The memorandum of association of company defines its constitution and scope of the powers of the company with which it has been established under the act. It is the very foundation on which the whole company is built.
Object of registering a memorandum of association
It contains the object for which the company is formed and identifies the possible scope of its operation beyond which it can't operate.
Such documents enables the shareholders, creditors and any other dealing with the company to know the powers and activities of the company.
It is a public document and every person entering into a contract with the company is presumed to have the knowledge of the conditions contained in it.
A company cannot depart from the provisions of memorandum. In other words company cannot enter a contract which is beyond the power specified in memorandum of the company.
Content or clauses of memorandum of association
1. Name clause
This clause shall contain the name of the company. The name of the company shall end with last words "limited" in case of public limited company and end with last words "private limited" in case of private limited company.
The name of the company shall not be undesirable i.e., it shall not be identical with or reasonable to the name of any existing company.
2. Registered office clause
This clause must contain the name of the state in which registered office of the company is to be situated. Exact address of registered office may be submitted even later stage i.e. after incorporation of the company.
3. Object clause
This clause contains the object for which the company came into existence. If a company change its activities which are not reflected in its name, it shall change its name in line with its activities.
In addition it also contains the object which are identical or ancillary (providing assistance to the main work) to attainment of main objects.
4. Liability Clause
(a)In case of company limited by shares liability of each member shall be limited to the extent of nominal value of shares held by them.
(b)In case of company limited by guarantee
liability of each member shall be limited to the extent amount which each member undertakes to guarantee to the company.
5. Capital clause
This clause contains details about the amount of authorised shares capital of the company. A company not having share capital need not to have this clause.
6. Association clause
This clause states that persons subscribing there signatures at the end of the memorandum are desirous of forming a company.
Memorandum must be signed by seven or more persons in case of public company and two or more persons in case of private company and shall be attested by witnesses.
It is to be noted that a company being a legal person can through its agent subscribe to the memorandum. However, a minor cannot be a signatory to the memorandum as he is not competent to the contract. The guardian of a minor, who subscribes to the memorandum on his behalf, will be deemed to have subscribed in his personal capacity.