as altered from time
to time in pursuance of any previous company law or of
this Act.
 Features
⮚ It defines the scope & powers of a company, beyond which
the company cannot operate.

⮚ It is used in the registration process, without it the company

cannot be incorporated.

⮚ It helps anyone who wants to enter into a contractual

relationship with the company to gain knowledge about the
company.

⮚ It is also called the charter of the Company, as it contains all

the details of the company, its members and their liabilities.
Forms of MOA U/S 4 and 5
⮚ Table A-MOA of a company limited by shares
⮚ Table B-MOA of a company limited by guarantee and not
having share capital
⮚ Table C-MOA of a company limited by guarantee and
having share capital
⮚ Table D-MOA of an unlimited company and having share
capital
⮚ Table E-MOA of an unlimited company and not having share
capital
 Clauses of MOA
⮚ Name Clause
⮚ Situation Clause
⮚ Object Clause
⮚ Liability Clause
⮚ Capital Clause
⮚ Subscription Clause
⮚ Nomination or Succession clause (In case of OPC)
 Name Clause
⮚ No company shall be registered by name which in the opinion
of the Central Govt. is undesirable and in particular which is
identical with or which too nearly resembles the name of an
existing company.
⮚ The name should not be identical or similar to that of a
Company/LLP already registered or a registered trademark.
⮚ Public limited company-‘Limited’ as the last word

Private limited company- ‘Private Limited’ as the last words.

⮚ This is not applicable to companies formed under
Section 8 of the Act who must include one of the
following words, as applicable: Foundation / Forum /
Association/ Federation/ Chambers / Confederation/
Council/ Electoral Trust, etc.
⮚ Companies (Incorporation ) Rules , 2014

Case-
Ewing V. Butter cut Margarine Company Ltd. (1917)
Situation (Registered Office) Clause
⮚ The name of the State in which the registered office (In
existence from 15th day of incorporation) of the company
will be situated shall be specified.
⮚ It is place from which the business shall operate and where
the Common Seal, Statutory books of the Company are
kept.
⮚ Company must furnish to the Registrar verification of its
registered office within 30 days from the date of
incorporation.
 Object Clause
⮚ The objects for which the company is being incorporated/ or
main activities of business which will be carried out by the
Company should be specified. It defines the limit of
operations to be carried on by the company.

⮚ The Memorandum should be stated in the following manner:

(a) the main objects of the company to be pursued by the

company on its incorporation;

(b) objects incidental or ancillary to the attainment of the

main objects.
 Liability Clause
⮚ For a company limited by shares – it should specify the
liability of its members is limited to any unpaid amount on
the shares that they hold.
⮚ For a company limited by guarantee – it should specify
the amount undertaken by each member to contribute to:
-The assets of the company when it winds-up.
-The costs, charges, and expenses of winding up and the
adjustment of the rights of the contributors among
themselves.
Capital Clause
⮚  This is valid only for companies having share capital.
These companies must specify the amount of Authorized
capital divided into shares of fixed amounts.

⮚ Further, it the names of each member and the number of

shares against their names should be mentioned.
Association Clause / Subscription Clause
⮚ Details the particulars of the promoters/ shareholders of
the company
⮚ According to section 12, there should be at least two
persons subscribing to Memorandum of Association in
case of private company and seven in case of public
company and one in case of OPC.
Nomination or Succession clause (In case of OPC)
Alteration of Memorandum

Change of Name –Sec. 13(2)

⮚ By special resolution
⮚ By ordinary resolution
⮚ Direction for change of name by Central Govt.

Case-
Malhati Tea Syndicate Ltd. V. Revenue Officer (1973)
Change of registered office
⮚ From one place to another place in the same city, town
or village
⮚ From one town to another town in the same state
⮚ From one state to another state
Change of Object clause
⮚ Company which has not issued a prospectus
⮚ Company which has issued a prospectus

