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Memorandum of Association What you should know : 3.1 Meaning and Definition 3.2 Purpose of Memorandum of Association. 3.3 Form of Memorandum of Association 3.4 Contents of Memorandum 3.5 Doctrine of Ultra Vires 3.6 Changes in MOA

3.1 Meaning and Definition Definition: According to sec. 2(28) of the Companies Act, memorandum of association means “the memorandum of association of a company as originally framed or as altered from time to time”.

3.2 Purpose The purpose of memorandum is two-fold: First, to enable the prospective investors to know the purpose for which their money is going to be used and what risk they are taking in making the investment. The second, to inform the outsiders dealing with the company as to what is its permitted range of activities in which it may lawfully engage.

3.3 Form of Memorandum of Association As per section 15 of the Companies Act, the memorandum of association should be - printed, - divided into paragraphs numbered consecutively and, - signed by seven (two in case of a private company) subscribers in the presence of at least one witness.

3.4 Contents of Memorandum The basic conditions, as per section 13 are as follows :A. Name Clause B. Situation Clause (Domicile clause or Registered office clause) C. The objects clause of the memorandum of association of a company is split up as follows: i) main objects of the company, ii) objects incidental or ancillary to the attainment of main object, & iii) any other objects. D. Liability Clause E. The Capital Clause F. Subscription Clause

3.5 Doctrine of Ultra Vires

The word ‘ultra’ means beyond and the word ‘vires’ means the powers. Ultra vires, therefore, means beyond the powers. Any act beyond the objects stated in the memorandum is ultra vires the company and thus void. Effects of ultra vires transactions: - Ultra vires contracts are void ab initio - Injunction: - Personal liability of Director :

3.6 Alteration of Memorandum of Association I. Change of name: Section 21 provides that the name of a company may be changed at any time by passing a special resolution at a general meeting of the company and with the written approval of the Central Government.

Procedure for change of Name: -

For changing the name, the company is required to apply to ROC in Form 1A to ascertain the availability of name - After the approval of the new name convene a general meeting of the company. A special resolution shall specify that the old name is being change to the new name. - After passing the special resolution, company shall file Form No. 23 with a copy of special resolution, within 30 days - Apply to ROC for obtaining the approval of change of name and obtain fresh certificate of registration. The change of name does not effect any legal right or liabilities. Legal proceeding commenced under old name will continue under new name.

Direction to change name: If through inadvertence or otherwise, a company has been registered with a name which is identical with or too closely resembles the name of an existing company, or a registered trademarks. A) The rectification of the name must be carried out if the Central Government so direct within a period of 12 months from the date of registration of the company. The direction of the Central Government is required to be complied with within period of three months from the date thereof.

Direction to change name: (cont..)

B) The Company may also on its own, change its name by passing an ordinary resolution and by obtaining the approval of the Central Government in writing: -

Any default in complying with the direction of the Central Government renders the company and its officer in default liable for punishment with fine, which may extent to Rs. 1000 for every day during with the default continues. - The Registrar will enter the new name of the register in place of the old name and shall issue a fresh certificate of incorporation with necessary alterations -

The change of name becomes effective on the issue of fresh certificate of incorporation.

Change of Registered Office: Since the situation clause in the memorandum does not contain the exact location or city address of the company, the need for alteration in the registered office clause will arise only when the registered office shifted from one state to another A) Within the same City B) Within the same State - Within the jurisdiction of the existing RoC in the same state - Within the jurisdiction of another RoC in the same state C) From one State to another State

Change of Registered Office from One Premises to another premises in the same city: -

Pass a resolution in the meeting of board of directors for change of registered office within the same city.

- File e-Form No. 18 within 30 days of shifting the registered office. The notice in e-form No. 18 shall contain the fact of change of registered office and complete address of new registered office

Change of Registered Office from One Town to Another town and within the jurisdiction of existing ROC in the same state: In this case, the following procedure is to be followed: - Pass a special resolution at a general meeting of the shareholders; - File a copy of the special resolution with the Registrar within 30 days of the passing of Special resolution in Form No. 23; -

Within 30 days of the shifting of the registered office, give the notice of the new location to the Registrar in Form No. 18 who shall record the same.

Change of Registered Office from One Town to Another town in the same state and within the Jurisdiction of another RoC: If a company wants to change the place of its registered office from jurisdiction of one RoC to jurisdiction of another RoC within the same State, it needs to go through the following procedure: - Special Resolution Convene the General Meeting for approving the change in the Registered office from jurisdiction of one RoC to jurisdiction of another RoC within the same State. File Form 23 - Obtain confirmation from Regional Director: Make an application in the prescribed form to the Regional Director for confirmation.. The confirmation or otherwise shall be communicated to the company within four weeks from the date of receipt of application for such change.

Cont…… Filing of confirmation with RoC. File a certified copy of the confirmation by the Regional Director for change of its registered office, within two months from the date of confirmation, together with a printed copy of the memorandum as altered with the Registrar. -

- Registration: The Registrar shall register the same and certify the registration under his hand within one month from the date of filing of such document. The certificate shall be conclusive evidence that all the requirements of this Act with respect to the alteration and confirmation have been complied with and henceforth the memorandum as altered shall be the memorandum of the company. -

Give notice of new location to RoC in Form No. 18 within 30 days of change in registered office.

