Memorandum of

Association
Introduction
• A company is formed when a number of people come together for achieving a specific purpose. This purpose
is usually commercial in nature. Companies are generally formed to earn profit from business activities. To
incorporate a company, an application has to be filed with the Registrar of Companies (ROC). This
application is required to be submitted with a number of documents. One of the fundamental documents that
are required to be submitted with the application for incorporation is the Memorandum of Association.
Definition of Memorandum of Association

• Section 2(56) of the Companies Act, 2013 defines Memorandum of Association. It states that a
“memorandum” means two things:
• Memorandum of Association as originally framed.
• Memorandum as originally framed refers to the memorandum as it was during the incorporation of
the company.
• Memorandum as altered from time to time.
• This means that all the alterations that are made in the memorandum from time to time will also be
a part of Memorandum of Association.
• The section also states that the alterations must be made in pursuance of any previous company law
or the present Act.
• In addition to this, according to Section 399 of the Companies Act, 2013, any person can inspect
any document filed with the Registrar in pursuance of the provisions of the Act. Hence, any person
who wants to deal with the company can know about the company through the Memorandum of
Association.
Palmer says:
• The memorandum of association is a document of great importance.
It contains the objects for which the company is formed and therefore
identifies the possible scope of its operations beyond which its
actions cannot go. It defines and confines the powers of the company.
If anything is done beyond these powers, that will be ultra-vires the
company and void.
Meaning of Memorandum of Association

• Memorandum of Association is a legal document which describes the purpose for which the
company is formed. It defines the powers of the company and the conditions under which it
operates. It is a document that contains all the rules and regulations that govern a company’s
relations with the outside world.
• It is mandatory for every company to have a Memorandum of Association which defines the scope
of its operations. Once prepared, the company cannot operate beyond the scope of the document. If
the company goes beyond the scope, then the action will be considered ultra vires and hence will
be void.
• It is a foundation on which the company is made. The entire structure of the company is detailed in
the Memorandum of Association.
• The memorandum is a public document. Thus, if a person wants to enter into any contracts with the
company, all he has to do is pay the required fees to the Registrar of Companies and obtain the
Memorandum of Association. Through the Memorandum of Association, he will get all the details
of the company. It is the duty of the person who indulges in any transactions with the company to
know about its memorandum.
Object of registering a Memorandum of Association or MOA
• Memorandum of Association is an essential document that contains all the details of the company.
• It governs the relationship between the company and its stakeholders. Section 3 of the Companies
Act, 2013 describes the importance of memorandum by stating that, for registering a company,
(a) In case of a public company, seven or more people are required.
(b) In case of a private company, two or more people are required.
(c) In case of a one-person company, only one person is required.
• In all the above cases, the concerned people should first subscribe to a memorandum before
registering the company with Registrar.
• Thus, Memorandum of Association is essential for registration of a company. Section 7(1)(a) of the
Act states that for incorporation of a company, Memorandum of Association and Articles of
Association of the company should be duly signed by the subscribers and filed with the Registrar.
• In addition to this, a memorandum has other objects as well. These are,
1. It allows the shareholders to know about the company before buying it shares. This helps the
shareholders determine how much capital will they invest in the company.
2. It provides information to all the stakeholders who are willing to associate with the company in
any way.
Format of Memorandum of Association

• Section 4(5) of the Companies Act states that a memorandum should be in any
form as given in Tables A, B, C, D, and E of Schedule 1. The Tables are of
different kinds because of different kinds of companies.
• Table A – It is applicable to a company limited by shares.
• Table B – It is applicable to a company limited by guarantee and not having a
share capital.
• Table C – It is applicable to a company limited by guarantee and having a share
capital.
• Table D – It is applicable to an unlimited company not having a share capital.
• Table E – It is applicable to an unlimited company having a share capital.
• The memorandum should be printed, numbered and divided into paragraphs. It
should also be signed by the subscribers of the company.
Content of Memorandum of Association

