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Group 3 MEMORANDUM OF ASSOCIATION ARTICLE OF ASSOCIATION DOCTRINE CERTIFICATE OF COMMENCEMENT OF BUSINESS

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Page 1: MOA, AOA

Group 3

MEMORANDUM OF ASSOCIATIONARTICLE OF ASSOCIATION

DOCTRINE CERTIFICATE OF COMMENCEMENT OF

BUSINESS

Page 2: MOA, AOA

Memorandum of Association

Memorandum of Association is the constitution of the company

Any action beyond the powers given in the memorandum is void

Reason for existence

Page 3: MOA, AOA

Purpose of Memorandum

There are two purposes of the MOA

1. Share holder purpose Field of investment Risk of investment

2. Outsider’s Purpose Objects of the company Contractual Relation

Page 4: MOA, AOA

Format of Memorandum

Divided into paragraphs and numbered consecutively

Signed by subscriber For Private company 2 subscriber For Public company 7 subscriber In the presence of at least 1

witness

Printed

Should be accepted by the Registrar

Page 5: MOA, AOA

Clauses of Memorandum

The memorandum should contain following clauses

Name clause Registered office clause Capital clause Liability Clause Objects clause Association Clause

Page 6: MOA, AOA

Name Clause

Avoid Undesirable Names Too similar to the name of another company Misleading

Prohibition of use of certain names Ex: Name, emblem or official seal of UNO WHO Central and State government President and Governor

Page 7: MOA, AOA

Key WordsKey Words Req. Authorized CapitalReq. Authorized Capital

CorporationCorporation 5 Crore5 Crore

International, Globe, Universal, International, Globe, Universal, Continental, Inter – Continental Continental, Inter – Continental , Asiatic, Asia, being the first , Asiatic, Asia, being the first words of the namewords of the name

1 Crore1 Crore

If any of the above words used If any of the above words used in the name within or without in the name within or without the bracketthe bracket

50 Lakh50 Lakh

Hindustan, India, Bharat, being Hindustan, India, Bharat, being the first word of the namethe first word of the name

50 Lakh50 Lakh

If any of the above words used If any of the above words used within the name within or within the name within or without bracket without bracket

5 Lakh5 Lakh

Industries/ Udyog Industries/ Udyog 5 Lakh5 Lakh

Enterprise, Products, Business, Enterprise, Products, Business, ManufacturingManufacturing

10 Lakh10 Lakh

Page 8: MOA, AOA

Name Clause

Limited Public Company

Private Limited Private Company

If the company is promoting art, science, religion etc Limited and Private Limited can avoided with the permission of central government.

Page 9: MOA, AOA

Registered Office Clause

State in which Registered office will be situated.

Exact location of registered office should be intimated within 30 days

Rs 500 fine everyday

Page 10: MOA, AOA

Capital Clause

Share capital amount should be specified

Cannot issue more shares for the time being

Equity or Preference shares

Private company can issue any type of shares

Page 11: MOA, AOA

Object clause

Divided in main objects

Company should commence its business with the main object

In case of non-trading companies ,state to which the objects extend should also be mentioned

In case of trading companies, this need not be mentioned

Page 12: MOA, AOA

Liability Clause

MOA of company

Limited by shares or Limited by guarantee

Page 13: MOA, AOA

Association Clause

Subscriber’s name, address should be mentioned in the MOA

Each subscriber must take at least 1 share

MOA should be signed by

At least 7 subscriber for Public company

At least 2 subscriber for Private company

Attested by at least 1 witness

Page 14: MOA, AOA

Alteration of MemorandumChange of Name

By special resolution

For deletion or addition of Private, Central government approval is not necessary

Ordinary resolution Similar name Within 12 months of registration

Rs 100 is punishing amount for everyday for every responsible in case of default

Page 15: MOA, AOA

Alteration of MemorandumChange of Registered Office

Within a State

Confirmed by the regional office

Approach Registrar with Confirmation letter from regional director

within 2 months Original MOA

Outside the state

By special resolution

Page 16: MOA, AOA

Procedure of Alteration

1. Special Resolution2. Confirmation by National Company Law Tribunal3. Notice to affected parties4. Notice to registrar 5. Power of tribunal6. Rights & interests of members and creditors7. Approach to registrar with Special resolution Certified copy from NCLT within 3 months of the

order MOA

Page 17: MOA, AOA

Alteration of Objects1. To carry out business more economically or more

efficiently2. To attain its main by new improved means3. To enlarge the area of operation4. Adding to objects of MOA5. To restrict or abandon a object6. To sell or dispose7. To amalgamate

Procedure1. Special Resolution2. Filing the Special Resolution3. Certification of Registration

Page 18: MOA, AOA

Change in Liability Clause

A Company limited by shares or guarantee cant change its memorandum so as to impose any additional liability on the members or to compel them to buy additional shares of the company….. Unless all the members agree in writing to such change either before or after change..

