Memorandum of Association

Transcription

1 Memorandum of Association Section 2(28) of the Companies Act, 1956 defines the term 'Memorandum' to mean the Memorandum of Association of the company as originally framed or as altered from time to time in accordance with theprovisions of the Act. MOA was best defined by Lord Macmillan to enable the shareholders, creditors, and those who deal with company to know what is the permitted range of the enterprise So memorandum is Which creates the Charter of the company. Defines the objective of the company. Whatever is neither included in the memorandum as its objective and nor ancillary to the company s objective, company is restricted to do that act. Means, it will be ultra-vires of the company and can t be rectified even though shareholders assents to it. The purpose of the memorandum is to let the intending shareholders to know more about the company, how their money will be used in which activities and also provide a synopsis of company s activities so that the person dealing with the company can also know the ambit of the company. Section 13 lays down the contents of the MOA Name clause :- Limited in case of a public company and using pvt. Limited in case of private company is mandatory. Only those company which comes under the purview of Section 25 are exempt from using the word limited. o Section 20 provides that no company shall be registered by a name which is undesirable in the opinion of Central govt. o When a name is too identical with similar existing company, then the same can be changed with the approval of central govt and thereafter passing an ordinary resolution. o This rule applies to foreign companies or traders also, whose goods are imported into the country as it was applied in the case of La societe Anonyme Panchard at levessor v. Panchard levessor Motor co. Ltd. o The Plaintiff were a French co. which alleged the defendant company for using the same name Panchard motors in England. Even though the plaintiff company had no agencies in England but had a market for their goods. So the later company s name was deceiving others by using that company s name. Situation clause :- o Memorandum shall state the name of the state.

2 o The correct address of the company is require to be filed in e-form18 with e-form 1 within 30 days of incorporation of the company. o If the company changes its address then it should intimate the registrar of same state. Object clause :- o Objects can be divided into 2 parts. Main objects Other objects The acts beyond this ambit are ultravires and hence void and even shareholder s can t rectify it. If the object of company is illegal, it can t be registered. A trading company has an implied power to borrow money,draw and accept bills of exchange in ordinay form, but a railway co. can t issue bills although it may borrow money. Liablity clause :- o Liablity clause determines the liability of the shareholds subject to the nature of the company (guarantee, shares or otherwise unlimited) o If the shares are fully paid up or guarantee amount already paid up to the extent of his liablity, then that shareholder can t be held liable if the company is limited, no matter how much big debts of the company are due. Capital clause :- Minimum o Private company Rs.100,000 o Public company Rs.500,000 o No criteria of minimum capital for co. reg under Sec. 25 Association Clause :- o Its very important clause as it binds the subscribers of the company that they desire to form a company. o Subcriber s name address and occupation as well as no of share held by them. o When the person is illiterate or sign in other language, it must be confirmed that he understands the document. In case of illiterate, thumb impression would be authentication. o The memorandum should be signed by all subscribers but Subscriber can be appointed by power of attorney /agent in the following cases Corporate subscriber In case of subscriber not available. Illiterate person. NRI to subscribe to the Memorandum of Association of an Indian Company and to take shares as a subscriber subject to the limit prescribed by RBI. In case of NRI if he is signing the subscription clause from out of India, then his signatures must be verified by the public notary of that country/state or by the Officers of the Embassy.

