1. UNIT – II Memorandum of Association
DEPARTMENT OF MANAGEMENT STUDIES
UNIT – II Memorandum of Association
7/2/2018
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2. MEMORANDUM OF ASSOCIATION
“Memorandum of Association of a company is its charter & defines the limitations of the powers of a company. It contains the fundamental condition upon which alone the company is allowed to be incorporated”
- Lord Cairns
7/2/2018
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3. MEMORANDUM OF ASSOCIATION
Definitions
“Memorandum of Association of a company as originally framed or as altered from time to time in pursuance of any previous companies law or of this Act”
Sec.2 (28)
7/2/2018
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4. MEMORANDUM OF ASSOCIATION
“The purpose of Memorandum of Association is to enable the share holders, creditors and those who deal with the company to know what its permitted range of enterprise is.”
- Lord Macmillan
7/2/2018
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5. MEMORANDUM OF ASSOCIATION
FORM OF
MEMORANDUM OF ASSOCIATION
Form as given in table B, C, D, & E in Schedule I
Printed
Divided into paragraphs
Numbered consecutively
Signed by at least 7 persons for public & 2 for private company. Signatures attested by one witness. Subscribers shall at least take one share
7/2/2018
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6. CONTENTS OF MEMORANDUM OF ASSOCIATION
Six Clauses
Registered
office
Name
Objects
Association
or subscription
Liability
Capital
7/2/2018
Dr. G. MAHESWARAN/AP

7. DOCTRINE OF ‘ULTRA VIRES’
The words :
Ultra means beyond
Vires means the powers
Ultra Vires means beyond the powers
A company which owes its incorporation to statutory authority cannot effectively do anything beyond the powers expressly or impliedly conferred upon it by the statute or Memorandum of Association.
7/2/2018
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8. The company has been formed with the object :
ASHBURY RAILWAY CARRIAGE &
IRON COMPANY LTD. Y. RICHE
The company has been formed with the object :
To make and sell, or lend or hire railway carriage and wagons and all kinds of railway plants, to carry on the business of mechanical engineers and general contractors etc.
The company contracted with Riche to finance the construction of Railway line in Belgium. The company repudiated the agreement and was sued for breach of contract.
7/2/2018
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9. ASHBURV RAILWAY CARRIAGE & IRON COMPANY LTD. Y. RICHE
Rich Contended :
Firstly, that the contract in question came well within the meaning of the words ‘general contractors’, and, was therefore, within the powers of the company, secondly, that the contract was ratified by the majority of the shareholders.
Dr. G. MAHESWARAN/AP
7/2/2018

10. EFFECTS OF DOCTRINE OF ULTRA VIRES
Void ‘Ab Initio’
Injunction
Personal Liability of Directors
Acquisition of Property that is Ultra Vires
Directors personally liable to third parties
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11. ALTERATION OF NAME CLAUSE
Special Resolution.
Written Approval of Central Government.
No Approval of Central Government is necessary if the change of name involves only the addition or deletion of the word “Private”.
Change by ordinary resolution and approval of Central Government when name is identical or too closely resembles the name of an existing company.
7/2/2018
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12. CHANGE OF REGISTERED OFFICE
From one premises to another premises in the same city, town or village
By passing a resolution of Board of Directors
Dr. G. MAHESWARAN/AP
7/2/2018

