Hereby, we are going to discuss what is memorandum of association, purpose and its clauses in detail. Look at this to know some useful information about the company before you set up a business.
Memorandum of association:
It is the constitution of the company and provides the foundation on which the structure has been built. It is the principal document of the company and it cannot be registered without the memorandum of association. It defines the scope of the company’s activities as well as its relation with the outside world.
Under section 2(28) of the company act, it states as memorandum of association of the company has been originally framed or altered from the different time intervals in pursuance of any previous company laws or of this act.
The main purpose is to explain the scope of the activities of the company. The prospective shareholders know the areas where the company would invest their money and the risks they are to be carried out while investing the money. The outsiders probably understand the limits of the working of the company and their dealings within the prescribed scope.
What are the clauses of memorandum?
Being a separate legal entity, the company must have a name. A company can select any name which shouldn’t resemble any other company name and it shouldn’t contain the words like queen, king, emperor, government bodies and the names of world bodies.
The name shouldn’t be the objectionable one in the view point of the government. It is important to use the word “limited” at the end of public company name and the word “private limited” have to be kept at the end of the private limited company name. These words ensure that the people who are dealing with the company should know that the liability of the members is limited.
The name of the company has to be painted outside every place where the business of the company is carried on. If the company holds any undesirable names, then it can be changed by passing an ordinary resolution.
Registered office clause:
Each and every company must have a registered office, the address of that have to be communicated to the registrar of companies. This makes the registrar to have correspondence with the company. The registered office place can be intimated to the registrar within 30 days of incorporation or commencement of any business.
When the company shift its registered office from one place to another, even in the same town, the proper intimation needs to be given to the registrar. In case the company wants to shift its place to another town in the same state, special resolution must be passed by the company. If the office is going to be shifted from one state to other state, the required alteration needs to be made in the memorandum.
One of the significant clauses of the memorandum of association since it determines the rights and powers of the company and also defines the sphere of activities.
The alteration of this clause is little bit tedious so it should be decided carefully in the beginning itself. When any of the activities are not mentioned by the company in the object clause, then it cannot be taken up.
Moreover, the shareholders will know the sphere of activities which the company could undertake. The object clause choice lies with the subscribers to the memorandum. They are literally free to add anything which is provided and it is not contrary to the provisions of the companies act and other laws of the land.
It can be altered to enable a company to carry on its activities more economically or by improved means to carry on some business which under existing circumstances can be conveniently combined with the object clause.
It states that the liability of the member have been limited to the value of shares held by them which means that the members will be liable to pay only the unpaid balance of their shares. The liability of the members can be limited by guarantee. Another important thing is that it also states that the amount which every member will undertake to contribute to the assets of the company during winding up.
It states the total capital of the proposed company. The capital can be divided in to equity shares capital and the preference share capital that also has to be mentioned. The shares and the values in each category should be given. If any special privileges and rights conferred on any shareholders, it should be clearly mentioned so that the public can be known exactly about the nature of the capital structure of the company.
This clause can be altered by passing a special resolution and by obtaining the approval from the company law board.
This clause contains the name of the signatories to the MoA. In case of public limited company, at least seven members need to be signed in the memorandum and in case of private limited company at least two members have to be signed in the memorandum. Each subscriber has to take at least one share in the company. Subscribers declare that they agreed upon incorporating a company and take the shares which are stated against their names.
The signature, full address and the occupation of the subscriber and the witnesses have to be mentioned.
For more information -> Click here