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Memorandum & Article of Association
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Memorandum & Article 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. 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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- First step in the formation of a company.Constitution of the
company.Defines limitations of the powers of a company.
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- The memorandum must state the name of the company with public
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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- 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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This clause is quite important and must be very carefully
drafted as it determines the activities of the company. In the
object clause each and every detail of activities of the business
to be carried out must be laid down.
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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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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- 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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- In this clause , 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.
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Alteration OfName ClauseAlteration Of Registered office
clauseAlteration Of Object clauseAlterationOfLiability
clauseAlteration OfCapital 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.
ALTERATION OF NAME CLAUSE
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Memorandum & Article of Association
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A. Special Resolution
B. Alteration is sought on any of these grounds:
To carry on its business more economically & more efficientlyTo
attain its main purpose by new or improved meansTo enlarge or
change the local area of its operationsTo carry on some business
which under existing circumstances may conveniently or
advantageously be combined with the business of the companyTo
restrict or abandon any of the objects specified in the
memorandumTo sell or dispose off the whole or any part of the
undertakingTo amalgamate with any other company
C. Copy of (A) is filed with ROC within 30 days
ALTERATION OF OBJECTS CLAUSE
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Memorandum & Article of Association
- 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
ASHBURY RAILWAY CARRIAGE & IRON COMPANY LTD. Y. RICHE
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Memorandum & Article of Association
- The construction of a railway, was ultra vires. Therefore
Riches action for breach of the alleged contract failed as it was
void.The law has since changed through Section 108 of the Companies
Act 1989, substituting a new section 35 of the Companies Act 1985.
Under that new section it remains the duty of the directors to
observe any limitations on their powers flowing from the companys
memorandum (and a member of a company may bring proceedings to
restrain the doing of an act in excess of those powers (section
35(2)); but, by section 35(1): "The validity of an act done by a
company shall not be called into question on the ground of lack of
capacity by reason of anything in the companys memorandum."
ASHBURY RAILWAY CARRIAGE & IRON COMPANY LTD. Y. RICHE
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Memorandum & Article of Association
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The words :
Ultra means beyondVires means the powersUltra 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.
DOCTRINE OF ULTRA VIRES
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Memorandum & Article of Association
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From one premises to another premises in the same city, town or
village
By passing a resolution of Board of Directors
ALTERATION OF REGISTERED OFFICE
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Memorandum & Article of Association
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From one town or city or village to another town or city or
village in the same state
Special Resolution.Confirmation of Regional Director when
jurisdiction of Registrar of companies is changed.Copy of (i) &
(ii) to be filed with ROC.Notice of new location to ROC within 30
days.
ALTERATION OF REGISTERED OFFICE
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Memorandum & Article of Association
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From one state to another state
Special ResolutionConfirmation of Central Govt.For certain Purposes
only
(As given in section 17)
ALTERATION OF REGISTERED OFFICE
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Memorandum & Article of Association
- 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 LIABILITY CLAUSE
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Memorandum & Article of Association
- A company can reduce share capital by first passing a special
resolution for reduction of capital but powers to reduce share
capital must be guaranteed in the articles of the company
,otherwise the share capital can be altered by special resolution
giving such powers The company can apply to the court by petition
for getting confirmation from the court for reducing the share
capital . The main duty of the court is to look after the interest
of the creditors and different classes of shareholders , and then
decide whether the company should be allowed to reduce share
capital .
ALTERATION OF CAPITAL CLAUSE
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Memorandum & Article of Association