• Section 4 of the Companies Act, 2013 states the contents of the memorandum. It details all the essential information
that the memorandum should contain.
• Name Clause
• The first clause states the name of the company. Any name can be chosen for the company. But there are certain
conditions that need to be complied with.
• Section 4(1)(a) states:
• If a company is a public company, then the word ‘Limited’ should be there in the name. Example, “Robotics”, a public
company, its registered name will be “Robotics Limited”.
• If a company is a private company, then ‘Private Limited’ should be there in the name. “Secure “a private company, its
registered name will be “Secure Private Limited”.
• This condition is not applicable to Section 8 companies.
• What are Section 8 companies?
• Section 8 Company is named after Section 8 of the Companies Act,2013. It describes companies which are established
to promote commerce, art, sports, education, research, social welfare, religion etc. Section 8 companies are similar to
Trust and Societies, but they have a better recognition and legal standing than Trust and Societies.
• E.g. CCI- CONFEDERATION OF INDIAN INDUSTRIES, FICCI- FEDERATION OF INDIAN CHAMBERS OF
COMMERCE & INDUSTRY
What kind of names are not allowed?

• The name stated in the memorandum shall not be:

• Identical to the name of another company.
• Too nearly resembling the name of an existing company.
• According to Rule 8 of the Company (Incorporation) Rules,2014, If a company adds ‘Limited’,
‘Private Limited’, ‘LLP’, ‘Company’, ‘Corporation’, ‘Corp’, ‘INC’ and any other kind of
designation to its name to differentiate it from the name of the other company, the name would still
not be accepted.
• Illustration: Precious Technology Limited is same as Precious Technology Company.
• In Ewing v. Butter cup Margarine Co. Ltd, the plaintiff who carried on business under the name
Butter Cup Diary Co. succeeded in obtaining an injunction against defendant on the ground that
public might think that the two businesses were connected since the word ‘butter cup’ was an
unnecessary and fancy one.
Merely a few words are identical will not
render the name identical and undesirable
• In Society of Motor Manufacturers & Traders Ltd. v. Motor
Manufacturers & Traders Mutual Assurance Ltd., the court held that,
the defendant company was an insurance company and the plaintiff
society was a trade protection society. In the normal course of
business, public will not jump into erroneous conclusions.
• Thus, whether a name is too similar or not and therefore it shall be
allowed or not is a question in each case, one of fact.
Undesirable names are those names which in the opinion of the Central Government are:

1. Prohibited under the Provisions of Section 3 of Emblems and Names (Prevention and Improper Use) Act,
1950.
2. Names which resemble each other, which are chosen to deceive.
3. The name includes a registered trademark.
4. The name includes any word or words which are offensive to a section of people.
5. Name which is identical to or too nearly resembles the name of an existing Limited Liability Partnership.
• Furthermore, statutory names such as the UN, Red Cross, World Bank, Amnesty International etc. are also not
allowed to be chosen.
• Names which in any way indicate that the company is working for the government are also not allowed.
To use key words in its name the company should
have minimum authorized share capital
• Corporation- 5 crores
• International, globe, universal, continental, intercontinental, Asiatic,
Asia- 1 crore
• ‘Stock exchange’ can be used only with the approval of SEBI
• Infosys, software, systems, computers, info system, cyber, cyberspace-
only if substantial income is derived from software business.
Publication of name
• Every company shall –
a) Publish its name outside the registered office & every office/ place
of business, legibly, in language in general use in the locality
b) Have its name engraved in legible characters on its seal
c) In all its business letters, bill heads, negotiable instruments,
invoices, receipts etc.
Penalty – Rs. 500/ day for a continuing offence. Personal liability on the
officer in default who signs in his personal capacity.
Reservation of a Name
• Section 4(5)(i) of the Act states that for formation of the Company, the Registrar on receiving the required
documents can reserve a name for 20 days. If the application is made by an existing company, then once the
application is accepted, the name will be reserved for 60 days from the date of application. The company
should get incorporated with the reserved name in these 60 days.
• If after making the reservation of a name, it is found that some wrong information is given. Then two cases
arise.
• In case the company has not been incorporated: In this case, the Registrar can cancel the reservation of the
name and impose a fine of Rupees 1,00,000.
• In case the company has been incorporated: In this case, after hearing the reasons of the company, the
Registrar has 3 options. These are,
1. On being satisfied, he can give 3 months’ time to the company to change the name by passing an ordinary
resolution.
2. He can strike off the name from the Register of Companies.
3. He can file a petition of winding up of the company.
• Rule 8 and 9 of the Company (Incorporation) Rules, 2014 state that the application for reservation of name
under section 4(4) should be filed on Form INC – 1.
Registered Office Clause

