memoradum of association.pptx

7/28/2019 MEMORADUM OF ASSOCIATION.pptx

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What is Memorandum ??? Is the document stating about the relationship

between company and the outsiders and a route ofcommunication to public.

Specially meant for shareholders and creditors.

No company can be registered without MOA.


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IMPORTANCE of MOAAn intending shareholder can find out the purposes

for which his money is going to be used by thecompany and what risk he is taking in making theinvestment.

The supplier of goods or money, will know whether thetransactions he intends to make with the company is

within the objects of the company and not ultra viresits objects.


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FORMS AND CONTENTS The memorandum should be printed.

It should be divided into paragraphs, numbered

consecutively, and signed by at least seven persons (2in case of private company) in the presence of at leastone witness, who will attest the signatures.

Each of the subscribers must take at least one share

and write opposite his name the number of shares hetakes.

The signatories to the Memorandum shall add theiraddress, description and occupation.


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Six Clauses

CONTENTS OF MEMORANDUM OFASSOCIATION

NameRegistered

office

Liability Capital Associationor subscription

Objects


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NAME CLAUSE IN

MEMORANDOM OF

ASSOCIATION


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A company as a separate legal entity must have a nameof its own to established its separate identity.

The last word in the name of the company is limited orprivate limited, if limited by shares or by guarantee.


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GUIDELINES/PRINCIPLES FOR

DECIDING AVAILABILITY OF NAMES No company should be registered with undesirable

name.

A name is said to be undesirable when it is tooidentical with the name of the company in existence orwith a registered trade-mark.


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While applying for the name in the prescribed e-form1A, using digital signature certificate, the applicant

shall be required to furnish a declaration to the effectthat:

i. He has used search facility available on portal of theMinistry of corporate affairs.

ii. The proposed name is not in violation of theprovisions of any Emblems.

iii. The proposed name is not offensive to any section of

people.


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The name if made available to the applicant, shall bereserved for a period of 60 days from the date ofapproval and further 30 days extension is given. If the

company is not incorporated within such time, thenthe name shall be lapsed and will be available for otherapplicants.

If the proposed name include words such as Insurance,

bank, stock exchange, mutual fund etc., the name maybe allowed with a declaration by the applicant that therequirements mandated by the respective regulatorsuch as RBI, SEBI, MCA.


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If the proposed name includes the word State, thesame shall be allowed only in case the company is a

government company.

If a foreign company is incorporating its subsidiarycompany, then the original name of the holdingcompany as it is may be allowed with the addition ofword India or name of any Indian state or city, ifotherwise available.


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Srno

Key words Required Authorizedcapital

1 Corporation, corp, corpn. 25 crore

2 International, Globe, Global, World, Overseas,Universe, Universal, Continent, Continental,InterContinental, Asiatic, Asia , Asian being thefirst word of the name.

5 Crore

3 If any of the words at 2 above is used within thename 2 crore

4 Hindustan, India, Indo, Indian, Bharat,Bharatvarsh, Bhartiya or any other countrysname being first word of the name

2 crore

5 If any of the words at 4 above is used within thename

25 lakh

6 Industries/Udyog 5 Crore

7 Enterprises, Products, Business, Manufacturing,Venture.

50 lakh


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PUBLICATION OF NAME Paint or affix its name and address of its registered

office and keep the same painted or affixed on theoutside of every office or place of business.

PENALTY: The company and every officer who is indefault shall be punishable with a fine of Rs 500 per

day till the default continues.


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There are few limitations from ROC on what the name ofthe company should not be.

Identical or too similar name to an already existing

company The name of the Company in liquidation cannot be

allotted for 2 years from the date of such dissolution

Addition or subtraction of word like new, modern, etc.


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Well known abbreviations like TISCO, ITC, etc.

Name should suggest the business that company is

undertaking The name of the company should not be the exact

translation of the existing companys name in otherlanguage

Example Hindustan Steel Industries Ltd. Will not beallowed if there exists a company with the nameHindustan Ispat Udyog Limited.


