Page 63 - DCOM106_COMPANY_LAW

Company Law

Notes commence business in the ‘other objects’, provided the votes cast in favour of the resolution
exceed the votes cast against the resolution, if any [s.149(2B)].
The objects of the company must not be illegal, immoral or opposed to public policy or in
contravention of the Act. For example, s.77 prohibits a company to purchase its own shares.

5.2.5 The Liability Clause [s.13 (2)]

This clause states the nature of liability of the members. In case of a company with limited
liability, it must state that liability of members is limited, whether it be by shares or by guarantee.
This means that in case of a company limited by shares, a member can be called upon at any time
to pay to the company the amount unpaid on the shares held by him. In case of companies
limited by guarantee, this clause will state the amount which every member undertakes to
contribute to the assets of the company in the event of its winding up.

In the case of an unlimited company, this clause need not be given in the memorandum. In fact,
the absence of this clause in the memorandum means that the liability of its members is unlimited.
As per s.45, under certain circumstances the liability of members of a limited company becomes
unlimited.

5.2.6 The Capital Clause [s.13 (4)(c)]

This clause states the amount of share capital with which the company is registered and the
mode of its division into shares of fixed value, i.e., the number of shares into which the capital
is divided and the amount of each share. If there are both equity and preference shares, then the
division of the capital is to be shown under these two heads.

5.2.7 The Association Clause [s.13(4)(c)]

At the end of the memorandum of every company there is an association or subscription clause
or a declaration of association which reads something like this:

“We, the several persons whose names and addresses and occupations are subscribed, are desirous
of being formed into a company in pursuance of this memorandum of association and we
respectively agree to take the number of shares in the capital of the company set opposite our
respective names”.
Then follow the names, addresses, descriptions, occupations of the subscribers and the number
of shares each subscriber has taken and his signature attested by a witness.

Self Assessment

Fill in the blanks:
1. The memorandum serves a ............................... purpose.

2. ............................... 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.
3. As in the case of publication of the company’s name, ............................... also makes similar
provisions regarding publication of the Registered Office of the company.
4. ............................... states the nature of liability of the members.
5. In the case of an ..............................., liability clause need not be given in the memorandum.

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