Page 19: MOA, AOA

ARTICLES OF ASSOCIATIONThe Articles of Association (AOA) is a contract between the company and its members and also between the members themselves that they shall abide by the rules and regulations of internal management of the company specified in the AOA.

They are framed with the object of carrying out the aims and object as set out in the MOA

They are next in importance to MOA it contains the fundamental conditions upon which a company is allowed to function.

Page 20: MOA, AOA

IMPORTANCE OF AOA

They are subordinate to, and controlled by, the memorandum.

While framing care must be taken to see the regulations framed do not go beyond the powers of company or MOA.

Page 21: MOA, AOA

CONTENTS OF AOA

Powers, duties, rights and liabilities of Directors Powers, duties, rights and liabilities of members Rules for Meetings of the Company Dividends Borrowing powers of the company Calls on shares Transfer of shares Forfeiture of shares Voting powers of member Appointment of directors and their qualifications

Page 22: MOA, AOA

COMPANIES WHICH MUST HAVE THEIR OWN ARTICLES

Unlimited companies Companies limited by guarantee Private companies limited by shares

Public company may adopt Table A given in schedule 1 to the Act

Page 23: MOA, AOA

REGULATIONS REQUIRED

A. Unlimited company

- The number of members with whom the company has to be registered

- If it has share capital, the amount of share capital with which the company is to be registered.

B. Company limited by guarantee - The articles shall state the number of members

with which the company is to be registered.

Page 24: MOA, AOA

REGULATIONS REQUIRED(cont.)

C. Private company

For companies having a share capital the following provisions apply

- Restrict the rights to transfer shares. - Limit the members to 50. - Prohibits any invitation to public to subscribe for

shares or debentures in company.

Page 25: MOA, AOA

FORM AND SIGNATURE OF ARTICLES

The articles should be Printed Divided into paragraphs signed by each subscriber of memorandum with

his details in the presence of a witness and registered with the memorandum

Page 26: MOA, AOA

ALTERATION OF ARTICLES

1. Alteration in articles can be done by passing a special resolution using which it can alter its articles anytime.

2. A copy of every resolution should be sent to the registrar within 30 days of passing

3. Alteration is to be registered within 3 months

Page 27: MOA, AOA

LIMITATIONS TO ALTERATION

Must not be inconsistent with the act Must not conflict with the memorandum Must not sanction anything illegal Must be for the benefit of the company Must not increase liability of the members Alteration by special resolution only Approval of central government when a company is

converted into a private company Breach of contract Must not result in expulsion of members Memorandum cannot be altered with retrospective effect.

Page 28: MOA, AOA

LEGAL EFFECT OF MEMORANDUM AND ARTICLES

The Memorandum and Articles when registered, bind a company and the members to the same extent as if it has been signed by the company and each member.

The effect of these provisions is to constitute, through the Memorandum and the Articles of a company, a contract between each member and the company.

Page 29: MOA, AOA

HOW FAR THESE DOCUMENTS BIND?

Members to the company Company to the members Members inter se Company to the outsiders

Page 30: MOA, AOA

CONSTRUCTIVE NOTICE OF MEMORANDUM & ARTICLES

Outsiders dealing with the company have rights to know about the contents of MOA and AOA

As soon as they are registered with the registrar they become public documents.

This is known as constructive notice of memorandum and articles.

The office of the registrar is a public office. The MOA and AOA will be open and accessible to all.

Page 31: MOA, AOA

CONSTRUCTIVE NOTICE OF MEMORANDUM & ARTICLES

(Contd) It is the duty of every person dealing with the

company to inspect these documents and whether it is within its powers to enter into the proposed contract.

All special resolutions when registered with the registrar become public documents, so that an outsider is on notice of the contents like MOA and AOA

Page 32: MOA, AOA

DOCTRINE OF CONSTRUCTIVE NOTICE

It is regarding the contents of MOA and AOA

Every outsider dealing with the company is deemed to have notice of the contents of Memorandum and Articles of Association.

These documents, on registration with the Registrar, assume the charter of public documents. This is knows as constructive notice of Memorandum and Articles.

Page 33: MOA, AOA

DOCTRINE OF CONSTRUCTIVE NOTICE

Outsiders are on notice of the contents of the Memorandum and Articles which is open and accessible to all.

Thus doctrine of constructive notice protects the company against outsiders.

Page 34: MOA, AOA

DOCTRINE OF INDOOR MANAGEMENT

It is regarding the internal proceedings

The outsiders dealing with the company are entitled to assume that as far as the internal proceedings of the company are concerned, everything has been regularly done.

