Formation of Company Q. What is memorandum of
Association? Explain its clauses.
Ans: - Memorandum of Association is the
fundamental conditions on which the company is incorporated. It is the charter
of the company. Its clauses are:
·
Name Clause-Under
this clause the corporate name of the company is stated with the name "limited”
or "Private Limited” as the last word in this name. The name should not be
identical with the name of any registered company No company can be registered
by the name which is not desired by the Central Government.
·
Domicile Clause:
Under this clause the company is required to mention the state in which the
company is situated
·
Objects clause: It
defines the area of operations of the company’s activities by enumerating a
long series of objects and the purposes for which a company is started. The
object clause must contain the main object of the company and the other objects
related with it for the completion of main object. The company is not entitled
to carry any of the business which is not mentioned in the object clause.
·
Liability Clause
This clause stated that the liability of members is limited to the amount
unpaid on their shares.
·
Capital Clause:
It shows the amount of share capital with which the company is going to be
registered and division there of into shares
·
Association Clause:
This clause signifies the desire of the subscribers to form them into a body
corporate.
Q. Distinguish between
Memorandum of Association & Article of Association.
Ans: - The difference between Memorandum of
Association & Article of Association is given here:
|
BASIS
OF DISTINCTION
|
MEMORANDUM OF ASSOCIATION
|
ARTICLE OF ASSOCIATION
|
|
MEANING
|
It is a charter of a company .It sets the constitution .It
defines limits ,powers and objects of the company
|
It contains rules and regulation for the internal management of
the company
|
|
OBJECTIVES
|
It governs relationship with the external world i.e. creditors,
sellers, buyers & debtors.
|
It governs internal relationship between the members of the
company.
|
|
STATUS
|
It is the primary document. It is the foundation of the company.
|
It is the secondary document & it is based on the memorandum
of association.
|
|
COMPULSION
|
It is a compulsory document for all the companies
|
It is compulsory for private companies, unlimited companies and
companies limited by guarantee.
|
|
ALTERATION
|
It is an unalterable document. Alteration can only be done by
the permission of court
|
It can be stitched according to the management a resolution is
to be passed and it is within the limits of Memorandum of Association
|
|
Ultra
Vires Actions
|
It lays down the boundaries beyond which a company cannot work.
All such acts are illegal and they are called ultra vires acts.
|
The articles are controlled by the memorandum Within it the
shareholders and the directors may make such regulations as they feel fit for
internal management.
|
| 