• The Registered Office of a company determines its nationality and jurisdiction of courts. It is a
place of residence and is used for the purpose of all communications with the company.
• Section 12 of the Companies Act, 2013 talks about Registered Office of the company. Before
incorporation of the company, it is sufficient to mention only the name of the state where the
company is located. But after incorporation, the company has to specify the exact location of the
registered office. The company has to then get the location verified as well, within 30 days of
incorporation.
• It is mandatory for every company to fix its name and address of its registered office on the outside
of every office in which the business of the company takes place. If the company is a one-person
company, then “One-person Company” should be written in brackets below the affixed name of the
company.
• Change in place of Registered Office should be notified to the Registrar within the prescribed time
period.
Object Clause

• Section 4(c) of the Act details the object clause. The Object Clause is the most important clause of
Memorandum of Association. It states the purpose for which the company is formed. The object clause
contains both, the main objects and matters which are necessary for achieving the stated objects also known as
incidental or ancillary objects.
• The stated objects must be well defined and lawful according to Section 6(b) of the Companies Act, 2013.
• By limiting the scope of powers of the company.
• The object clause provides protection to:
• Shareholders – The object clause clearly states what operations will the company perform. This helps the
shareholders know their investment in the company will be used for what purpose.
• Creditors – It ensures the creditors that capital is not at risk and the company is working within the limits as
stated in the clause.
• Public Interest – The object clause limits the number of matters the company can deal with thus, prohibiting
diversification of activities of the company.
The company should divide its objects into-

a) Main objects of the company to be pursued by the company upon

incorporation and objects incidental to or ancillary to the
attainment of main objects;
b) Other objects of the company not included in the above clause.
Other objects requirements
• No new business in ‘other objects’ can be commenced unless prior
approval of the shareholders with regard thereto is obtained by way
of special resolution passed in general meeting.
• The business may however be commenced with the special
permission of central government provided votes casted in favour of
resolution exceed votes casted against it.
• ‘New business’ means a business which is not germane to the existing
business of the company.
• The objects of the company should not be illegal, immoral or opposed
to public policy or in contravention of the Companies Act.
Doctrine of ultra-vires
• A company which owes its incorporation to statutory authority cannot
effectively do anything beyond the powers expressly or impliedly
conferred upon it by the statute or memorandum of association.
• Any purported activity beyond such powers will be ineffective even if
agreed to by all members.
• This rule is commonly called as ‘ doctrine of ultra-vires’. ‘ultra’ means
beyond and ‘vires’ means the powers. ‘Ultra-vires’ means ‘beyond the
powers of’
The rule was first laid down in Ashbury
Rly.Carriage & Iron Company v. Riche
• The company was formed to carry on the business as ‘mechanical
engineers and general contractors’. The contractors entered into an
agreement for financing a construction of railway in Belgium, the
agreement had been ratified by all members. The company
repudiated the agreement and was sued for breach of trust. The court
held that the word ‘general contractors’ must be taken to indicate
such contracts connected with mechanical engineers. A broad
interpretation to the term would include contracts of many kind like
fire and marine insurance under its purview, virtually allowing it to
carry on any business.. Held the contractors acted ultravires.
• Powers confined to the objects may be express or implied.
• E.g. power to appoint agents, and where the company is a trading
entity, a power to borrow and give security for the purposes of its
business, and also power to sell. Such powers are incidental or
properly to be inferred from the powers expressed in the
memorandum.
• “ Implied powers” means “Any thing that is reasonable to attain the
main objects”
Powers which are not implied
• Acquire any business similar to company’s own
• Entering into a partnership agreement with other firms, joint ventures or
arrangements.
• Taking shares in companies having similar objects
• Promoting other companies or financially helping them
• Power to use funds for political purposes
• Power to give gift and donations to charity not relating to main objects
• Power to sell and dispose of whole of the company’s undertaking
• Entering into surety ship or guarantee
• Making loans by a company not engaged in financing/ banking business
Effects of ultra-vires transactions
1. Liability of Directors: The directors of the company have a duty to ensure that
company’s capital is used for the right purpose only. If the capital is diverted for
another purpose not stated in the memorandum, then the directors will be held
personally liable.
2. Ultra Vires Borrowing by the Company: If a bank lends to the company for the
purpose not stated in the object clause, then the borrowing would be Ultra Vires
and the bank will not be able to recover the amount.
3. Ultra Vires Lending by the Company: If the company lends money for an ultra
vires purpose, then the lending would be ultra vires.
4. Void ab initio – Ultra Vires acts of the company are considered void from the
beginning.
5. Injunction – Any member of the company can use the remedy of injunction to
prevent the company from doing ultra vires acts.
Liability Clause