They are presumed to have read these documents and they need not inquire into the regularity of the internal proceedings as required by the Memorandum and the Articles.

Page 35: MOA, AOA

DOCTRINE OF INDOOR MANAGEMENT

They can presume that all is being done regularly.

This limitation of the doctrine of constructive notice is known as the “doctrine of indoor” management”

Thus doctrine of indoor management protects

outsiders against the company.

Page 36: MOA, AOA

Exceptions to the Doctrine of Indoor Management

1. Knowledge of irregularity- Where the person has actual or constructive notice of irregularity as regards internal management. He cannot claim the benefit under the rule of indoor management.

2. Acts outside the scope of apparent authority- If an officer of a company enters into a contract with a third party and if the act of the officer is beyond the scope of his authority, the company is not bound.

Page 37: MOA, AOA

Exceptions to the Doctrine of Indoor Management

3. Negligence – Where a person dealing with a company could discover the irregularity if he had made proper inquiries. He cannot claim the benefit of the rule of indoor management.

Anand Bihari Lal v. Dinshaw & Co., A.I.R. (1942) Oudh 417.

Anand Bihari Lal an outsider accepted a transfer of a company’s property from its accountant.

Held, the transfer was void as such a transaction was apparently beyond the scope of the accountant’s authority.

Page 38: MOA, AOA

Exceptions to the Doctrine of Indoor Management

4. Forgery- A Company can never be held bound for forgeries committed by its officers.

The leading case on the point is: Ruben v. Great Fingall Consolidated Co. (1906) A.C.

439. The secretary of a company issued a share

certificate under the company’s seal with his own signature and the signature of a director forged by him.

Held, The person who advanced money on the strength of this certificate was not entitled to be registered as holder of the shares.

Page 39: MOA, AOA

DOCTRINE OF ULTRA VIRES

Ultra means beyond and Vires means powers.

Purpose of these restrictions is to protect – a) investors in the company so that they know the

objects in which there money is to be employed b) Creditors by ensuring that the company’s funds

are not wasted in unauthorized activities

Doing of any act beyond legal power and authority of the company is void.

It does not create any legal relationship. It is not necessary that an act to be considered ultra

vires must be illegal

Page 40: MOA, AOA

DOCTRINE OF ULTRA VIRES Features of ultra vires

1)The company being a corporate person should not be fined or punished for its own acts or acts of its agent.

2) The directors of the company may be held personally liable to outsiders for an ultra vires

Ultra Vires the Directors-

If an act is within the powers of company but beyond the power of directors, then the shareholders can ratify it by a resolution in a general meeting.

Ultra Vires the Articles- if an act is ultra vires the ARTICLES the

company can ratify it by altering the Articles by a special resolution.

Page 41: MOA, AOA

Certificate of Incorporation

Once all the above documents have been filed

and they are found to be in order, the Registrar of Companies will issue Certificate of Incorporation of the Company.

This document is the birth certificate of the company and is proof of the existence of the company. Once, this certificate is issued, the company cannot cease its existence unless it is dissolved by order of the Court.

Page 42: MOA, AOA

Operational Guidelines for Application for a Certificate of

Commencementof Business1. The documents that need to be submitted are:

a) Form 18 Form 18 needs to be complete with the following

details: - Number and name of the company. - Signed in the presence of a Commissioner for

Oaths. - Date and place where the declaration was made. - Name, address and phone number of the person

who submitted the documents.b) Statement In Lieu Of Prospectusc) Copy of the company’s certificate of incorporationd) Two copies of the cover letter ande) Fees of US $95

Page 43: MOA, AOA

Operational Guidelines for Application for a Certificate of

Commencementof Business

2. Documents that are complete/in order will be processed for registration.

3. The certificate in the form of Form 23 will be issued within five days from the date the complete set of documents was received.

Page 44: MOA, AOA

COMMENCEMENT OF BUSINESS

A private company or a company having no share capital can commence its business immediately after it has been incorporated.

However, other companies can commence their

activities only after they have obtained Certificate of Commencement of Business.

For this purpose, the following additional

formalities have to be complied with :-

Page 45: MOA, AOA

COMMENCEMENT OF BUSINESS

1. If a company has share capital and has issued a prospectus

2. If a company has share capital but has not issued a prospectus

Once the above provisions have been complied

with, the Registrar of Companies grants "Certificate of Commencement of Business" after which the company can commence its activities.

Page 46: MOA, AOA

THANK YOU

• ANSHU YADAV• CHIRANJEEV CHATRY• JAYENDRA KUMAR• RAJESH THALLAM• SANDHYA VARMA • SHIVANI THAKUR• SUSBHA SHETTY

GROUP MEMBERS