AMITY LAW SCHOOL

(2015-2020)

Company Law

Project On

Memorandum Of Association

Submitted By: -

Saumya Singh

A3211115161

B.A LL.B(H)

SECTION - B

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 INTRODUCTION:

Under the existing law a limited company can be formed by preparing

certain legally specified documents and filling the same with the registrar of
companies. The first essential document to be prepared and filled with
registrar and without which a company cannot be incorporated is named as
memorandum of association, briefly called memorandum. The preparation
of this document is the starting point in the formation of a company.

Memorandum of association is one of the basic documents of the company,

it is known as charter of the company. It sets out the limits outside which
company cannot go. Memorandum of association defines the constitution of
the company. It contains the fundamental condition upon which a company
is registered.

It is the document that governs the relationship between the company and
the outside. It is one of the documents required to incorporate a company in
the United Kingdom, Ireland, India, Bangladesh, Pakistan and Sri Lanka,
and is also used in many of the common law jurisdictions of the
Commonwealth.

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 HISTORY

When a company is incorporated it requires a constitution which basically

records the purposes for which the company is incorporated, and which
regulates the distribution of power in the company and its internal
procedural matters. Before 1856, under the Joint Stock Companies Act 1884,
a company was incorporated on the basis of single document called the;
Deed of Settlement.” The Joint Stock Companies Act 1856 introduced a new
constitutional framework for incorporation in 1888.Under the 1856 Act, two
documents were required: the memorandum of association and article of
association. This structure was followed in successive Companies Acts until
the Companies Act 2006.

EXPLANATION:

The promoters of the company prepare the memorandum of association. The

memorandum of association is the charter of company, and so to say, a
statutory deed of partnership. It contains the fundamental conditions upon
which alone company is granted incorporation.

Memorandum binds the company and the members as if each member had
signed and covenanted as regards himself, his heirs and legal representatives
to observe and abide by all its provisions and conditions. Memorandum
regulates the company’s external affairs is that the relation of company with

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outside world. It informs all persons what the company is formed to do and
what capital it has to play with.

Memorandum of association is a public document, and every person who

deals with company is presumed to have a sufficient knowledge of its
contents and provisions.

REQUIREMENTS:

It is basically a statement that the subscribers wish to form a company under

the 2006 Act, have agreed to become members and, in the case of a company
that is to have a share capital, to take at least one share each. It is no longer
required to state the name of the company, the type of company (such as
public limited company or private company limited by shares), the location
of its registered office, the objects of the company, and it’s authorized share
capital. Companies incorporated prior to 1 October 2009 are not required to
amend their memorandum. Those details which are now required to appear
in the Articles, such as the objects clause and details of the share capital are
deemed to form part of the Articles.

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FORM OF MEMORANDUM OF
ASSOCIATION:

The memorandum of association of a company must be in the prescribed

form. Memorandum of association should be in printed form and divided
into various paragraphs and signed by the prescribers in the presence of
witness.

CAPACITIES:

The memorandum no longer restricts what a company is permitted to do.

Since 1 October 2009, if a company's constitution contains any restrictions
on the objects at all, those restrictions will form part of the articles of
association.

Historically, a company's memorandum of association contained an objects

clause, which limited its capacity to act. When the first limited companies
were incorporated, the objects clause had to be widely drafted so as not to
restrict the board of directors in their day to day trading. In the Companies
Act 1989 the term "General Commercial Company" was introduced which
meant that companies could undertake "any lawful or legal trade or
business."

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PURPOSE:

The memorandum of association records the agreement of the first

subscribers to form a company under the 2006 Act, to become members and,
in the case of a company that is to have a share capital, to take at least one
share each.

RESTRICTION ON ALTERATION OF MEMORANDUM:

A company shall not alter the conditions contained in its memorandum

except in the cases and in the mode and to the extent specified in this
Ordinance.

