Clauses in The Memorandum of Association: 1. Name Clause

Grade 9
Enterprise
Memorandum of Association
Memorandum of association is one of the documents which has to filed with the
registrar of companies at the time of incorporation of a company. Section
2(28) of the Companies Act, 1956 defines the Memorandum of Association as, the
memorandum of association of a company as originally framed or as
altered from time to time in pursuance of any previous company law or of
this act. In simple words, the Memorandum of Association is the most important
document of the Company and is called the charter of the Company. It is
compulsory for every Company to have its own Memorandum of Association and
file it with the Registrar of Companies in order to obtain the Certificate of
Incorporation.
The Memorandum of Association is an extremely important document in relation

to the affairs of the company. It is a document which sets out the constitution
of the company and is really the foundation on which the structure of the
company is based. It contains the fundamental conditions upon which alone the
company is allowed to be incorporated. A company may pursue only such objects
and exercise only such powers as are conferred expressly in the Memorandum or
by implication therefore i.e. such powers as are incidental to the attainment of the
objects. A company cannot depart from the provisions contained in its
Memorandum, however, great the necessity may be. If it does, it defines its relation
with the outside world and the scope of its activities. The purpose of the
Memorandum is to enable shareholders, creditors and those who deal with
the company to know what the permitted range of the enterprise is.
Clauses in the Memorandum of Association
1. Name clause
A company may be registered with any name it likes. But no company shall be
registered by a name which in the opinion of the Central Government is
undesirable and in particular which is identical or which too nearly resembles the
name of an existing company. Where a company is registered by a name so
similar to that of another company, that the public are likely to be deceived, the
court will grant an injunction restraining it from using that name.
Every Public Company must write the word limited after its name and every
Private Limited Company must write the word Private Limited after its name.
Grade 9
Enterprise
The use of the word Company is however, not compulsory. Companies, whose
liabilities are not limited, are prohibited from using the word limited. The words
limited may be dispensed with in the name of charitable companies. But
companies formed to promote art, science, religion etc. which do not propose to pay
dividend but intend to apply all its profits towards the working of the company, can
be registered without the word limited under licenses granted by the central
government.
A company cannot adopt a name which violates the provisions of the

emblems and names act 1950. This act prohibits the use of the name and
emblems of the United Nations, and the World Health Organization, the official seal
and emblem of the Central and the State Governments, the Indian National Flag,
the name and pictorial representation of Mahatma Gandhi and the Prime Minister of
India.
Every company is required to publish its name outside its registered office,
and outside every place where it carries on business, to have its name
engraved on its seal and to have its name on all business letters, bill heads,
notices and other official publications of the company.
2.Situation Clause/Domicile Clause

This clause states the name of the state where the registered office of the
company is/will be situated. This clause is important for two reasons. Firstly, it
ascertains the domicile and nationality of a company. This domicile clings to it
throughout its existence. Secondly, it is the place where various registers
relating to the company must be kept and to which all communications
and notices must be sent. A company need not carry on its business at its
registered office. The jurisdiction in case of legal matters is also determined by
the Domicile Clause.
3.Objects Clause
The Objects Clause is the most important clause in the Memorandum of Association
of a company. A company cannot undertake any activity which is outside the
purview of the Object Clause of the Memorandum of Association and any activity
undertaken outside its purview is considered null and void and so ultra vires. The
doctrine of ultra vires states that 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. Any
Grade 9
Enterprise
purported activity beyond such powers will be ineffective even if agreed to

by all members.
The Object Clause serves a two-fold purpose.
(a) It gives an idea to the prospective shareholders the purposes for which their
money will be utilized.
(b) It enables the persons dealing with the company to ascertain its powers.
The Object Clause contains the main objects and subsidiary objects of the
company.
4.Liability Clause
This clause states the type and extent of liability of each member. In the case
of a company limited by company limited by guarantee the members are liable to
the amount undertaken to be contributed by them to the assets of the company in
the event of its being wound up. However, this clause is omitted from the
Memorandum of Association of unlimited companies.
5.Capital Clause
The Capital Clause contains the Authorized or Nominal capital of the company
and it is the maximum amount of capital that the company can collect
during its life time. The company cannot collect capital beyond the amount
mentioned in the Capital Clause and so it has to keep the amount of Authorized
Capital sufficiently high.
6.Association for Subscription Clause
This clause gives the names, addresses, occupations and other important
information about the people who have agreed to act as directors of the
Company. This clause basically gives credibility to the company. A Public Limited
Company needs to have at least 7 signatories to its Association for Subscription
Clause and a Private Limited Company needs to have at least 2 signatories to it.
Grade 9
Enterprise
Reference
http://www.preservearticles.com/201104085069/complete-information-on-
memorandum-of-association-of-a-company-its-purpose-contents-a-
different-clauses.

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Grade 9

The Memorandum of Association is an extremely important document in relation

Clauses in the Memorandum of Association

A company cannot adopt a name which violates the provisions of the

2.Situation Clause/Domicile Clause

purported activity beyond such powers will be ineffective even if agreed to

The Object Clause serves a two-fold purpose.

6.Association for Subscription Clause

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