Q.3:- What is a ‘Memorandum of Association’? Briefly explain its clauses.
Memorandum of Association is the most important document. It defines the objectives of the company and determines the boundary line, with in which the company has to perform tasks. No company can legally undertake activities that are not contained in its Memorandum of Association. The Memorandum of Association contains different clauses, which are given as follows
(i) The Name Clause This clause contains the name of the company with which the company will be known, which has already been approved by the Registrar of Companies. According to name clause the name of a company should not be identical or resembling the name of an existing company and should not violate the provisions of ‘The Emblem and Names (Prevention of Improper Use) Act, 1950.
(ii) Registered Office Clause This clause contains the name of the state, in which the registered office of the company is proposed to be situated. The exact address of the registered office is not required at this stage but the same must be notified to the Registrar within thirty days of the incorporation of the company.
(iii) Objects Clause This clause is the most important one as it defines the purpose for which the company is formed. A company is not legally entitled to undertake an activity, which is beyond the objects stated in this clause. The object clause is divided into two objects
(a) The Main Objects The main objects for which the company is formed are listed in this sub-clause.
(b) Other Objects Objects not included in the main objects could be stated in this sub-clause.
A company can undertake a business included in this sub-clause, either by passing a special resolution or passing an ordinary resolution and get central government’s approval for the same.
(iv) Liability Clause This clause limits the liability of the members to the amount unpaid on the shares owned by them.
(v) Capital Clause This clause specifies the maximum capital which the company will be authorized to raise through the issue of shares. The authorized share capital of the proposed company along with its division into the number of shares having a fixed face value is specified in this clause.
(vi) Association Clause In this clause, the signatories to the Memorandum of Association state their intention to be associated with the company and also give their consent to purchase qualification shares. The Memorandum of Association must be signed by at least seven persons in case of a public company and by two persons in case of a private company.