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Unit 5: Memorandum of Association

Introduction Notes

‘Memorandum’ means “the 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”–S. 2(28).
Any seven or more persons, or where the company to be formed will be a private company, any
two or more persons, associated for any lawful purpose may, by subscribing their names to a
memorandum of association and otherwise complying with the requirements of this Act in
respect of registration, form an incorporated company, with or without limited liability.

5.1 Memorandum of Association – Meaning and Purpose

The Memorandum of Association of a company is its charter which contains the fundamental
conditions upon which alone the company can be incorporated. It tells us the objects of the
company’s formation and the utmost possible scope of its operations beyond which its actions
cannot go. Thus, it defines as well as confines the powers of the company. If anything is done
beyond these powers, that will be ultra vires (beyond powers of) the company and so void.
The memorandum serves a two-fold purpose viz., it enables shareholders, creditors and all
those who deal with the company to know what its powers are and what is the range of its
activities. Thus, the intending shareholder can find out the field in, or the purpose for which his
money is going to be used by the company and what risk he is taking in making the investment.
Also, any one dealing with the company, say, a supplier of goods or money will know whether
the transaction he intends to make with the company is within the objects of the company and
not ultra vires its objects.

5.2 Form and Contents

Section 14 requires that the memorandum of a company shall be in such one of the Forms in
Tables B, C, D and E in Schedule I to the Act, as may be applicable in the case of the company, or
in Forms as near thereto as circumstances admit. Section 15 requires the memorandum to be
printed, divided into paragraphs, numbered consecutively, and signed by at least seven persons
(two in the case of a private company) in the presence of at least one witness, who will attest the
signature. Each of the members must take at least one share and write opposite his name the
number of shares he takes. Section 13 requires the memorandum of a limited company to
contain:
1. The name of the company, with ‘limited’ as the last word of the name in the case of a public
company and ‘private limited’ as the last words in the case of a private company;

2. The name of the state, in which the registered officer of the company is to be situated;
3. The objects of the company, stating separately ‘main objects’ and ‘other objects’;
4. The declaration that the liability of the members is limited;

5. The amount of the authorised share capital, divided into shares of fixed amounts.
These contents of the memorandum are called compulsory clauses.

5.2.1 Use of Certain Keywords as Part of the Name

The Department of Company Affairs has clarified that if a company used any of the following
keywords in its name, it must have a minimum authorised capital mentioned against the
keywords:

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