What do you understand by Memorandum of a company?

What do you understand by Memorandum of a company?

After deciding the companies’ identity, goals, and working pattern the documents such as MOA & AOA needs to be drafted to enable shareholders, creditors and those who deal with the company to know the permitted range of the enterprise.  Memorandum of association is one of the documents which has to filed with the Registrar Of Companies at the time of incorporation of a company. The memorandum of association is an extremely important document in relation to the affairs of the company. It is a document which sets out the constitution of the company and is really the foundation on which the structure of the company is based. It contains the fundamental conditions upon which alone the company is allowed to be incorporated. A company may pursue only such objects and exercise only such powers as are conferred expressly in the memorandum or by implication. A company cannot depart from the provisions contained in its memorandum, however, great the necessity may be. If it does, it defines its relation with the outside world and the scope of its activities. It defines as well as confines the powers of the company; it not only shows the object of its formation, but also the utmost possible scope of its operation beyond which its action cannot go.

Purpose of memorandum:

1. The intending share holder who contemplates the investment of his capital shall know within what field it is to be put at risk. 2. Anyone who shall deal with the company shall know without reasonable doubt whether the contractual relation into which he contemplates entering with the company is one relating to a matter within its corporate objects. At least seven persons in the case of public company and at least two in the case of a private company must subscribe to the memorandum. The memorandum shall be printed, divided into consecutively numbered paragraphs, and shall be signed by each subscriber, with his address, description and occupation added, the presence of at least one witness who will attest the same.

Contents of Memorandum:

1. The name of the company with ‘limited’ as the last word of the name in the case of a public limited company and with ‘private limited’ as the last word in the case of a private limited company. 2. The state in which the registered office of the company is to be situated. 3. The objects of the company. 4. In the case of companies with object not confined to one state, the states to whose territories the objects extend. 5. The liability of members is limited if the company is limited by shares or by guarantee. 6. In the case of a company having a share capital, the amount of share capital with which the company proposes to be registered and its division into shares of a fixed amount. An unlimited company need not include items 5 and 6 in its memorandum. In the case of a company limited by guarantee, its memorandum of association shall state that each member undertakes to contribute to the assets of the company, in the event of its being wound up while he is a member or within or year afterwards for the payment of the debts and liabilities of the company. Every subscriber to the memorandum shall take at least one share and shall write opposite to his name the number of shares taken by him. The memorandum has to be signed by each subscriber in the presence of at least one witness who must attest the signatures. No subscriber of the memorandum shall take less than one share. This clause need not be numbered. _____________________________________________________________________________________________ Feel free to write to us,at [info@taxmantra.com] or call us at +91 88208208 11.