Change of liability clause

⮚ Limited company
⮚ Unlimited company
Change of Capital clause
⮚ Limited company having share capital- Ordinary
resolution in General meeting
⮚ Confirmation of the court not required in special
circumstances.
Procedure for alteration of AOA – Section 14
⮚ Approval of BOD
⮚ Convene the general meeting
⮚ Filing certified copy of resolution with ROC- 30 days
⮚ Approval of the Tribunal if converting Public co. in to
Pvt. Co.
⮚ Printed copy of AOA after alteration to be filed with
ROC – 15 days
⮚ Six copies of amendments to be send to stock exchanges
⮚ Alteration should be noted in every copy of the AOA
Restriction on power to alter AOA
⮚ Must not be against the provisions of the Act
⮚ Must not be inconsistent with MOA
⮚ Must not sanction anything illegal
⮚ Not inconsistent with alteration made by Tribunal
⮚ Approval of Tribunal if conversion of public co. in
to pvt. Co.
⮚ No increase in the liability of members
⮚ Alteration by special resolution only
⮚ Should not cause breach of contract
British Murac Syndicate V. Alperton Rubber Co. Ltd. (1915)
⮚ Must be for the benefit of the company.
⮚ Not Constitute fraud on the minority
MOA and AOA
⮚ Concept
⮚ Scope
⮚ Contents
⮚ Status
⮚ Alteration
⮚ Ultra vires
Binding effect of MOA and AOA
⮚ Members to the company
⮚ Company to the member
⮚ Members inter se..
⮚ Company to the outsiders
Doctrine of ultra vires
Doctrine of Constructive notice
Kotla venkataswamy v. Ram Murthi (1934)

Doctrine of Indoor management

Royal British Bank V. Turquand (1856)
Doctrine of Constructive notice
⮚ Every outsider dealing with a company is deemed to
have notice of the contents of MOA and AOA
⮚ On registration , MOA and AOA become public
documents
⮚ Section 399 of CA 2013 provides right to inspection to
all.
⮚ Documents are open for public inspection on payment.
⮚ Inspect the MOA and AOA before dealing with the
company
⮚ Office of Registrar is a public office
⮚ Presumption that outsider has read MOA and AOA
⮚ Knowledge of these documents and their contents is
constructive notice of MOA and AOA
⮚ Understand the contents according to their proper
meaning.
Kotla venkataswamy v. Ram Murthi (1934)
⮚ The articles of a company required that all deeds and
other important documents should be signed by the MD,
the secretary and working director on behalf of the
company.
⮚ The plaintiff accepted a deed of mortgage executed by the
secretary and working director only.
⮚ It was held that the plaintiff could not claim under this
deed as the deed was invalid.
Doctrine of Indoor management
⮚ Exception to rule of constructive notice
⮚ Entered in to transactions which is proper with the
company after reading MOA and AOA
⮚ Irregularity in the conduct of the affairs of the company
⮚ Company can not escape from the liability
⮚ Outsider dealing with company had no means to discover
the irregularity
⮚ An outsider is presumed to know the constitution of a
company, but not what may or may not have taken place
within the doors that are closed to him.
Royal British Bank Vs. Turquand (1856)
⮚ The articles of a company stated that the directors could
borrow money on behalf of the company, if they are so
authorised by a resolution passed by the shareholders in
general meeting

⮚ The directors borrowed money from T without obtaining

any authorisation from shareholders.
⮚ T had lent the money to the company assuming that the
shareholders had authorised the directors to borrow
money as per the requirements of the articles.
⮚ Held that borrowing of money by the directors without
any authorisation from the shareholder is mere internal
irregularity
⮚ Mr. T could sue the company
Damodara Reddi Vs. Indian National Agencies Ltd.
(1946)
⮚ The articles of a company provided that the directors
could allot shares only to the existing members and could
not without the consent of the company in general
meeting allot them to outsiders.

⮚ They allotted certain shares to P without the consent of

the company in general meeting.
⮚ Held that the applicant was entitled to assume that the
sanction of the company in general meeting must have
been obtained. The allotment was held valid.
Exceptions to Doctrine of Indoor Management
⮚ Knowledge of irregularity

TR Pratt Ltd. Vs. ED Sassoon &Co. Ltd. (1936)

Devi Ditta Mal Vs. Standard Bank of India (1927)

⮚ Negligence
Anand Bihari Lai Vs. Dinshaw & Co. (1942)
Underwood Vs. Bank of Liverpool (1924)
⮚ Forgery

Ruben Vs. Great Fingall Consolidated Co. (1906)

⮚ Acts outside the scope of apparent authority

Kreditbank Cassel Vs. Schenkers Ltd. (1927)