ALTERATION OF MEMORANDUM:

(1) Subject to the provisions of this Ordinance, a company may, by

special resolution alter the provisions of its memorandum so as
to change the place of its registered office from one Province to
another, or from one city or town in a Province to another, or
from a part of Pakistan not forming part of a Province to a
Province or from a Province to a part of Pakistan not forming
part of a Province, or with respect to the objects of the
company, so far as may be required to enable it—

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1. To carry on its business more economically or more efficiently; or
2. To attain its main purpose by new or improved means; or
3. To enlarge or change the local area of its operations; or
4. To carry on some business, not being a business specified in its
memorandum, which may conveniently or advantageously be
combined with the business of the company; or
5. To restrict or abandon any of the objects specified in the
memorandum; or
6. To sell or dispose of the whole or any part of the undertaking of the
company; or
7. To amalgamate with any other company or body of persons.

(2) The alteration shall not take effect until and except in so far as
it is confirmed by the Commission on petition: Provided that an
alteration so as to change the place of registered office of a
company from a place in the Province of the Punjab to the
Islamabad Capital Territory or from the latter to a place in the
Province of the Punjab, or from one city in a Province to
another shall not require confirmation by the Commission.

(3) Before confirming the alteration, the Commission must be

satisfied—

 that, sufficient notice has been given to every holder of debentures of

the company and to any person or class of persons whose interest will,
in the opinion of the Commission, be affected by the alteration; and

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  that with respect to every creditor who in the opinion of the
Commission is entitled to object, and who signifies his objection in
manner directed by the Commission, either his consent to the
alteration has been obtained or his debt or claim has been discharged
or determined, or has been secured to the satisfaction of the
Commission.

POWERS OF COMMISSION WHEN CONFORMING

ALTERATION:

The Commission may make an order confirming the alteration either wholly
or in part, and on such terms and conditions as it thinks fit, and make such
order as to costs as it thinks proper.

Time, place for filing memorandum of association:

Memorandum of association is to be filed with the registrar at the time of

formation of company.

Clauses of memorandum of association:

The mandatory contents of the memorandum of association are as follows:

1. The name clause

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 This clause states the name of company. A company may select
any name, but it should not resemble the name of any other
company. The name clause must include:

a) The word “Limited” as the last word in case of a Public Limited

Company.
b) The words “(Private) Limited” as the last words in the case of a
Private Limited Company.
c) The words “(SMC-Private) Limited” as the last words of a Single
Member Private Limited Company.
These end words show that all persons dealing with the company must
know that their liability is limited to the extent of their shares.

2. Registered Office Details

It is known as domicile clause. The memorandum of association must state

the name of the place of business of the company. The company must have a
registered office and its place must be notified to the registrar.

Change of place of registered office:

Place of registered office may be change from province to province or town
to town;

 From province to province:

Registered office of the company may be changed by passing special
resolution and obtaining the confirmation of the commission.

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  From town to town:
The place of registered office of the company may be changed from one
town to another town within the same province by passing special resolution
and notice to the registrar without any confirmation of the commission.

3. Object Clause

This is the most important part of the memorandum of association and is to

be worded immensely carefully. A company cannot legally take up any
business that is not authorized by its object clause. The object clause cannot
contain any thing contrary to the provisions of the Companies Ordinance,
1984. It is generally very lengthy and the Registration Procedure for A
Company Legal Services Cell 9 scope of the company’s activities is widened
by including the words “and the doing of all such other things incidental or
conductive of the environment of the above objects.”

The statement of object defines the sphere of company activities. It

determines and restricts the power of company.
 Scope of object:
The company can have any object provided that it is not contrary to law.
 Act done outside the objects:
The company can not do any thing outside the powers specified in the object
clause.

4. Liability Clause

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The clause must include whether the company is limited by share or
guarantee. The effect of this statement is in the event if the company is
wound up, the members of the company will not be liable to contribute more
than the amount, if any, unpaid on their shares, in case of a company limited
by shares. In the case of a company limited by guarantee, the members
undertake to contribute a specific amount to the assets of the company.
 Exceptions:

If however the number of members of company is reduced in case of private

company below 2 and incase of public company below 7 and the business is
carried on for more than six months, thereafter every member who knows
this fact is personally liable for the all debts contracted during that period.