13. CHANGE OF REGISTERED OFFICE
From one town or city or village to another town or city or village in the same state
Special Resolution.
Confirmation of Regional Director — when jurisdiction of Registrar of companies is changed.
Copy of (i) & (ii) to be filed with ROC.
Notice of new location to ROC within 30 days.
7/2/2018
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14. CHANGE OF REGISTERED OFFICE
From one state to another state
Special Resolution
Confirmation of Central Govt.
For certain Purposes only
(As given in section 17)
7/2/2018
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15. ALTERATION OF OBJECTS CLAUSE
A. Special Resolution
B. Alteration is sought on any of these grounds:
To carry on its business more economically & more efficiently
To attain its main purpose by new or improved means
To enlarge or change the local area of its operations
To carry on some business which under existing circumstances may conveniently or advantageously be combined with the business of the company
To restrict or abandon any of the objects specified in the memorandum
To sell or dispose off the whole or any part of the undertaking
To amalgamate with any other company
C. Copy of (A) is filed with ROC within 30 days
7/2/2018
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16. ALTERATION OF LIABILITY CLAUSE
The liability of a member of a company cannot be increased unless the member agrees in writing.
From unlimited liability, it can be made limited by re-registration of the company.
7/2/2018
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17. ALTERATION OF CAPITAL CLAUSE
Increase of authorized share capital.
Consolidation and subdivision of shares.
Conversion of shares into stock & vice versa.
Diminution of share capital.
7/2/2018
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18. ARTICLES OF ASSOCIATION
Definition
‘Article’ means the articles of association of a company as originally framed or as altered from time to time in pursuance of any previous companies laws or of this Act’
Sec.2 (2)
7/2/2018
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19. ARTICLES OF ASSOCIATION
“…. The articles proceed to define the duties, the right and the powers of the governing body as between themselves and the company at large and the mode and form in which the business of the company is to be carried on and the mode and form in which changes in the internal regulations of the company may from time to time be made.
- Lord Cairns
7/2/2018
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20. The extent to which Table ‘A’ is applicable
CONTENTS OF ARTICLES
The extent to which Table ‘A’ is applicable
Different classes of shares and their rights
Procedure of making an issue of share capital and allotment thereof
Procedure of issuing share certificates and share warrants
Forfeiture of shares and the procedure of their re-issue
Procedure for transfer and transmission of shares
7/2/2018
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21. Directors, their appointment, remuneration, qualifications, etc.
CONTENTS OF ARTICLES
The time lag in between calls on shares conversion of shares into stock
Directors, their appointment, remuneration, qualifications, etc.
Account and audit
Lien of shares
Payment of commission on shares and debentures to underwriters
Rules for adoption for ‘preliminary contracts’ if any
7/2/2018
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22. Re-organization and consolidation of shares capital
CONTENTS OF ARTICLES
Re-organization and consolidation of shares capital
Alteration of share capital & Buyback of shares
Borrowing power of directors
General meeting, proxies and polls
Voting rights of members
Winding up
7/2/2018
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23. ALTERATION OF ARTICLES (SEC 31)
Procedure :
Alteration by passing a special resolution.
Copy of resolution to be sent to registrar within 30 days.
Copy of altered articles to be registered within 3 months of passing of resolution.
7/2/2018
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24. LIMITATIONS REGARDING ALTERATION OF ARTICLES
Alteration should not be inconsistent with
Provisions of Company Act or any other statute
Conditions contained in memorandum
Approval of govt. to be obtained in certain cases
Alteration must not deprive any person of his rights under a contract
Alteration must not constitute a fraud on the minority
Alteration must be bonafide for the benefit of the company as a whole
7/2/2018
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25. The following are the legal implications:
BINDING FORCE OF MEMORANDUM AND ARTICLES (SEC 36)
The following are the legal implications:
Company is bound to its members
Each member is bound to the company
Each member is bound to other members in exceptional case only
Neither the company nor the members are bound to outsiders
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26. Memorandum of Association Articles of Association
Charter of Company
Regulations for interal management
Defines the scope of the activities
Rules for carrying out the objects of company.
Supreme document
Subordinate to the memorandum.
Must for every company
Company limited by shares need not have it (Table ‘A’ applies)
Strict restrictions, alteration only with sanction of central govt./ tribunal.
Can be altered by special resolution.
Act, ‘Ultra Vires’ is wholly void & cannot be ratified.
Act ‘Ultra Vires’ (but intra vires the memorandum) can be ratified.
7/2/2018
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27. DOCTRINE OF CONSTRUCTIVE NOTICE
Documents are open & accessible to all.
Presumption that any outsider dealing with company has read & understood the documents.
It is a negative doctrine, acting only against the outsiders & not the company.
7/2/2018
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28. DOCTRINE OF INDOOR MANAGEMENT
Persons dealing with the company in good faith have a right to assume that the internal requirements prescribed in public documents have been observed
Persons are not bound to enquire into regularity of internal proceedings
Exceptions :
Knowledge of irregularity
Negligence on part of the outsider
Forgery
Acts outside scope of apparent authority
7/2/2018
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