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“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”

- Lord Cairns

MEMORANDUM OF ASSOCIATION

Definitions“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 (28)


“The purpose of Memorandum of Association is to enable the share holders, creditors and those who deal with the company to know what its permitted range of enterprise is.”

- Lord Macmillan


• Form as given in table B, C, D, & E in Schedule I• Printed• Divided into paragraphs• Numbered consecutively• Signed by at least 7 persons for public & 2 for

private company. Signatures attested by one witness. Subscribers shall at least take one share

FORM OF MEMORANDUM OF ASSOCIATION

Six Clauses

CONTENTS OF MEMORANDUM OF ASSOCIATION

Name Registeredoffice

Liability CapitalAssociation

or subscription

Objects

The words :• Ultra means beyond• Vires means the powers• Ultra 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’

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

Rich Contended :• Firstly, that the contract in question came well

within the meaning of the words ‘general contractors’, and, was therefore, within the powers of the company, secondly, that the contract was ratified by the majority of the shareholders.

ASHBURV RAILWAY CARRIAGE & IRON COMPANY LTD. Y. RICHE

• Void ‘Ab Initio’• Injunction• Personal Liability of Directors• Acquisition of Property that is Ultra Vires• Directors personally liable to third parties

EFFECTS OF DOCTRINE OF ULTRA VIRES

• 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

From one premises to another premises in the same city, town or village

• By passing a resolution of Board of Directors

CHANGE OF REGISTERED OFFICE

From one town or city or village to another town or city or village in the same state

1. Special Resolution.2. Confirmation of Regional Director — when

jurisdiction of Registrar of companies is changed.

3. Copy of (i) & (ii) to be filed with ROC.4. Notice of new location to ROC within 30

days.


From one state to another state1. Special Resolution2. Confirmation of Central Govt.3. For certain Purposes only

(As given in section 17)


A. Special ResolutionB. Alteration is sought on any of these grounds:

• To carry on its business more economically & more efficiently

• To attain its main purpose by new or improved means• To enlarge or change the local area of its operations• To carry on some business which under existing

circumstances may conveniently or advantageously be combined with the business of the company

• To restrict or abandon any of the objects specified in the memorandum

• To sell or dispose off the whole or any part of the undertaking

• To amalgamate with any other companyC. Copy of (A) is filed with ROC within 30 days

ALTERATION OF OBJECTS CLAUSE

• 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

• Increase of authorized share capital.

• Consolidation and subdivision of shares.

• Conversion of shares into stock & vice versa.

• Diminution of share capital.

ALTERATION OF CAPITAL CLAUSE

Definition

‘Article’ means the articles of association of a company as originally framed or as altered from time to time in pursuance of any previous companies laws or of this Act’

Sec.2 (2)

ARTICLES OF ASSOCIATION

“…. The articles proceed to define the duties, the right and the powers of the governing body as between themselves and the company at large and the mode and form in which the business of the company is to be carried on and the mode and form in which changes in the internal regulations of the company may from time to time be made.

- Lord Cairns

ARTICLES OF ASSOCIATION

1. The extent to which Table ‘A’ is applicable2. Different classes of shares and their rights3. Procedure of making an issue of share

capital and allotment thereof4. Procedure of issuing share certificates and

share warrants5. Forfeiture of shares and the procedure of

their re-issue6. Procedure for transfer and transmission of

shares

CONTENTS OF ARTICLES

7. The time lag in between calls on shares conversion of shares into stock

8. Directors, their appointment, remuneration, qualifications, etc.

9. Account and audit10. Lien of shares11. Payment of commission on shares and debentures

to underwriters12. Rules for adoption for ‘preliminary contracts’ if

any


13. Re-organization and consolidation of shares capital

14. Alteration of share capital & Buyback of shares

15. Borrowing power of directors16. General meeting, proxies and polls17. Voting rights of members18. Winding up


Procedure :

• Alteration by passing a special resolution.• Copy of resolution to be sent to registrar

within 30 days.• Copy of altered articles to be registered

within 3 months of passing of resolution.

ALTERATION OF ARTICLES (SEC 31)

1. Alteration should not be inconsistent witha. Provisions of Company Act or any other statuteb. Conditions contained in memorandum

2. Approval of govt. to be obtained in certain cases3. Alteration must not deprive any person of his rights

under a contract4. Alteration must not constitute a fraud on the

minority5. Alteration must be bonafide for the benefit of the

company as a whole

LIMITATIONS REGARDING ALTERATION OF ARTICLES

The following are the legal implications:

• Company is bound to its members• Each member is bound to the company• Each member is bound to other members in

exceptional case only• Neither the company nor the members are bound

to outsiders

BINDING FORCE OF MEMORANDUM AND ARTICLES (SEC 36)

Memorandum of Association

Articles of Association

Charter of Company Regulations for interal management

Defines the scope of the activities Rules for carrying out the objects of company.

Supreme document Subordinate to the memorandum.

Must for every company Company limited by shares need not have it (Table ‘A’ applies)

Strict restrictions, alteration only with sanction of central govt./ tribunal.

Can be altered by special resolution.

Act, ‘Ultra Vires’ is wholly void & cannot be ratified.

Act ‘Ultra Vires’ (but intra vires the memorandum) can be ratified.

• Documents are open & accessible to all.• Presumption that any outsider dealing with

company has read & understood the documents.

• It is a negative doctrine, acting only against the outsiders & not the company.

DOCTRINE OF CONSTRUCTIVE NOTICE

• Persons dealing with the company in good faith have a right to assume that the internal requirements prescribed in public documents have been observed

• Persons are not bound to enquire into regularity of internal proceedings

Exceptions :• Knowledge of irregularity• Negligence on part of the outsider• Forgery• Acts outside scope of apparent authority

DOCTRINE OF INDOOR MANAGEMENT