Documente Academic
Documente Profesional
Documente Cultură
Meaning
Memorandum of Association is one of the documents which has to be filed with the registrar of companies at the time of incorporation of a company. It is a document which sets out the constitution of the company. It defines as well confines the power of the company. It defines companys relation with the outside world and the scope of its activities.
Memorandum of Association
It also states the authorized share capital of the proposed company and the names of its first/permanent directors. The substance of the Memorandum can be explained as follows: It defines the scope and limitations of the projected company. It is very difficult to change or amend the Memorandum of the company because it defines certain powers, the company cannot go beyond. The Memorandum becomes a public document as soon as the company gets registered. Memorandum forms the outer framework within which the company operates.
Contd.
1. The name clause. The name clause contains the name of the company. A public company limited by shares or by guarantee must end with the word 'Limited' and a private limited company must end with the words 'Private Limited'. The company cannot have a name, which in the opinion of the Central Government is undesirable [Section 20(1)]. A name which is identical with or nearly resembles the name of another company in existence will not be allowed [Section 20(2)]. Moreover, a company cannot use a name which is prohibited under the Names and Emblems (Prevention of Misuse) Act, 1950 or use a name reflective of connection to government or state patronage. A company can , however, change its name by passing a special resolution.
Contd.
Objects clause. This is the most important clause of a company. It defines the activities which a company can carry on and those, it cannot. This clause must state: Main object(s) of the company to be pursued by the company upon its incorporation. Objects incidental or ancillary to the attainment of the main object(s). Other objects of the company not included in (i) and (ii) above.
Contd..
4. Liability clause. This contains the nature of the liability of the members. A declaration that the liability of the members is limited, in case the company is limited by shares or guarantee, must be given under this clause. The memorandum of a company limited by guarantee must also state the amount that each member undertakes to contribute to the assets of the company in the event of its being wound-up. Contd
Alteration of MOA
Change of Name Clause:
Doctrine of Ultra-Vires
The word ultra means beyond, and vires means the powers. The Latin term ultra-vires therefore means to describe an act which is beyond the powers. Any transaction, which is not set out in the object clause of the companys memorandum, is ultra-vires the company and therefore void (i.e., of no legal effect). Consequences of an ultra-vires Act The company cannot sue any person for enforcement of any of its rights and vice versa. The directors of the company may be held personally liable to outsiders for an ultra-vires act.
cont..
Doctrine of Ultra-Vires
1. 2. 3. 4.
5.
Exceptions. However, the doctrine of ultra-vires does not apply in the following cases: If an act is ultra-vires of directors powers but intra-vires of company, the company is liable. If an act is ultra-vires the articles of the company but it is intra-vires of the memorandum, the articles can be altered to rectify the error. If an act is within the powers of the company but is irregularly done, consent of the shareholders will validate it. Where there is ultra-vires borrowing by the company or it obtains delivery of the property under an ultra-vires contract then the third party has no claim against the company on the basis of the loan but it has a right to follow its money or property if it exists as it is, and obtain an injunction from the court restraining the company from parting with it. The lender of the money to a company under the ultra-vires contract has a right to make directors personally liable.