UNIT I

Memorandum of Association
Articles of Association
Prospectus
 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 companies’ law or of this Act. {Sec. 2 (56)}
• Charter of the Company
 Significance of MoA
• Basic features of Company
• Relationship
• Area of activity

• If anything is done beyond MoA, that will be ultra

vires (beyond powers of) the company and so void
 Use of Certain Keywords as Part of the Name
•  1. Corporation 5 crores (Required authorized capital)
• 2. International, Globe, Universal Continental, Inter-continental, Asiatic, Asia,
being the first word of the name 1 crore
• 3. If any of the words in (2) above stated is used within the name (with or
without brackets) 50 lakhs
• 4. Hindustan, India, Bharat, being the first word of the name 50 lakhs
• 5. If any of the words at (4) above is used within the name (with or without
brackets) 5 lakhs
• 6. Industries/Udyog 1 crore
• 7. Enterprises, Products, Business, Manufacturing 10 lakhs
 Content of MoA
• Publication of Name (s.147) [Name Clause]
In case of a OPC, words ‘One Person Company’ shall
be mentioned in brackets below the name of such
company, wherever its name is printed affixed or
engraved. {Sec. 12(3)}
• Registered office clause : [s.13(1) (b)]
• The Objects Clause [s.13 (1) (d)]
 Contents of MoA …
• The Liability Clause [s.13 (2)]
• The Capital Clause [s.13 (4)(c)]
• The Association Clause [s.13(4)(c)]
• Nomination clause: OPC
 DOCTRINE OF ULTRA VIRES

• Beyond Powers

• Ultravires acts are void

• Can’t be ratified
 Doctrine does not Apply
• ultra vires only the directors

• ultra vires only the Articles of Association

• act is intra vires but has been done in violation of

some bye-laws of the company
 ARTICLES OF ASSOCIATION
• According Sec. 2(5) of the Act
• “Articles means the articles 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, including, so far as
they apply the company the regulations contained
in Table A in Schedule I annexed to this Act”.
 Contents of AoA

• Various classes of shares the company shall issue and their rights.
• Procedure for issue of shares and their allotment.
• Procedure for issuing share certificates and share warrants.
• Forfeiture of shares and the procedure for their re-issue.
• Procedure for transfer and transmission of shares.
• Calls on shares.
• Conversion of shares into stock.
• Payment of commission on shares and debentures to underwriters.
 Contents…
• Borrowing powers of directors.
• Rules for adoption for preliminary contracts, if any,
• Re-organization and consolidation of share capital.
• Alteration of shares capital.
• Payment of dividends and creation of reserves.
• General meetings, proxies and polls.
• Voting rights of members.
• Keeping of books of account and their audit.
• Rules regarding use of the Common Seal of the company.
• Appointment, powers, duties, qualifications and remuneration of directors.
• Appointment, powers, duties remuneration, etc of auditors. And …
• MoA Vs. AoA….

• Let’s Discuss
 Constructive Notice of MOA & AOA
• Public Document
• Read before contracting
• Nothing hidden
 Doctrine of ‘Indoor Management’

• According to this doctrine, a person dealing with the

company is not presumed to have the knowledge of
internal proceedings of the company i.e. there is no
constructive notice as to how the company’s
internal machinery is handled by its officers.
• Contract will be binding on the company and it will
be liable to the outsiders
 Prospectus Sec. 2(36),31, 32 & 2(70)
• According to section 2(36) of the Companies Act,
“Prospectus means any document described or
issued as a prospectus and includes any notice,
circular, advertisement or other document inviting
deposits from the public or inviting offers from the
public for the subscription or purchase of any shares
in or debentures of a body Corporate”
 Prospectus…
• Abridged Prospectus
• Abridged prospectus means a memorandum containing
such salient features of a prospectus as may be specified
by the SEBI by making regulations in this behalf. [Sec. 2 (1)]
• Deemed Prospectus
• It is a common practice that the securities of a company
are allotted or agreed to be allotted to some intermediary
known as ‘Issuing House’
 Prospectus…
• Shelf Prospectus
• Definition:- ‘Shelf prospectus’ means a prospectus
in respect of which the securities or class of
securities included therein are issued for
subscription in one or more issues over a certain
period without the issue of a further prospectus.
[Explanation to Sec. 31]
 Prospectus…
• Red Herring Prospectus
• Definition:- Red herring prospectus means a prospectus
which does not have complete particulars on the quantum
or price of the securities offered and the quantum of
securities included therein. [Explanation to Sec. 32]
• Deemed Prospectus – document to public by issuing
house
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