Page 220 - DMGT407Corporate and Business Laws

Unit 9: Memorandum of Association

9.1 Form and Contents Notes

The memorandum serves a two-fold purpose. 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,
anyone 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.
Section 14 requires that the memorandum of a company shall be in one of the forms as shown 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 a form 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: (i) 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; (ii) the
name of the State, in which the registered office of the company is to be situated; (iii) the objects
of the company, stating separately ‘main objects’ and ‘other objects’; (iv) the declaration that the
liability of the members is limited; and (v) the amount of the authorised share capital, divided
into shares of fixed amounts. These contents of the memorandum are called compulsory clauses
and are explained.

9.1.1 The Name Clause

The promoters are free to choose any suitable name for the company provided:
1. The last word in the name of the company, if limited by shares or guarantee is ‘limited’
unless the company is registered under s.25 as an ‘association not for profit’ [s.13(1) (a) &
s.25].
2. In the opinion of the Central Government, the name chosen is not undesirable [s.20(1)].

Did u know? The Department of Company Affairs has issued guidelines for deciding
availability of names. However these are not exhaustive but only illustrative of what is
considered as an undesirable name under s.20.

3. The name of the company should not be identical or should not too nearly resemble the
name of another registered company.

9.1.2 Two Similar Names

In case of two similar names, the resemblance between the two names must be such as to be
calculated to deceive. A name shall be said to be calculated to deceive where it suggests some
connection or association with the existing company.

Example: In Society of Motor Manufacturers and Traders Ltd. vs. Motor Manufacturers
and Traders Mutual Assurance Ltd. (1925) 1 Ch. 675, the plaintiff company brought an action to
restrain the defendant company to use the said name. But, Lawrence, J., held “anyone who took
the trouble to think about the matter, would see the defendant company was an insurance

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