• The Liability Clause provides legal protection to the shareholders by protecting

them from being held personally liable for the loss of the company.
• There are two kinds of limited liabilities:
• Limited by Shares – Section 2(22) of the Companies Act, 2013 defines a company
limited by shares. In a company limited by shares, the shareholders only have to
pay the price of the shares they have subscribed to. If for some reason they have
not paid the full amount for the shares and the company winds up, then their
liability will only be limited to the unpaid amount.
• Limited by Guarantee – It is defined in Section 2(21) of the Companies Act,
2013.A company limited by guarantee has members instead of shareholders. These
members undertake to contribute to the assets of the company at the time of
winding up. The members give guarantee of a fixed amount that they will be liable
for.
• Non-profit Organizations and other charities usually have a structure of companies
limited by guarantee.
Capital Clause

• It states the total amount of share capital in the company and how it is divided into
shares. The way the amount of capital is divided into what kind of shares. The
shares can be equity shares or preference shares.
• Illustration: The share capital of the company is 80,00,000 rupees, divided into
3000 shares of 4000 rupees each.
Subscription Clause

• The Subscription Clause states who are signing the memorandum. Each subscriber
must state the number of shares he is subscribing to. The subscribers have to sign
the memorandum in the presence of two witnesses.
• Each subscriber must subscribe to at least one share.
Association Clause

• In this clause, the subscribers to the memorandum make a declaration that they
want to associate themselves to the company and form an association.
• “ we, the several persons whose names and addresses and occupations are
subscribed, are desirous of being formed into the company in pursuance of this
memorandum of association, and we respectively agree to take the number of
shares in the capital of the company set opposite our respective names”.
Memorandum of Association for One-Person-Company
• A one-person company is called so because it can be formed by one person. The minimum capital
required to form a one-person company is 1,00,000 Rupees.
• It is a new concept which has been introduced to promote entrepreneurship. All the laws which are
applicable on private companies will be applicable on one-person company.
• Section 2(62) of the Companies Act, 2013 defines one-person company.
• A one-person company is a separate legal entity from its owner. It is mandatory for the company to
be converted into a private limited company in case its annual turnover crosses the 2 Crore mark.
• In case of one-person-company, in addition to all the other clauses, the Memorandum of
Association contains a clause called the Nomination Clause. This clause mentions the name of an
individual who will become the member in case the subscriber dies or becomes incapacitated. The
nominee must be an Indian citizen and resident of India i. e. he must have been living in India for
at least 182 days in the preceding year. A minor cannot be a nominee.
• The individual whose name is mentioned should give his consent in written form and it is required
to be filed with the Registrar of Companies at the time of incorporation. If the nominee wants to
withdraw, he shall give it in writing and the owner of the company will have to nominate a new
person within 15 days.
What’s the use of Memorandum of Association?

• It defines the scope & powers of a company, beyond which the company cannot
operate.
• It regulates company’s relation with the outside world.
• It is used in the registration process; without it the company cannot be
incorporated.
• It helps anyone who wants to enter into a contractual relationship with the
company to gain knowledge about the company.
• It is also called the charter of the Company, as it contains all the details of the
company, its members and their liabilities.
Subscription of Memorandum of Association

