BUSINESS LAWPresented By :Bhavani Singh RathoreHemam Johnson SinghShivaranjiniShudhakarRavi ShankarMEMORANDOM OF ASSOCIATIONIntroductionDefinitionMEMORANDUM 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)

TWO Main documents of companyMemorandum Of Association Article Of AssociationMemorandum of associationThememorandum of associationof acompany, is the document that governs the relationship between the company and the outside. It is one of the document which has to be filed with the registrar of companies at the time of incorporation of a company.Memorandum of Association of a company as originally framed or altered from time to time in pursuance of any previous Companies Law or of this Act. -SECTION2(28),Companies Act,1956Memorandum of Association of a company is its charter & defines the limitations of the powers of a company. -LORD CAIRNS

Purpose of memorandumThe prospective shareholders shall know the field in, which their money is going to be used by the company and what risk they are undertaking in making investment. The outsiders dealing with the company shall know the objects of the companyPrinting and signing of Memorandum The Memorandum of Association of a company must be:

Printed, divided into paragraphs numbered consecutively, andSigned by 7 (2 in case of a private company) subscribersEach subscriber shall sign (and add his address, description and occupation, if any) in the presence of at least 1 witness who shall attest the signature and shall likewise add his address, description and occupation.

Forms Of memorandum of associationTable B: relates to the company limited by sharesTable C: relates to the company limited by guarantee and not having a share capitalsTable D: relates to the company limited by guarantee and having a share capital.Table E: relates to unlimited company.Contents of Memorandum: Section 13According to section 13,every company must contain the following clauses:name of the company, with Limited as the last word of the name in the case of a public limited company and with private Limited as the last words of the name in the case of a private limited company.The state in which the registered office of the company is to be situated.The objects of the company which shall be classified as:main objects of the company to be pursued by the company on its incorporation and objects incidental or ancillary to the attainment of the main objects, and

Other objects not included above.In the case of companies (other than trading corporations) with objects not confined to one state, state to whose territories the objects extend.The liability of members is limited if the company is limited by shares or guarantee.In the case of a company having a share capital, each subscriber shall take at least 1 share and shall write opposite his name the number of shares he takes.

Clauses under Memorandum of associationName clause [section 13(1)(a)]:the name of a company establishes its identity. This clause contains the name of the company.RestrictionsThe name must not be identical with the name of another companyWhich in the opinion of central government is undesirableShould have the words Limited or Private Limited at the end.Registered Office clause [section 13(1)(b)]:it contains the name of the state in which the registered office is to be situate.Notice of situation of registered office & every change therein must be given to registrar when it starts or within 30 days of incorporation as the case may be.If default is made in complying with the requirements, the company or officer who is in default shall be punishable with fine which may extend to Rs.500 for every day during which the default continues.

Object clause [section 13(1)(c)&(d):it determines the rights and powers of the company and also defines its sphere of activities.Section13(1)(d) requires a company to divide its object clause into two partsMain objects: the main objects to be pursued by the company on its incorporation and objects incidental to the attainment of the main objects.Other objects: other objects which are not included in the above clause.Liability clause [section13(2)]:this clause states that- liability of the members is limited by the value of shares held by them.In case of a company limited by guarantee the members are liable to the amount undertaken to be contributed by them to the assets of the company in the event of its being wounded up.

Capital clause [section13(4)(a)]:the clause states-the total capital of the proposed company, the division of the capital into equity share capital & preference share capital should also be mentioned.the memorandum of the company limited by shares must state the authorized & the nominal share capital.Example: the capital of the company is Rs.10,00,000 divided into 1,00,000 equity shares of Rs.10 each. This amount lays down the upper limit beyond which the company cannot issue shares.Association or subscription clause [section 13(4)(c): this clause contains the-name of the signatories to the memorandum of association.The memorandum must be signed by at least 7 persons in case of public company & 2 in case of private company in the presence of at least one witness who must attest the signatures.

Alteration of mOA:Alteration can be done regarding:Alteration of the Name ClauseAlteration of the Registered OfficeAlteration of the Object ClauseAlternation of the Liability ClauseAlteration of the Capital Clause

Alteration of name clause:A company can change its name in the following ways:By a special resolution at a general meeting with the written approval of the Government.No Approval of Central Government is needed if the change of name involves only the addition or deletion of the word Private.If the name registered by a certain company is identical to the name of an existing company, the registered name can be changed by passing an ordinary resolution and by obtaining a written consent of the Central Government.

Alteration OF REGISTERED OFFICE

From One Place to another within the same city: By passing a resolution of Board of Directors. Notice to Registrar of companies.

From one city to another within jurisdiction of the same ROC within the same state:Special resolutionConfirmation of Regional Director when jurisdiction of Registrar of companies is changed.Copy of (i) & (ii) to be filed with ROC.Notice of new location to ROC within 30 days.

FROM THE JURISDICTION OF ONE ROC TO THE JURISDICTION OF ANOTHER ROC WITHIN THE SAME STATE [section 17(A)]

An application shall be made in the prescribed form to the Regional Director to shift its registered office from one ROC to another ROC within the same state.On confirmation, Regional Director shall communicated to the company within 4-weeks from the date of receipt of the application for such change.A certified copy confirmation by Regional Director and a copy of memorandum to be filed with ROC within 2-months and ROC will issue the certificate of registration within 1-month.

From one state to another

Special ResolutionConfirmation of Central Govt.For certain Purposes only

ALTERATION OF OBJECTS CLAUSE sec 17(1)

Special ResolutionAlteration is sought on any of these grounds:To carry on its business more economically & more efficientlyTo attain its main purpose by new or improved meansTo enlarge or change the local area of its operationsTo carry on some business which under existing circumstances may conveniently or advantageously be combined with the business of the companyTo restrict or abandon any of the objects specified in the memorandumTo sell or dispose off the whole or any part of the undertakingTo amalgamate with any other companyCopy of (A) is filed with ROC within 30 days

ALTERATION OF LIABILITY 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 CAPITAL CLAUSE

Increase of authorized share capital.

Consolidation and subdivision of shares.

Conversion of shares into stock & vice versa.

Diminution of share capitalDoctrine of ultra viresThe object clause of the Memorandum of thecompany contains the object for which the company isformed.An act of the company must not be beyond the objects clause, otherwise it will be ultra vires and,therefore, void and cannot be ratified even if all the members wish to ratify it. This is called the doctrine of ultra vires.

Ultra means beyond & Vires means powers. An action outside the memorandum is ultra vires.

An act is said to be ultra vires when it is performed which, though legal in itself, is not authorised by the objects clause in memorandum of association or statue.

Asbury Railway Carriage & Iron Company Ltd. V. Riche(1875)Doctrine of ultra vires has been firmly established in the following case:The company was formed with the objects to make and sell, or lend or hire railway carriage and wagons & all kinds of railway plant to carry on the business of mechanical engineers & general contractors etc.The company contracted with Riche to finance the construction of railway line in Belgium. The company repudiated the agreement & was sued for breach of contract.Riche contentions were:The contract in question came well within the meaning of the words general contractors & therefore within the powers of the company.The contract was ratified by the majority of shareholders

Points decided in the case are:If an act is ultravires the memorandum, it is not binding upon the company.

A contract ultravires a company is void & incapable of ratified even if every member wishes to ratify it. Effects of doctrine of ultra viresVoid ab initioInjunctionPersonal liability of directorsAcquisition of property that is Ultra ViresDirectors personally liable to third party

MEMORANDOM OF ASSOCIATION OF

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