Page 223 - DMGT407Corporate and Business Laws

Corporate and Business Laws

Notes As in the case of publication of the company’s name, s.147 also makes similar provisions regarding
publication of the registered office of the company.
The objects clause [s.13 (1) (d)]: The objects clause defines the objects of the company and indicates
the sphere of its activities. A company cannot do anything beyond or outside its objects and any
act done beyond them will be ultra vires and void and cannot be ratified even by the assent of
the whole body of shareholders. However, a company may do anything which is incidental to
and consequential upon the objects specified and such act will not be ultra vires. Thus, a trading
company has an implied power to borrow money, draw and accept bills of exchange.
Section 13, read along with Tables ‘B’, ‘C’, ‘D’ and ‘E’, requires the company to divide its objects
clause into three parts: (a) Main objects of the company to be pursued by the company on its
incorporation; (b) Objects incidental or ancillary to the attainment of the main objects; and (c)
Other objects of the company not included in (a) and (b) above. A company may, on receipt of
certificate to commence business, pursue any business given in the ‘main objects’. In the case of
companies (other than trading companies) with objects not confined to one State, the
memorandum must give the name of the State(s) to whose ‘territories the objects extend’. No
business given in ‘other objects’ can, however, be commenced unless prior approval of
shareholders with regard thereto is obtained by way of special resolution passed in general
meeting [s.149 (2A)]. Where special resolution is not passed, the Central Government, may on
an application made by the board of directors, allow a company to 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.
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.

Notes 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.
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. [Para 2.4]

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

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