Memorandum of Association
Clauses of Memorandum of Association and Its Alternation
Company Law Notes for B.Com, BBA and MBA
Memorandum of Association
Memorandum
of association is the document which contains the rules regarding constitution
and activities and objects of the company. It is fundamental charter of the
company. Its relation towards the members and the outsiders are determined by
this important document.
Section 2 (56) of the Companies Act, 2013 defines Memorandum
as “Memorandum means the Memorandum of association of a company as originally
framed or as altered from time to time in pursuance of any previous companies
law or of this act”.
One of the essentials for the registration of a company is memorandum of
association. It is the first step in the formation of a company. Its importance
lies in the fact that it contains the fundamental clauses which have often been
described as the conditions of the company’s incorporation.
Memorandum of association is divided into 6 clauses/contents [Sec. 4 of the Companies Act, 2013]:
1.
Name clause
2.
Situation or Registered office clause
3.
Objects clause
4.
Liability clause and
5.
Capital clause
6.
Subscription or Association Clause
1. Name
clause: This clause state the name of the company. Name of every company
limited by shares or by guarantee must end by the word 'Ltd.' or 'Pvt. Ltd.'
except companies exempted u/s 8. The
name must not be undesirable or most not resemble the name of any other
registered company.
2.
Situation or Registered office clause: Must contain the name of state is which
registered office is situated. Actual
address of registered office is notified to ROC within 30 days of
incorporation.
3. Object
clause: It sets out object or vires of the company. The objects must be legal
and not be against the provision of the companies Act, 2013. It is divided into
two parts:
(a) The
main objects and Objects incidental or ancillary to the main objects.
(b) Other
objects.
4.
Liability clause: States that liability of members is limited to the amount
unpaid on their shares and in case of company limited by guarantee the amount
which every member undertakes to contribute to the assets of the company in the
event of its winding up.
5. Capital
clause: Every company having a share capital, the amount of share capital with
which the company is proposed to be registered and the division of its shares
into a fixed denomination.
6.
Subscription clause: This clause shall state the number of shares that each
subscriber to member has agreed to subscribe. Every subscriber shall agree to
subscribe for at least one share.
ALTERNATION OF MEMORANDUM OF ASSOCIATION (Sec. 13 of the Companies Act, 2013)
1. Alteration of name:
A company may change its name at any time by passing a
special resolution and with the prior approval of the Central Government. The
company shall file with the registrar a copy of special resolution and a copy
of the order of the central government approving the change of name. The
registrar shall enter the new name of the company in the register of companies
and issue a fresh certificate of incorporation to the company. The change in
the name shall become complete and effective from the last date of issue of
fresh certificate of incorporation.
However, it should be noted that no approval of central government will
be required if the change consists merely addition or deletion of the word
“private” consequent on the conversion of a public company into a private
company or vice versa.
2. Alteration
of registered office clause: A company may change the place of its
registered office from one state to another state by passing a special
resolution and obtaining approval of central government. For obtaining the approval of central
government (CG), the company shall make an application to CG in such form and
manner as may be prescribed. CG shall dispose of the application within 60
days. Before passing any order, CG shall satisfy itself that the creditors and
lenders have consented to such alterations. After obtaining the approval, the
company shall file with the registrar a copy of special resolution and a copy
of the order of the central government approving the change of the address. The
registrar shall enter the new address of the company in the register of
companies and issue a fresh certificate of incorporation to the company. The
change in the address shall become complete and effective from the last date of
issue of fresh certificate of incorporation.
3. Alteration
of objects: A company may alter its objects with the passing of a
special resolution. The confirmation of the central government is not required
for this purpose. Alteration of object clause is not permitted if any company
has raised money from the public by issue of a prospectus, and any part of such
money remains unutilised with the company.
4. Alteration of liability clause: Liability of shareholders can be
increased by express approval of each and every member. However in case the
company is a club or similar association and alteration in the memorandum
requires the member to pay recurring charge at a higher rate, although he does-
not agree in writing to be bound by the alteration. Liability of directors, MD or managers can be
made unlimited by passing a special resolution if the article so permit and
getting consent of such officer.
Unlimited liability of shareholders can be made limited by:
a)
Pass a special resolution and fill it within 30 days.
b)
Obtain tribunal sanction and fill it within 3 months of the date
of order.
c)
Alteration will be effective from date of registration.
5.
Alteration of capital clause [Sec. 61 of the Companies Act, 2013]: If article
provides, by passing an ordinary resolution in the general meeting, a company
can:
a)
Increase in authorised capital by such amount as it may think fit.
b)
Consolidate or sub-divide the whole or any part of existing shares
into shares of larger or smaller denominations.
c)
Convert its fully paid up shares into stock or vice-versa.
d)
Cancel its unsubscribe shares by diminishing authorised capital.
As per
sec. 64 of the Companies Act, 2013, notice of alternation of share capital is
to be given to the ROC within 30 days along with a copy of altered memorandum.
Alteration of share capital does not require any confirmation by the court, CG,
CLB or any other authority.
6.
Alteration of subscription clause: This clause can be altered by passing a
special resolution and complying with the procedure as specified in the sec. 13
for alteration of name clause and registered office clause.
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