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NAME CHANGE IN MOAAccording to Section 21 Changing the Name of the

Company requires

Special Resolution at General MeetingWritten approval of the CG


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PROCEDUREAvailability of name

Application to ROC

Fees Rs. 500 Validity of 6 months

Submission of change with a copy of Special resolution

The name must be sanctioned by ROC on behalf of CG


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CHANGE BY ORDINARY

RESOLUTIONIf the name is similar or closely related to the name of

some other company then CG on its own or on thebasis of complaint of existing co. of that name canorder proprietor to change the name.

But, the affected company must complain within 12months of the registration of the new company.

The required changes must be executed in 30 daysfrom the issue of order from CG otherwise proprietorwill have to penalty which may be as high as Rs.1000 aday.


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EFFECT OF NAME CHANGEIt shall not affect any rights or obligations of the

company.

If any legal proceeding is commenced, after the namechange the plaint can be amended to substitute thenew name.

By change of name constitution of the company does

not change as in case of partnership.


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Registered office clause States the name of the state in which registered office

is situated

Exact address of office where books are normally kept

Provided in form no.18 to RoC (sec.146)

Any change or alteration in the name


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Alteration in Registered office

clause Change of registered office from one premises to

another premises in the same city, town or village.

Change of registered office from one town or city orvillage to another town or city or village in the samestate.

Special resolution

Confirmation of regional directorCopy of special resolution and confirmation by regional

directors to be filed with ROC.


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Alteration in Registered office

clause Change of registered office from one state to another.

Passing special resolution and confirmation fromCentral Government.

Sufficient notice should be given to the creditor and allthe persons whose interest are effected.

Loss of revenue or employment of state whetherrelevant consideration.

Example Orient paper mills Ltd i.e. shifting fromOrissa to west Bengal.

Example of Minerva mills Ltd.


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The Capital Clause [ Sec. 13(4)(a)]This clause states the amount of share capital with which

the company is registered and the mode of its divisioninto shares of fixed value, i.e., the number of shares

into which the capital is divided and the amount ofeach share.

This clause lays down the limit beyond which acompany cannot issue shares without altering thememorandum as provided by Section 94 of the Act.


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Alteration of Capital Clause Section 94 provides that, if the articles authorize, a

company limited by share capital may, by an ordinaryresolution passed in general meeting, alter the

conditions of its memorandum in regard to capital soas-


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1. To increase its authorized share capital by such amount as itthinks expedient by issuing fresh shares.

Within 30 days of passing of the resolution, a notice of increasein share capital must be filed with the RoC.

The Registrar shall record the increase and also make necessaryalterations in the companys memorandum or articles or both.

If default is made in filing the notice, the company and everyofficer of the company who is in default shall be punishable withfine up to Rs. 500 per day during which the default continues.


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2. To consolidate and divide all or any of its share capital into shares oflarger amount than its existing shares.

Consolidation means 10 shares of Rs. 10 each may be consolidatedinto 1 share of Rs. 100.

Subdivision of shares is just the opposite of consolidation. It means1 share of Rs. 100 may be divided into 10 shares of Rs 10 each.

Once a resolution has been passed, a copy of resolution is requiredto be sent within 30 days to the Registrar of Companies.


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3. To convert all or any of its fully paid up shares into stock , and reconvert the stock

into fully paid up shares of any denominations

Stock- A set of fully paid up shares & is transferable in anydenomination or fraction.

Share- Transferable as a whole. E.g A share of Rs 10 can be transferred as a whole.

But if 10 shares of Rs. 10 each fully paid areconverted into stock of Rs. 100, then theshareholder can transfer stock say worth Rs. 17also.

Section 94, empowers a company to convert its fully paid-up sharesinto stock by passing a resolution in the general meeting if its articlesauthorize such conversion.

A notice is to filed with the Registrar within 30 days of passing theresolution specifying the shares so converted.


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Objects Clause In MOA


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Objects Clause Section 13(1)(c)&(d) It defines the objects of the company and indicates its

sphere of its activities

Ultra Vires cannot be ratified even of the assent of thewhole body of shareholders

Company may do anything which is incidental to andconsequential upon the objects specified.

Eg Trading company


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2 parts of Objects Main objects of the company to be pursued by all the

company on its incorporation and objects incidental orancillary to the attainment of the main objects

Other objects of the company not included in theabove clause


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Commencement of business May commence business given in the main objects

only after obtaining certificate to commence business

In case of objects not confined to one state thememorandum must give the name of the State.