3 A partnership firm is not a legal person and it does not have any separate entity, therefore it cannot be a subscriber to the Memorandum. However, it may be a member of a company licenced under section 25 of the Companies Act, 1956 [Circular No. 4/72, dated ] A LLP duly registered under the LLP Act, 2008, has separate legal entity, and can be a member. Minor and incompetent person cannot be subscriber but HUF can be a subscriber. Forms of Memorandum of Association The Memorandum of Association shall be in one of the Forms in Tables B, C, D and E given in Schedule I to the Companies Act, 1956, Table B: Memorandum of Association of a company limited by shares. Table C: Memorandum & Articles of Association of a company limited by Guarantee and not having share capital. Table D: Memorandum & Articles of Association of a company limited by Guarantee and having a share capital. Table E: Memorandum & Articles of Association of an unlimited company The Central Government has vide its Notification SO 2276(E), dated effective from amended the Scheme for e-filing and provides that stamp duty on Memorandum of Association can be paid electronically through the MCA portal As per provisions of section 15, the Memorandum and Articles of Association shall be in printed form. Computer and offset printing are accepted for the above purpose but not zerox copies. Doctrine of ultra vires :- Ashbury Railway Carriage and Iron Co. v Riche The company entered into a contract with M/S Riche, a firm of railway contractors to finance the construction of railway line in Belgium. Later on the company repudiate the contract by saying that as ultra-vires act. Riche brought a case for damage on account of breach of contract as according to him the word general contractor give power the company to enter into such contracts. And the same is also rectified by majority of shareholders. The House of lords held that the contract was ultra-vires the company and therefore null and void. As the words general contractor was interpreted to indicate as the making generally of such contracts as are connected with the business of mechanical engineering. Thus :- A contract, which is ultra vires the company, is no contract at all. The ultra vires borrowings do not create the relationship of debtor and creditor. Directors cannot make an unauthorised grant unless object is to promote prosperity of the company or the grant is incidental to carrying out of the object of the company

4 In Cotman v Brogham, a rubber company underwrote shares in an oil company. Theobjects clause in the memorandum of the company contained many objects and one of them was tosubscribe for shares of other companies. There was a clause in the objects clause that each of the objectswas to be considered independent and on this ground the court held that the underwriting was not ultra vires. Interpretation/construction of object clause :- The memorandum of association must be read fairly and reasonably. Must not be vague. The objects clause must be construed as per its literal meaning. Purposes for alteration in the Memorandum of Association (a) to carry on its business more economically or more efficiently; (b) to attain its main purpose by new or improved means; (c) to enlarge or change the local area of its operations; (d) to carry on some business which under existing circumstances may conveniently and advantageously be combined with the business of the company; (e) to restrict or abandon any of the objects specified in the Memorandum; (f) to sell or dispose of the whole, or any part of the undertaking, or of any of the undertakings of the company; or (g) to amalgamate with any other company or body of persons. Alteration in the name clause The alteration in the name clause may be made by way of passing of a special resolution and approval of the Central Government. The alteration in the name clause may be made by way of passing of a special resolution and approval of the Central Government SEBI provides that the company who wishes to change its name which adds new lines of business, must provide its turnover, income, return. In addition the listed company can change their names only after the lapse of 1 year and atleast 50% of the revenue in the next year should be accounted for by the new activity suggested by the new name of the company. The new name as well as the old name should be displayed through the websites of recognized stock exchange/s where the company is listed for a continuous period of 1 yr from the date of last name change.

5 Alteration in the domicile clause : Permission of company law board + special resolution if changes the State. In this case New CIN will be issued to the company. While filing of e-form 1AD, service request number (SRN) of e-form 23 is required to be entered In case the existing company does not have the service request number of e-form 23, enter Z as SRN of e-form 23 and attach the copy of the original resolution passed for the change of registered office as an optional attachment. Within the city, inform the regional director. Fill the e form no. 23 within 30days. If the jurisdiction of the RD also changes then e-form 1AD should be registered. The RD will give necessary orders within 4 weeks from the date of receipt of the application. Then company must send the copy of confirmation order within2 months to another ROC where it wants to shift. The company law board can extent the period to 3 months and revival of company law board s order can be given only when the above time limit is expired. Non adherence to time-limit would amount to fresh start. Alteration in the object clause The alteration of object clause requires passing of a special resolution, however if the company is a listed company, it needs to be passed by special resolution through the process of postal ballot and confirmation by the Registrar of Companies. Alteration in the capital clause Increasing capital, general resolution. But special resolution in case company reduces its liability and court approval is must. And special resolution should be passed by postal ballot rules. Alteration in the liability clause The liability of members can be increased only with their consent in writing. In order to convert limited liability of directors into unlimited liability, only special resolution has to be passed. Alteration in clauses other than conditions contained in Memorandum of Association the Memorandum may also contain other conditions including those relating to the appointment of a managing director or manager. These conditions may be altered in the same manner as the Articles of the company by passing a special resolution. Regards Renu.