• Subscribers are the first shareholders of the company. They are the people who agreed to come together and
form the company. The name of each subscriber along with their particulars are mentioned in the
memorandum.
• Different kinds of companies require different number of subscribers for incorporation.
• Private Company: In case of a private company, the minimum number of subscribers required are 2.
• Public Company: In case of a public company, 7 or more subscribers are required.
• One-Person-Company: In case of one-person-company, only one person is required.
Who can Subscribe to the MoA?
• Rule 13 of the Companies (Incorporation) Rules, 2014 describes the provisions of subscribing to the
memorandum.
• There are specific kinds of persons (natural or artificial) who can subscribe to the memorandum:
• Individuals – An individual or a group of individuals can subscribe to the memorandum.
• Foreign citizens and Non-Resident Indians – Rule 13(5) of the Companies (Incorporation). Rules, states that
for a foreign citizen to subscribe to a company in India, his signature, address and proof of identity will need
to be notarized. The foreign national must have visited India and should have a Business Visa.
• For a Non-Resident Indian, the photograph, address and identity proof should be attested at the Embassy with
a certified copy of a passport. There is no requirement of Business Visa.
• Minor – A minor can only be a subscriber through his guardian.
• Company incorporated under the Companies Act – The company can be a subscriber to the memorandum.
The Director, officer or employee of the company or any other person authorized by the board of resolution.
• Company incorporated outside India – Foreign Company is defined in Section 2(42) of the act; it states that a
foreign company is a company incorporated outside India. A company registered outside India can also
subscribe to the memorandum by fulfilling the additional formalities.
• Society registered under the Societies Registration Act, 1860.
• Limited Liability Partnership – A partner of a limited liability partnership can sign the memorandum with the
agreement of all the other partners.
• Body corporate incorporated under an Act of Parliament or State Legislature can also be a subscriber to the
memorandum.
Alteration of memorandum
• The company cannot alter the conditions contained in the memorandum except in
the cases and in the mode and to the extent express provisions have been made in
the Act.
• change of name:
• Name of the company may be changed at anytime by passing a special resolution
at a general meeting of the company and with the written approval of the Central
Government.
• No approval of the Central government is require for mere addition or deletion of
the word “private” – during conversion of a public company to a private company
and vice versa.
• If through inadvertence or otherwise, a company has been registered with a name
too identical with that of an existing company, the company may change its name
by passing an ordinary resolution and by obtaining the approval of the Central
government.
• Change of registered office:
• From one premise to another in the same city, town or village-
• By passing a resolution of the Board of Directors
• Notice of the change should be intimated to the registrar within 30
days of the change, who shall record the same.
• Change from one premise to another will not effect in the alteration
of memorandum, because in the memorandum, it is the name of the
state that is mentioned but not its registered office.
• Change of registered office from one town, city or village to another
in the same state:
• Special resolution at the share holders meeting
• Confirmation of regional directors
• Copy of special resolution and confirmation of regional directors need
to be filed with ROC, within 30 days in Form 23
• The ROC shall record and issue new registration certificate within 30
days
• Change of registered office from one state to another:
• Special resolution and confirmation by the NCLT.
• The NCLT shall give notice to all creditors, the registrar and other
persons interested in the company to be heard.
• A company can shift its registered office from one state to another for
certain purposes only. Grounds are common for both change of
registered office and change of objects clause
Alteration of objects clause by passing a
special resolution
• to carry on its business more economically and more efficiently
• to attain its main purpose by new or improved means
• to enlarge or change the local area of its operation
• to carry on some business which under the existing circumstances may
conveniently or advantageously be combined with the business of the
company
• to restrict or abandon any of the objects mentioned in the memorandum
• to sell or dispose of the whole or any part of undertaking or any of the
undertakings
• to amalgamate with any other company or body of persons
• A special resolution should be filed with the ROC within 30 days of such
resolution
• The ROC will record the change and will issue the new certificate
Alteration of liability clause-
• The Liability clause of the memorandum cannot be altered except with the written consent of all the members
of the company. By altering the liability clause, the liability of the directors of the company can be made
unlimited. In any case, the liability of the shareholders cannot be made unlimited. Changes in the liability
clause can be made by passing a special a special resolution and sending a copy of the resolution to the
Registrar of Companies.
Alteration of capital clause
• A company limited by share capital may alter the conditions as to capital
in the memorandum by passing an ordinary resolution in a general
meeting.
1. To increase its share capital by such amount as it thinks expedient by the
issue of new shares
2. To consolidate and divide all or any of the share capital into shares of
larger amount than existing shares
3. To convert all or any of the fully paid up shares into stocks and reconvert
the stock into such shares of any denomination
4. To sub-divide its shares into smaller amounts, but the proportion of paid
and unpaid shares should remain the same
5. To cancel and diminish the amount of share capital by the amount of
shares so cancelled
• The altered Memorandum of Association should be submitted to the Registrar within 30 days of passing the
resolution.