DOCUMENTS OF COMPANY

Companies Act, 1956

Documents

Documents

MOA AOA

Memorandum of Association

Main document of the company. It defines its objects. Lays down the conditions upon which alone the

company allowed to be formed. Charter of the constitution of the company. It defines the scope of its activity and also states

that anything beyond it is unauthorized and illegal.

Memorandum of Association

A public document binding on the company and the members.

It specifies the scope of the activities of the company and also anything beyond which is illegal or unauthorized.

The memorandum shall be one of the forms given in Tables B, C, D and E in schedule 1 of the Act.

How Moa Looks?

The Memorandum of Association must be printed, divided into paragraphs, numbered consecutively and signed by each subscriber (seven or more in

case of a public company), who must add his name, address and description in the presence of at lease one witness who is to

attest the signature.

Clauses of Moa

Name clause. Registered office or Situation clause. Object clause. Liability clause. Capital clause. Subscription clause.

Name Clause

The Company is a legal entity. Therefore, it must have its name to establish its identity.

The name of the company should not be Similar, Undesirable, or which will mislead the public. its use has been, therefore, prohibited by the Government

under the Emblems and Names (Prevention of Improper Use) Act, 1950.

The company can change its name by passing a special resolution and obtaining he approval of the Central Government.

Registered Office Clause

Memorandum of Association must state the name of the State in which the registered office of the company is situated.

This clause is important as it mentions the residence for the purpose of the communication with the company.

It determines the jurisdiction of the company and also mentions the place where all the records of company are maintained.

Registered Office Clause

Where the company wants to change its registered office from one state to another then it can do so by passing a special resolution as well as by confirmation of Company Law Board.

Such confirmation will be given provided debenture holders and creditors are satisfied and such alteration is fair.

Object Clause

It is the most important clause in the Memorandum of Association.

It defines and limits the scope and sphere of the operation of the company.

It explains to the members the scope of activities of the company.

It affords protection of its funds. It states the main objects as well as incidental objects of the

company. The transaction which does not fall within the scope of the

main objects of the company will not be valid and binding on the company simply because it is not beneficial for the company.

Object Clause

As regards to the alteration of object clause a special resolution must be passed and the confirmation by the Company Law Board must also be obtained.

The alteration is done to obtain a main purpose by new means or to enlarge the area of its operation, or to restrict the objects or sell or dispose of or amalgamate the undertaking.

Liability Clause

The liability clause states that the member or the shareholder will be liable to pay only the unpaid value of shares held by him.

If it is a company limited by guarantee, Memorandum of Association must further state that each member undertakes to contribute to the assets of the company at the time of the winding up while he is a member.

Ordinarily this clause cannot be altered except that the liability of the directors may be made unlimited under certain circumstances.

Capital Clause

Amount of share capital with which the company is to be registered and its division into shares of a fixed amount must be stated in the Memorandum of Association of a company limited by shares.

Capital clause can be varied or capital can be reduced (by special procedure) or the rights of the shareholders are varied or create ‘reserve liability’.

Subscription Clause

Maximum seven members in a public company and two members in a private company are shown in a Memorandum.

A declaration is to be given. Such declaration is to be signed by a member in presence of a witness.

Moreover the details as regards to name, address, age and business of the promoters are also recorded under this clause.

PROBLEMS & SOLUTIONS

(1)

A company altered Its Memorandum of Association according to the procedure laid down by law and the alteration was also confirmed by the Company Law Board. A certified copy of the order of the Company Law Board was filed 4-months after the order was passed by the Company Law Board. Can the Registrar register the alteration?

Solution

Yes. He can do so as per provisions mentioned under Sec.18. As per Section 18 company shall file with the Registrar, a

certified copy of the order of the company law board confirming the alteration within 3 months of the order. The registrar shall register the same and certify the registration within 1 month from the date of filing such documents.

However the company can be allowed the extension of time if the company law board thinks fit.

(2)

A company was started with the object of building 'a hall with shops'. The building was destroyed by fire and the company wanted to alter the objects clause in the Memorandum by substituting the words 'a hall with shops' with the words 'shops, dwelling houses and warehouses for letting purposes.' Should this alteration be allowed?

Solution

No, As the alteration exceeds object mentioned

by the company on its incorporation. (Strathspey Public Assembly etc. Hall Co. Ltd. v. Anderson's Trustees, (1934) S.C. 385).

(3)

X Mining Co. Ltd. applied to the Company Law Board for permission to add the following objects in its Memorandum of Association, which earlier stated mining as its main purpose : (a ) To sell goods on hire-purchase basis ; (b) To do all kinds of fabrication works of steel, aluminum, copper, zinc, and alloys ; (c) To buy and sell land, buildings, hotels, restaurants and business premises ; and (d) to enter in to contracts for construction of building with private people or government. Will the Company Law Board approve this alteration?

Solution

No,The Company Law Board will only approve the alteration if the incidental objects are in alignment of the main purpose for which the company is established.

(4)

A Ltd. applies to the Company Law Board for approving an alteration in situation clause of its Memorandum and thus permitting it to change its registered office from Calcutta to Delhi. The Government of West Bengal requests the Company Law Board not to allow this change, for it would lead to a loss of revenue of the Government. Decide.

Solution

No, The request of Government of West Bengal won’t be considered.

The change will be allowed if it is warranted by the interests of the company [Rank Film Distributors of India Ltd. v. Registrar of Companies]

The court observed that the state has no statutory right to oppose the shifting of the registered office from one state to another. Members of the company will decide whether the registered office of the company is to be transferred from one state to another. Moreover the shifting should be in the interest of the company.

(5)

A company put up telephone wires in a certain area. There was no power in the Memorandum to put up wires there. The defendants cut them down. Can the company sue for the damage done to the wires?

Solution

Yes In case National Telephone Co. v. St Peter Port

Constables, it was held that company being a corporate person should not be fined or punished for its own act or the act of its agents unless the authority conferred on the company by the Memorandum, the whole transaction would be altered by doctrine of ultra vires and it would be void. Moreover there is nothing to prevent the company from protecting its property.

(6)

The Memorandum of Association of a company formed to Improve and encourage the breeding of poultry contained a provision that no remuneration should be paid to the members of the governing body of the company. But the company owing to Its Increase in the business passed a special resolution providing for equitable remuneration to such members for services rendered, Can this alteration of the Memorandum be confirmed? If so, state why and when.

Solution

Yes It was decided that alteration is valid as it

will help to carry the business more economically or more efficiently and any resolution passed will be within the scope of MOA. [Scientific Poultry Breeders' Assn. Ltd.].

(7)

X Ltd a cotton textile company, enters into a contract with A Ltd, adjacent cotton textile mills, to supply electricity from their power generation plant. After the supplies have been made for 3 months it is discovered that this activity is beyond the scope of the object clause of memorandum of association of X Ltd. Shareholders of X Ltd ratify the above contract in their general body meeting. Can A Ltd. which refuses to make payment on the ground that the contract is wholly null and void be legally compelled to make payment?

Solution

No, as the transaction is ultra vires X Ltd.The transaction which does not fall within the scope of the main objects of the company will not be valid and binding on the company.

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