A memorandum of association is the charter of a company. Memorandum is the legal document of the company and is prepared during the registration process of the company. The memorandum of the company defines the scope of the business activities and also the information about the shareholdings of the companies.
The memorandum of association defines the company’s relationship with its shareholders and also defines the objectives for which the company has been prepared. It also contains the powers within which the company can act.
The memorandum of association is also helpful for the shareholders, creditors and other persons dealing with the company to known the powers and basic rights of the company. In case of a public limited company, the memorandum needs to be signed by at least 7 members and in case of a private company at least 2 subscribers need to sign the memorandum.
Format of the Memorandum of Association
The format of Memorandum of Association is prescribed from Table A to Table E of Schedule 1 of the Companies Act, 2013 depending on the type of a company. The format of Memorandum as per the type of company is as follows:-
|Table||Type of Company|
|Table A||Company limited by shares|
|Table B||Company limited by guarantee not having a share capital|
|Table C||Company limited by guarantee having share capital|
|Table D||Unlimited company|
|Table E||Unlimited company having share capital|
Main Clauses of a Memorandum of Association
Memorandum of Association contains six main clauses which are as follows:-
- Name clause
Name clause specifies the name of a company. Any companies name should not be identical with that of any other existing company. Also there are some names which are specifically restricted to be used by any company.
A private company should have the words “Private Limited/ Pvt. Ltd.” at the end of its name while a public company should have the words “Limited” at the end of its name.
- Objects clause
The object clause is the most important clause of the memorandum. The objects clause contains the objects for which a company is formed. Object clause contains the main objects for which a company is formed and also contains other objects which are incidental with the main objects.
- Liability clause
Liability clause contains the liability of each member of a company. It contains the amount which is agreed by members to be paid in case of winding-up of the company.
- Registered office clause
This clause contains the name of the State in which the registered office of the company is to be situated. The location of the registered office is to be intimated by the company to the Registrar within 30 days of incorporation of the company.
Registered office clause is important because every notice, every document which are to be sent to the company will be sent at its registered office.
- Capital clause
The capital clause contains the authorized capital of a company and the total number of shares along with the value of each share. A company cannot raise amount in excess of the authorized capital.
Memorandum of Association
- Subscription clause
Subscription clause of the memorandum contains the details of the subscribers of a company. It contains the names of all the subscribers, their address, number of shares they are subscribing to, etc. the subscribers also signs the memorandum in presence of at least 2 witnesses.
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