Memorandum of Association & Memorandum of Association & Articles of AssociationArticles of Association

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The MOA of The MOA of aa Company Company Sec 4(1) of the new Act requires the MOA of a Sec 4(1) of the new Act requires the MOA of a

company to state: company to state: (a) the name of the company with the last words (a) the name of the company with the last words

"Limited" in the case of a public limited company, "Limited" in the case of a public limited company, or the last words "Private Limited" in the case of a or the last words "Private Limited" in the case of a private limited company. However, this clause private limited company. However, this clause shall not apply to a company incorporated under shall not apply to a company incorporated under Sec.8 (companies with charitable objects). Sec.8 (companies with charitable objects).

(b) the state where the registered office of the (b) the state where the registered office of the company is to be situated.company is to be situated.

(c) the objects for which the company is proposed (c) the objects for which the company is proposed to be incorporated and any matter considered to be incorporated and any matter considered necessary in furtherance thereof.necessary in furtherance thereof.

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contd....contd....

(d) the liability of members of the company, whether limited (d) the liability of members of the company, whether limited or unlimited and also state or unlimited and also state (i) (i) if limited by shares, if limited by shares, limited to the limited to the amount unpaid amount unpaid

(ii) if limited by guarantee, limited to the amount each (ii) if limited by guarantee, limited to the amount each member undertakes to contribute in the event of the member undertakes to contribute in the event of the company being wound up while he is a member or within company being wound up while he is a member or within one year after he ceases to be a member for payment of one year after he ceases to be a member for payment of the debts and liabilities of the company or of such debts the debts and liabilities of the company or of such debts and liabilities as may have been contracted before he and liabilities as may have been contracted before he ceases to be a memberceases to be a member

The memorandum of a company shall be in Table A, B,C, The memorandum of a company shall be in Table A, B,C, D and E in Schedule I as applicable to such company.D and E in Schedule I as applicable to such company.

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Memorandum of AssociationMemorandum of Association

It is the charter of the companyIt is the charter of the company It contains the fundamental conditions upon which the It contains the fundamental conditions upon which the

company can be incorporatedcompany can be incorporated It contains the objects of the company’s formationIt contains the objects of the company’s formation The company has to act within objects specified in the MOAThe company has to act within objects specified in the MOA It defines as well as confines the powers of the companyIt defines as well as confines the powers of the company Any thing done beyond the objects specified in the MOA will Any thing done beyond the objects specified in the MOA will

be ultra vires. Such transactions will be null and voidbe ultra vires. Such transactions will be null and void The outsiders have to transact looking into the MOAThe outsiders have to transact looking into the MOA

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The Compulsory ClausesThe Compulsory Clausesin MOAin MOA

The Name Clause – it decides on the The Name Clause – it decides on the name of the companyname of the company based on based on the capital involvedthe capital involved

The Registered Office Clause- where it has The Registered Office Clause- where it has registered its head officeregistered its head office and other branch office ( The registered office can be changed with and other branch office ( The registered office can be changed with the permission of the ROC)the permission of the ROC)

The Object Clause- The Object Clause- Main object, ancillary object and the other objectsMain object, ancillary object and the other objects of the company are clearly specified. of the company are clearly specified. Doctrine of Ultra Vires (beyond Doctrine of Ultra Vires (beyond the powers of the company) the powers of the company) has to be kept in mind.has to be kept in mind.

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Contd….Contd…. The Liability Clause-The Liability Clause- What is the liability of its members.. limited by shares or What is the liability of its members.. limited by shares or

guarantee or unlimited, there can be alteration in the liability clauseguarantee or unlimited, there can be alteration in the liability clause The Capital ClauseThe Capital Clause - The amount of the nominal capital of the company, - The amount of the nominal capital of the company,

number of shares in which it is to be divided… alteration of the capital clause number of shares in which it is to be divided… alteration of the capital clause etcetc

The Association or Subscription clause- The Association or Subscription clause- Where the subscribers to the MOA Where the subscribers to the MOA declare that they respectively agree to take the number of the shares in the declare that they respectively agree to take the number of the shares in the capital. It has to have the following:capital. It has to have the following:

a) They have to sign in the presence of two witnesses, who attest the a) They have to sign in the presence of two witnesses, who attest the signatures, signatures,

b) The subscriber to take at least one share. b) The subscriber to take at least one share. c) After the name the subscriber has to write the number of shares takenc) After the name the subscriber has to write the number of shares taken

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Conditions of the MOAConditions of the MOA

It should be printedIt should be printed Divided into paragraph and numbers consecutivelyDivided into paragraph and numbers consecutively Signed by at least seven persons or two in case of Signed by at least seven persons or two in case of

public and private company respectively.public and private company respectively. The signature should be in the presence of a The signature should be in the presence of a

witness, who will have to attest the signaturewitness, who will have to attest the signature Members have to take shares and write the Members have to take shares and write the

number of shares taken with full addressnumber of shares taken with full address

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The Doctrine of “The Doctrine of “Ultra ViresUltra Vires”” The powers exercisable by the company are to be confined to the The powers exercisable by the company are to be confined to the

objects objects specified in the MOA.specified in the MOA. So it is better to define and include the provisions regarding the So it is better to define and include the provisions regarding the

acquiring of business, sharing of profits, promoting company and other acquiring of business, sharing of profits, promoting company and other financial, gifts , political party funds etcfinancial, gifts , political party funds etc

If the company acts beyond the powers or the objects of the company If the company acts beyond the powers or the objects of the company that is specified in the MOA, the acts are considered to be of that is specified in the MOA, the acts are considered to be of ultra ultra viresvires. Even if it is ratified by the all the members, the action is . Even if it is ratified by the all the members, the action is considered to be ineffective.considered to be ineffective.

