Contents of Memorandum of Association
The memorandum of association must contain the following fundamental clauses which have often been described as the conditions of its incorporation i.e., registration:
(1) Name Clause;
(2) Situation or Registered Office Clause;
(3) Object Clause;
(4) Liability Clause;
(5) Capital Clause; and
(6) Association Clause;
(1) Name Clause: This clause contains the name by which the company is registered. The company’s corporate name not only is the identification of the company, it also reveals its individual status. There is no restriction on a company on the selection of its name-it can choose any name- but the following legal formalities must be kept in mind while naming a company:
(2) Situation or Registered Office Clause: This clause describes the address, city and state in which the company’s registered office will be located. On the basis of this information only it is possible to establish the domicile of the company and determine its ‘nationality’ and the local laws that will govern its operations. It also establishes whether the company is an Indian or a foreign company.
(3) Object Clause: This is probably the most important clause in the memorandum of association of the company, and defines the objects or aims for which the company is to be set up. A company is not legally entitled to do any business other than what is specified in the objects clause. This clause is meant to protect the interest of the members of the company (who become aware of the purpose for which their investment is to be employed) and the public at large who deal with the company to come to know the limitations or powers of the company. If a company crosses the limits of its objects and does some act which is beyond the scope of its activity, such act would be deemed to be ultra vires. Such an act of the company cannot be held valid even if it is done with the consent of its members.
(4) Liability Clause: In case of a company whose of members is by shares or guarantee, the memorandum must contain a clause stating that The liability of the members is limited’. Even a company which is exempted from using the word ‘Limited’ as a part of its name under Section 8 of the Companies Act, 2013 is also required to state in its memorandum that the liability of members liability limited is limited. The effect of this clause is that the liability of the shareholders is limited to the nominal value of shares held by him, i.e, no shareholders (member) can be called upon to pay more than the unpaid value of the shares held by him. In case his shares are fully paid, he shall not be required to pay any more even if tho company owes huge debts to his creditors.
(5) Capital Clause: The capital clause in memorandum states the amount of the nominal or authorised capital with which the company proposes to be registered and the value of the shares into which it is divided. The Capital of the company may be divided into two different categories namely,
(i) equity share capital
(ii) preference share capital.
The company, during its existence cannot issue any shares exceeding the value of its authorised or registered (or nominal) capital unless and until it completes the requisite legal formalities.
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(6) Association Clause: This clause is also known as ‘subscription clause’ of the memorandum. The association clause must state that the persons who are subscribing their signatures to the memorandum and are desirous of forming themselves into an association in pursuance of the memorandum. Each subscriber must sign the memorandum in the presence of at least one witness who shall at least the signature. Each one of them agrees to take the number of shares stated against their respective names.