Memorandum of Association

The company to be registered under the Companies Act is required to have two documents stamped, registered and filed with Registrar of Companies – they being Memorandum of Association and Articles of Association.

Memorandum of Association

Section 2 (28) of the Companies act defines Memorandum: Memorandum means the Memorandum of Association of company as originally framed or as altered from time to time in pursuance of any previous companies law or of this Act.

Memorandum of Association is the document which contains the rules regarding constitution and activities or objects of the company. It is a fundamental charter of the company. Company is governed by the Memorandum of Association. Its relations towards the members and outsiders are determined by this important document. The company is allowed to function within the frame work of Memorandum of Association. If it crosses the frame work, its act would be construed as ultra vires and therefore void. The Memorandum of association defines the extent and powers of the company. A company cannot exceed the powers conferred on it under its Memorandum of Association. Whether a transaction entered into by a company can be said to be within its powers or not has to decide on the basis of the facts established and the provisions in its Memorandum and not on the basis of any abstract rule. If the acts of the company are beyond the limits of the Memorandum of Association such acts would be void and ultra vires. They cannot be ratified in order to be binding on the company. Directors are personally liable to make good the Company’s loss if company’s money is spent on an unauthorized object.

The Memorandum of Association is designed to make the outside world know the state of affairs of the company. The prospective investors’ shareholders or creditors should know the extent of their risk and also possibilities of the company to overcome them. It is a public document and can be inspected by anybody.

Contents of Memorandum of Association:

According to section 13 of the Act the memorandum of every company shall state:

1) Name of the company with Limited as the last word of the name is case of a public company and Private Limited in case of a private company.
2) Registered office of the company.
3) Objects of the company.
4) Liability of the members
5) Details of share capital of the company.
6) Subscription or Association clause.

Name clause: Promoters of the company have to make an application to the Registrar of Companies for the availability of name. The company can adopt any name if:

1) there is no other company registered under the same or under an identical name;
2) the name should not be considered undesirable and prohibited by the Central Government. A name which misrepresents the public is prohibited by the government under the Emblems & names (prevention of improper use) Act, 1950 for example Indian National flag name and pictorial representation of Mahatma Gandhi and the Prime minister of India name and emblems of the UNO and WHO the official seal and Emblems of the Central Government and State governments.

A name which is identical with or too nearly resembles —

1) the name by which a company in existence has been previously registered or,
2) Registered trade mark, or a trade which is subject of an application for registration of any other person under the Trade Marks Act 1999, may be deemed to be undesirable by the Central Government. The Central Government before deeming a name as undesirable may consult the Registrar of Trade marks.

Where the name of the company closely resembles the name of the company already registered the Court may direct the change of the name of the company.

3) once the name has been approved and the company has been registered then,
a) The name of the company with registered office shall be affixed on outside of the business premises;
b) If the liability of the members is limited the words Limited or Private Limited as the case may be, shall be added to the name.
c) The names and address of the registered office shall be mentioned in all letter heads business letters notices and Common Seal of the company etc.