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Question
Answer the following question:
Define Memorandum of Association. Explain its features.
Solution
Definitions :
(1) Companies Act, 2013: Section 2 (56) of the Companies Act, 2013 defines a 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 company law or of this Act. ”
(2) According to Lord Cairns, “Memorandum of Association is the fundamental document of the company. It is the foundation on which the structure of a company stands. It lays down the limitations of its activities”.
According to the definitions, it is the primary, basic, and fundamental document of the company and it puts limitations on the powers of a company. Since it is the charter, it restricts the scope of the activities of a company. It is a compulsory document for every company.
Features of Memorandum of Association :
(1) Memorandum of Association states its aims, objectives, and the nature of business activities conducted by the company. It is a primary document of the company.
(2) It informs about the scope of activities of the company and defines boundaries within which the company must conduct its activities.
(3) It is prepared by the promoters before registration with the help of experts and the secretary.
(4) At least 7 members in the case of a public company, 2 members in the case of a private company, and 1 person in case of One Person Company (OPC) must sign the Memorandum of Association.
(5) It is prepared and filed with the Registrar of the companies for the registration, for obtaining the ‘Certificate of Incorporation’.
(6) It is a compulsory document for every company whether private or public, with capital or without capital.
(7) It defines and represents the relationship between the company and the outsiders (including its members).
(8) It contains 6 clauses such as
(i) The Name Clause
(ii) The Address Clause
(iii) The Object Clause
(iv)The Liability Clause
(v) The Capital Clause and
(vi) The Association or Subscription Clause.
(9) Alteration of a Memorandum of Association is almost impracticable because changes can be made with great difficulties.
(10) Memorandum of Association is a public document. Being the constitution of the company, it is open to public inspection and scrutiny.
(11) Any activity which is ultra Vires (beyond the powers of) the Memorandum of Association is void and is treated as illegal.
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