Commencement of business under other objects needsprior approval of shareholders in regards to a specialresolution passed in general meeting in case specialresolution is not passed, Central government may givethe permission provided the votes cast in favor of theresolution exceed the votes cast in against of theresolution if any.


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The objects of the company must not be immoral,illegal or opposed to public policy or in contraventionof the Act


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ALTERATION OF OBJECT CLAUSE Special resolution.

To attain main purpose by new or improved means

To enlarge or change the local area of operations.

To carry on business which under existingcircumstances may conveniently be combined with thebusiness 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.


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Liability Clause[sec13(2)] This clause of memorandum contains the declaration that

the liability of the shareholders is limited to the extent ofthe

o value of shares held by themo Guarantee given and accepted

A declaration that the liability of the members is unlimitedin case of the unlimited companies must be given.


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EXCEPTION OF THIS LIABILITY If a member agrees in writing to be bound by the alteration of MA / AA, requiringhim to take more shares or increasing his liability, he shall be liable up to the amountagreed to by him.

If every member agrees in writing to re-register the company as an unlimitedcompany and the company is re-registered as such, such members will haveunlimited liability.

If to the knowledge of a member, the number of shareholders has fallen below thelegal minimum, and the company has carried on business for more than 6 months,

while the number is so reduced, the members for the time being constituting thecompany would be personally liable for the debts of the company, contracted duringthat time.


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SPECIMEN OF LIABILITY CLAUSE

AGAINST GUARANTEEEvery member of a company undertakes to contribute to the

assets of company in the event of its being wound up while he

is a member or within one year after he ceases to be a member

for payment of his debts and liabilities of company contractedbefore he ceases to be a member and the costs, charges and

expenses of winding up and for the adjustment of the rights of

the contributories amongst themselves such amount as many be

required not exceeding Rs.1000


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ALTERATION IN LIABILITY CLAUSE ORDINARILY LIABILITY CLAUSE CANNOT BE ALTERED

SO AS TO MAKE THE LIABILITY OF MEMBERS

UNLIMITED.

ANY ALTERATION IN MEMORANDUM WILL BE VOID IFTHE EFFECT OF THE ALTERATION IS THE

ENHANCEMENT OF THE LIABILITY OF MEMBERS.

IT DOESNOT APPLY TO A CASE WHERE THE MEMBERS

AGREE IN WRITING TO BE BOUND BY THE

ALTERATION.


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Doctrine of Ultra Vires


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Introduction

Act of the company beyond the objects clause

Expression ultra vires consists of two words: ultra

and vires.

An ultra vires act is void and cannot be ratified even ifall the directors wish to ratify it.

Is It Ultra Vires Or Illegal?


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Ascertainment Of The Ultra Vires

An act is not ultra vires if it is found:

Within the main purpose, or

Within the special powers expressly given by the statute toeffectuate the main purpose,

Neither within the main purpose nor the special powersexpressly given by the statute but incidental to or

consequential upon the main purpose and a thingreasonably done for effectuating the main purpose.

Protection o cre itors an


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Protection o cre itors aninvsetors

Enables the investors to know the objects in whichtheir money is to be employed.

Doctrine prevents the wrongful application of thecompanys assets.

Prevents directors from departing the object for which

the company has been formed.


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Exceptions

An act, which is intra vires the company but outsidethe authority of the directors may be ratified by theshareholders in proper form.

An act which is intra vires the company but done in anirregular manner, may be validatedby the consent ofthe shareholders.

If the company has acquired any property through aninvestment, which is ultra vires, the companys rightover such a property shall still be secured.


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Exceptions(contd)

Certain acts under the company law, which thoughnot expressly stated in the memorandum

The company can alter its articles in order to validatethe act.


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ASSOCIATION OR SUBSCRIPTION

CLAUSEAt the end of the memorandum of every company

there is an association or subscription clause or adeclaration of association which reads something like

this:-We the several persons whose names and addresses and

occupations are subscribed, are desirous of beingformed into a company in pursuance of thismemorandum of association, and we respectivelyagree to take the number of shares in the capital of thecompany set opposite our respective names.

memoradum of association.pptx

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