Even the charitable contributions have to be based on the object Even the charitable contributions have to be based on the object clause. clause.

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Articles of AssociationArticles of Association It is the companies It is the companies bye- laws or rules bye- laws or rules

to governto govern the management of the the management of the company for its company for its internal affairs and internal affairs and the conduct of its businessthe conduct of its business..

AOA defines the AOA defines the powers of its powers of its officers and also establishes a officers and also establishes a contract between the company and contract between the company and the members and between the the members and between the members members

It can be altered by the company It can be altered by the company under the provisions of law.under the provisions of law.

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Contents of the AOAContents of the AOA Share capitalShare capital Lien on sharesLien on shares Calls on sharesCalls on shares Transfer and transmission of sharesTransfer and transmission of shares Forfeiture of the sharesForfeiture of the shares Surrender of the sharesSurrender of the shares General meetingsGeneral meetings Alteration of the capitalAlteration of the capital Directors etc..Directors etc.. Dividends and reservesDividends and reserves Account and auditAccount and audit Borrowing powersBorrowing powers Winding upWinding up Adoption of the preliminary contracts etc….Adoption of the preliminary contracts etc….

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AOAAOA AOA plays a AOA plays a subsidiary partsubsidiary part to the MOA to the MOA Any thing Any thing done beyond the AOA will be considered to be irregular and done beyond the AOA will be considered to be irregular and

may be ratified by the shareholdersmay be ratified by the shareholders.. The content of the AOA may differ from company to company The content of the AOA may differ from company to company Flexibility is allowed to the persons who form the company to adopt the Flexibility is allowed to the persons who form the company to adopt the

AOA within the requirements of the company lawAOA within the requirements of the company law The AOA will have to be in consonance with the MOA, as they are The AOA will have to be in consonance with the MOA, as they are

contemporaneous documents to be read together.contemporaneous documents to be read together. Any Any ambiguity and uncertainty in one of them may be removed by ambiguity and uncertainty in one of them may be removed by

reference to the other.reference to the other.

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Doctrine of Constructive notice and Doctrine of Constructive notice and Indoor ManagementIndoor Management

Persons dealing with the company have to satisfy Persons dealing with the company have to satisfy themselves. But need not know the internal themselves. But need not know the internal irregularity. irregularity.

The doctrine of Constructive notice can be invoked The doctrine of Constructive notice can be invoked by the company to operate against the persons by the company to operate against the persons dealing with the company.dealing with the company.

The outsider cannot embark, but only can acquaint The outsider cannot embark, but only can acquaint upon the MOA and AOA. upon the MOA and AOA.

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Raising of Capital From PublicRaising of Capital From Public

The companies can raise money by The companies can raise money by offering offering securitiessecurities for sale to the public. for sale to the public.

They can invite the public to buy shares, which is They can invite the public to buy shares, which is known as known as public issue.public issue.

For this purpose the company may issue a For this purpose the company may issue a prospectus, which may include a notice circular, prospectus, which may include a notice circular, advertisement or other documentsadvertisement or other documents which are which are issued to invite public deposits.issued to invite public deposits.

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ProspectusProspectus

It is an It is an invitation invitation issued to the public issued to the public to purchase or to purchase or subscribe shares or debenturessubscribe shares or debentures of the company. of the company.

Every Every prospectus must be datedprospectus must be dated. The date of publication . The date of publication and the date of issue must be specifically stated in the and the date of issue must be specifically stated in the prospectus.prospectus.

The The golden rulegolden rule of the prospectus is that every detail has to of the prospectus is that every detail has to be given in strict and scrupulous accuracy. The material be given in strict and scrupulous accuracy. The material facts given in the prospectus are presumed to be true.facts given in the prospectus are presumed to be true.

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Contents of the prospectusContents of the prospectus

General informationGeneral information Capital structureCapital structure Terms of present issueTerms of present issue Management and projectsManagement and projects Management and perception of risk factorManagement and perception of risk factor

It is compulsory to register the prospectus It is compulsory to register the prospectus with the Registrarwith the Registrar

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Civil Liability for MisstatementsCivil Liability for Misstatements

The liability will be on the director of the company , whose The liability will be on the director of the company , whose name was written during the time of issuename was written during the time of issue

The persons who have authorized their names to be theirs The persons who have authorized their names to be theirs in the prospectus to be named as directorsin the prospectus to be named as directors

PromoterPromoter Every person including the person who is an expert and Every person including the person who is an expert and

has authorized his name to be issued with the prospectus has authorized his name to be issued with the prospectus

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Remedies for misstatements in the Remedies for misstatements in the prospectusprospectus

Relying on the prospectus if any person buys shares, the Relying on the prospectus if any person buys shares, the person mayperson may

Rescind the contract ( only when there is Rescind the contract ( only when there is misrepresentation relating to the material facts).misrepresentation relating to the material facts).

The rescission has to be done within a reasonable timeThe rescission has to be done within a reasonable time Claim damages- it can be claimed from the directors, Claim damages- it can be claimed from the directors,

promoters or other persons who has authorized their promoters or other persons who has authorized their name to be written during the issue of the prospectusname to be written during the issue of the prospectus

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Share CapitalShare Capital

Share: Share: Share is defined as “an interest having a money Share is defined as “an interest having a money value and made up of diverse rights specified under the value and made up of diverse rights specified under the articles of association”. articles of association”.

Share capital: Share capital: Share capital means the capital raised by Share capital means the capital raised by the company by issue of sharesthe company by issue of shares. .

A share is a share in the share capital of the company A share is a share in the share capital of the company including the stock.including the stock.

Share gives a right to participate in the profits of the Share gives a right to participate in the profits of the company, or a share in the assets when the company is company, or a share in the assets when the company is going to be wound up.going to be wound up.

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