5. Share Capital Clause

The following information is provided in this clause, except for guarantee

companies having no share capital and unlimited companies:

a) The amount of share capital with which the company is formed and
registered.
b) The division of share capital into shares of fixed amounts.

The memorandum of association must be signed by the subscribers i.e. the

first members of the association.

6. Subscriber clause:

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Association and subscription clause contains declaration by the subscriber
that they are desirous of forming a company and agree to have number of
shares written against their respective names.

 Signature and attestation:

Each subscriber must sign the memorandum in the presence of at least one
witness who shall attest the signature.

DIFFERENCE BETWEEN
MEMORANDUM OF ASSOCIATION
AND
ARTICLE OF ASSOCIATION:

The Memorandum of Association sets out the company's name, where its
registered office is situated, the fact that the liability of members is limited,
its share capital and the purpose for which the company is set up (its objects
and its powers).

Contents of memorandum of association are as follow;

 Name of company
 Place of registered office

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  Objects of company
 Liability of shareholders
 Registered capital

The Articles of Association of the company are the internal rules of the
company. They create a contract between the members or owners of the
company and the company itself. If no Articles of Association are filed when
the company is incorporated a statutory standard form of articles will apply.
In practice, the statutory articles are amended to suit a company's specific
requirements. The Articles deal with such matters as the creation, issue,
allotment and transfer of shares, the company's borrowing limits and the
powers and duties and regulations of directors.

Contents of article of association are as follow;

 Amount and division of share capital

 Rights of shareholders
 Rules for transfer of shares
 Appointment of directors
 Power and duties of directors
 Alteration of capital
 Functions and powers of managing agent
 Stamp of company
 Voting rights of shareholders
 Declaration of dividend
 Procedure of winding up of company

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 The difference between memorandum of association and article of
association is as follow:

1. As to alteration:

 Memorandum of association is regarded unalterable document,

company cannot change the conditions mentioned in it.

 Whereas article of association is regarded alterable document,

company can change the conditions mentioned in it at any time.

2. As to subordinate:

 Memorandum of association is like a controller of company.

 Whereas article of association is the subordinate to memorandum of

association.

3. As to importance:

 Memorandum of association has primary importance.

 Article of association has secondary importance.

4. As to compulsion:

 Memorandum of association is a compulsory document for the

formation of company.

 Article of association is optional document for the company.

5. As to clauses:

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 Memorandum of association has usually six clauses.

 Article of association has many clauses.

6. As to legal effect:

 Any act beyond the limit of memorandum of association is illegal.

 Any act beyond the limit of article of association is legal.

7. As to object:

 Memorandum of association lays down the objects of company

 Article of association contains the procedure for achieving objects

8. As to nature:

 Memorandum of association is the charter of the company which

defines the external power of company.

 Article of association contains the rules and regulation for internal

management.

9. As to certificate of commencement:

 Memorandum of association is essential for getting certificate of

commencement.

 Article of association is not essential for getting certificate of

commencement.

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10. As to incorporation:

 Memorandum of association contains the conditions upon which the

company is granted incorporation.

 Article of association gives up final touch to the condition described

in it.

11. As to scope:
 Memorandum of association has wider scope alteration of
Memorandum of association prior permission is to be given by federal
government.
 There is no need of permission for alteration in article.

12. As to Status:

 Memorandum of association is the basic document of the company.

 Article of association is the supplementary document or secondary

document of the company.

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 Conclusion:

Both the Memorandum of Association and the Articles of Association are

very important documents for any type of company be it a public-limited
company or a private-limited company. For a company, a Memorandum is
the constitution of the charter of the company. In other words, a
Memorandum defines and confines the power of the company. As for the
Articles of Association, they are the by-laws of the company that give an
explanation to the Memorandum. While the Memorandum regulates the
interaction of the company with the external world, the Articles of
Association are responsible for the internal conduct of the company. Also
registration of the Memorandum is compulsory for every company. In
addition to that, a Memorandum is sub-ordinate to only the Company's
ordinance 19.

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