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RAHUL
MEMORANDUM OF ASSOCIATION
FUNDAMENTAL DOCUMENT:
Great importance in relation to the proposed company. It contains fundamental conditions upon which alone the company is allowed to be incorporated. It is the charter of the company and defines its raison detre ( i.e., reason for existence). lays down the area operation. regulates external affairs of the company in relation to outsiders. contains rules regarding the capital structure, the liability of the members, the objects of the company.
Purpose:
1. The prospective shareholders shall know the field in, or the purpose for , which their money is going to be used by the company and what risk they are undertaking in making investment.
2. The outsiders dealing with the company shall know with certainty as to what the objects of the company are and as to whether the contractual relation into which they contemplate to enter with the company is within the objects of the company.
Printed Divided into two paragraphs Numbered consecutively Signed by 7 to unlimited for government company (2 to 50, in case of private company)
Each subscriber shall sign in presence of at least 1 witness who shall attest the signature and shall likewise add his address, description and occupation.
Association clause
Name clause(sec 20):
(i) Corporation (ii) International, globe, universal, continental, inter- continental, Asiatic, Asia, being the first words of the name (iii) If any of the words at (ii) above is used within the name ( with or without brackets) (iv) Hindustan , India, Bharat, being used first word of the name (v) If any of the words at (iv) above is used within the name ( with or without brackets) (vi) Industries/udyog (vii) Enterprises , products, business, manufacturing
50 lacs
Purpose : (a) to enable subscribers of the memorandum to know the uses to which their money may be put. (b) to enable creditors and person dealing with the company to know what its permitted range of enterprise or activities is.
Object clause state: 1. Main objects: Pursued by the company on its incorporation and
objects incidental or ancillary to the attainment
2.
Other objects
II. The capital with which a company is registered is called registered, authorized or nominal capital. III. A company cannot issue more shares than are authorized for time being by the memorandum. The shares issued by a company can only be equity shares and preference shares. IV. The equity share capital may be with voting rights; or with differential right as to dividends, voting or otherwise, (secs.85 & 89). A private company which is not a subsidiary of a public company may issue shares of any kind and with disproportionate rights (sec.90).
The memorandum of company limited by shares or by guarantee shall also state that the liability of its members is limited. This means that the members can only be called upon to pay to the company at any time the uncalled and the unpaid amount on the shares held by them or up to the maximum of the amount which they have guaranteed.
ARTICLES OF ASSOCIATION:
The articles of association or just articles are the rules, regulations and bye laws for the internal management of the affairs of a company. They are framed with the object of carrying out the aims and objects as set out in the Memorandum of Association. In framing the articles of a company, care must be taken to see that regulations framed do not go beyond powers of the company itself as contemplated by the Memorandum of Association.
CONTENTS:
Share capital, rights of shareholders, variation of these rights , payments of commissions, share certificates. Lien on shares Calls on shares Transfer of shares Transmission of shares Forfeiture of shares Conversion of share into stock Share warrants Alteration of capital
Continued
General meetings and proceedings thereat. Voting rights of members, voting and poll, proxies. Directors, their appointment,renumeration, qualifications, powers and proceedings of board of directors. Manager, Secretary Dividends and reserves Accounts, audits and borrowing powers Capitalization of profits Winding up.
Regulations required in case of an unlimited company, a company limited by guarantee and a private company(sec. 27):
Unlimited company: in case of unlimited company, the articles shall be state1. The number of members with which company is to be registered. 2. If it has a share capital, the amount of share capital with which company is to be registered.
Company limited by guarantee: the articles shall state the numbers of members with which company is to be registered. Private company: in case of a private company having share capital, the articles shall contain provisions which1. Restrict the right of transfer shares. 2. Limit the number of its members to 50( not including employee members) 3. Prohibit any invitation to the public to subscribe for any shares in, or debentures of, the company.
The articles are subordinate to memorandum The terms of the memorandum cannot be modified or controlled by the Articles The memorandum must be read in conjunction with articles
Distinction
Memorandum of Association
It is the charter of the company indicating the nature of the business, its nationality, and its capital. It also defines the companys relationship with outside world.
Articles of Association
They are regulations for the internal management of the company and are subsidiary to the memorandum.
It defines the scope of the They are rules for carrying out activities of the company, or the the objects of the company as area beyond which the actions set out in the Memorandum. of the company cannot go It, being the charter of the company , is the supreme document. They are the subordinate to the memorandum. If there is a conflict between the articles and the memorandum, the later prevails A company limited by shares need not have articles of its
There are strict restrictions on its alteration. Some of the conditions of incorporation contained in it cannot be altered except with the sanction of the Company Law Board. Any act of the company which is ultra vires the memorandum is wholly void and cannot be ratified even by the whole body of the shareholders
They can be altered by a special resolution, to any extent, provided they do not conflict with the memorandum and the Companies Act. Any act of the company which is ultra vires the articles (but is ultra vires the memorandum) can be confirmed by the shareholders
Every outsider dealing with a company is deemed to have notice of the contents of the Memorandum and the Articles of Association. These documents, on registration with the Registrar, assume the character of public documents. This is known as constructive notice of Memorandum and Articles.
Every joint stock company has its Memorandum and Articles of Association, open to all who are minded to have any dealings whatsoever with the company and those who so deal with them must be affected with notice of all that is contained in these two documents.