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Thread: Q. What is memorandum of association of a company limited by shares.

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    Word Icon 35px Jpg.ashx Q. What is memorandum of association of a company limited by shares.

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    Q. What is memorandum of association of a company limited by shares. what are compulsory clauses in it? discuss them in detail. (2002)
    Q. What is memorandum of association of a company by shares. (1999)
    Q. What is memorandum of association? what alteration in the clauses of memorandum of association of a public limited company are permitted by law. state also the procedure of such alteration. (2007/A)
    Q. What is memorandum of association of a public limited company? list the six essential classes which must be contained by explaining each one of them fully.(2006/A) (2011/S)
    1. Introduction:

    There are there basic legal documents issued by a company these are.
    (i) Memorandum of association.
    (ii) Article of association.
    (iii) Prospectus.
    Memorandum of association is one of the basic documents of the company. it is knows as charter of the company. it sets out the limits out side which company cannot go memorandum of association defines the constitution of the company. it contains the fundamental conditions upon which a company is registered.
    2. Definition memorandum of association:
    It is document which sets out the constitution of the company. it is foundation on which the structure of the company is based.
    3. Definition under companies ordinance 1984:
    Sec 16 of the companies ordinance 1948. memorandum means the memorandum of association of a company as originally framed or as altered in pursuance of the provisions of this ordinance.
    4. Importance of memorandum of association:
    The memorandum of association is the charter of the company. it defines the limitation and powers. it is a document which regulate the external affairs of the company.
    5. Purpose:
    The main purpose of memorandum of association is to enable share holders, creditors and all those who concerned with the company to know what is permitted range of the enterprise.
    6. Form of memorandum of association:
    Memorandum of association should be in printed form and divided into various paragraphs and signed by the prescribes in the presence of witnesses.
    7. Alteration in memorandum of association:
    Memorandum of association is considered as unalterable document. but it can be amended by passing special resolution and with sanction of court of central government.
    8. Time place for filing memorandum of association:
    Memorandum of association is to be filed with the registrar at the time of formation of a company.
    9. Clauses of memorandum of association:
    I. Name clause:

    This clause states the name of the company. a company may select any name but it should not resemble the name of any other company. the companies ordinance 1984 provides that the name of the company must end with the word limited. so that all persons dealing with the company must know that their liability is limited to the extent of their shares.
    (a) Restriction:
    Any name may be chosen subject to the following restrictions:
    The words expressing or implying the patronage of any Pakistani or foreign head of state or provincial government federal Govt, or any of their authority or corporation cannot be used.
    (i) Exception:
    Such name can be used with the permission of commission.
    (b) Examples:
    Examples of such words are "Royal", "Imperial", "State". reserve "bank", "Municipal", "charted" etc.
    (c) Appearance of name:
    The name of the company must appear or every office or place of business of company in a conspicuous manner and on all cheques, bills, notices, advertisement, etc of the company.
    (d) Change of name of the company:
    The name of the company can be changed at any time subject to the following conditions:
    (i) A special resolution is passed.
    (ii) Approval in writing of the registrar is obtained.
    (iii) Registrar notified the new name and issues a certificate.
    II. Situation clause:
    It is also known as domicile clause. the memorandum 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.
    (a) Change of place of registered office:
    (i) Form province to province:

    Registered office of the company may be changed by passing a special resolution and obtaining the confirmation of the commission.
    (ii) From town to town in the same province:
    The place of registered office of the company may be changed from one town to another town with in the same province by special resolution and a notice to the registrar without any confirmation of the commission.
    III. Object clause:
    The statement of objects defines the sphere of the company activities. it determines and restricts the powers of the company. the object clause offer protection to the shareholders by ensuring them that amount collected for undertaking is not risked in any other undertaking.
    (i) Scope of objects:
    The company can have any object provided that it is not contrary to law.
    (ii) Act done out side the objects:
    The company cannot do any thing outside the powers specified in the object clause.
    (a) Effect:
    Any thing so done is ultra vires (beyond the powers of) the company and hence void.
    IV. Liability clause:
    The fourth clause in a memorandum of association is a statement that liability of the company is limited to the extent of the shares purchased by them.
    (a) Exception:
    If however the number of members of the company is reduced.
    (i) In case of a private company below 2.
    (ii) In case of a public company below 7 and the business is carried on for more than 6 months, thereafter every member who knows this fact, is personally liable for all debts contracted during that period.
    V. Capital clause:
    The clause must state the amount of the capital and the way in which it is to be divided into shares. it must be stated in this clause as to what funds are necessary to set the business going or, if its proposed to buy on old concern, what sum is wanted as its price and what is addition, is wanted to keep the business going. the capital as mentioned is called authorized or registered capital. the capital is divided into shares of a certain value which is specified in the capital clause, for example, the authorized share capital of the company shall be Rs. 5,000,000 consisting of 5,000,000 equally shares of rs, 10 each.
    VI. Association and subscription clause:
    This clause contains a declaration by the subscribers that they are desirous of forming a company and agree to have number of shares written against their respective names.
    (a) Signature and attestation:
    Each subscriber must sign the memorandum in the presence of at least one witness who shall attest the signature.
    10. Conclusion:
    To conclude I can say that the memorandum of association is of supreme importance in determining its powers and in this respect it is the charter of the company. it contains the fundamental conditions upon which the company can be incorporated. memorandum of association must be printed, divided into paragraphs and signed by the members of the company.
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