Change of Registered Office from one state to another state: A) Grounds for shifting. A company can shift its registered office from one State to another for certain purposes only as specified in sec. 17(1). These are : -

To carry on its business more economically and more efficiently [Section 17(1)(a)]. To attain its main purpose by new or improved means [ Sec.17(1)(b)] To enlarge or change the local area of its operation [Sec.17(1)(c)] To carry on some business which under existing circumstances may be conveniently or advantageously combined with the business of the company [Sec. 17(1)(d)] To restrict or abandon any of the objects specified in the memorandum [Sec.17(1)(e)] To sell or dispose of the whole or any part of the undertaking [Sec.17(1)(f)]. To amalgamate with any other company or body of persons [Sec.17(1)(g)].

Cont…… B) Special Resolution. Registered office of a company can be shifted from one State to another by passing special resolution in the general meeting of shareholders. Form 23. should be filed for registering the special resolution. C) Confirmation by the Company Law Board. The company should file a petition to the Company Law Board for confirmation of the change.

Cont…… D) Notice to affected parties. Before confirming the change, the Company Law Board will satisfy itself that sufficient notice has been given to - every creditor and all other persons whose interests are likely to be affected by the alteration including - the Registrar of Companies and the - Government of the State in which the registered office is situated. Also, the Company Law Board will give an opportunity to members and creditors of the company, the Registrar and other persons interested in the company to be heard.

E) Copy of the CLB order to be filed with ROC. The CLB may confirm the alteration and may impose such terms and conditions as it may deem fit .The company shall file with Registrar of each State – (The State where it was registered and the new state) -

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A certified copy of the CLB order within three months from the date of such order . Copy of memorandum as altered. If it is not filed within the prescribed time, then the alteration shall, at the expiry of such period, become void and inoperative. However the CLB may grand extension of time for filing upto 3 months. The Registrar shall register the change and give a certificate of registration within 1 month from date of filing of such documents.

A notice in Form No 18 of the new location of the registered office must be given to the Registrar of the State to which the office has been shifted, within thirty days after the change of the office (Sec. 146).

Procedure to Change the Object Clause: A) Grounds for shifting. A company can shift its registered office from one State to another for certain purposes only as specified in sec. 17(1). These are : -

To carry on its business more economically and more efficiently [Section 17(1)(a)]. To attain its main purpose by new or improved means [ Sec.17(1)(b)] To enlarge or change the local area of its operation [Sec.17(1)(c)] To carry on some business which under existing circumstances may be conveniently or advantageously combined with the business of the company [Sec. 17(1)(d)] To restrict or abandon any of the objects specified in the memorandum [Sec.17(1)(e)] To sell or dispose of the whole or any part of the undertaking [Sec.17(1)(f)]. To amalgamate with any other company or body of persons [Sec.17(1)(g)].

Cont…… B) Special Resolution. The company should pass a special resolution in the general meeting of shareholders for changing the objects clause. Section 18 provides that a special resolution passed by the company in relation to clauses (a) to (g) of sub-section (1) of section 17 shall be filed by the company with the Registrar within one month of the date of such resolution, together with a printed copy of the memorandum as altered. C) ROC to certify the Registration. The Registrar will register the documents and issue, within one month, a certificate which will be conclusive evidence that all the requirements of the Act, with respect to the alteration of the objects clause in the memorandum has been complied with (section 18). If the required documents are not filed within the prescribed time, the alteration shall, at the expiry of such period, become void and inoperative (Sec. 19).

Procedure for Alteration of Liability Clause: The liability of a member of a company cannot be increased unless the members agrees in writing (Sec 38). - Section 32 permits an unlimited company to register as a limited company. On alteration, the Registrar shall close the former registration of the company and the new registration shall take effect as if it were the first registration. The registration of an unlimited company as a limited company shall not, however, affect any debts, liabilities, obligations or contracts incurred or entered into, before the conversion. -

Cont…… Can the liability of the directors be made unlimited in a limited company? If the articles of a limited company so authorize, the liability clause in its memorandum of association may by a special resolution, be altered making the liability of all of its directors, or of any director or manager, unlimited. Such an alteration however, shall not affect the liability of any existing director or manager before the expiry of his present term of office, unless he gives his consent to making his liability unlimited (Section 323).

Procedure for Alteration of Capital Clause: These alterations can be done by passing an ordinary resolution, if authorised by the articles (Sec. 94). Alteration of capital clause may involve the following types of alterations – A) Increase of authorised share capital - A company, limited by shares, if the articles authorise, can increase its authorised share capital by passing an ordinary resolution. B) Consolidation and sub-division of shares - Consolidation is the process of combining shares of smaller denomination. For instance, 10 shares of Rs. 10 each may be consolidated into one share of Rs. 100. Sub-division of shares is just the opposite of consolidation e.g., one share of Rs. 100 may be dividend into 10 shares of Rs. 10 each.

Cont…… C) Conversion of shares into stock and vice versa - Section 94 empowers a company to convert its fully paid-up shares into stock by passing a resolution in general meeting, if its articles authorise such conversion. A notice is to be filed with the Registrar within thirty days of the passing of the resolution specifying the shares so converted. When shares are converted into stock, the shareholders are issued stock certificates. In the Register of Members, the amount of stock is written against the name of a particular member in place of number of shares. The stockholder is as much a member of the company as a shareholder.

Cont…… D) Diminution of share capital - Sometimes, it so happens that shares are issued, but are not taken up by the members of the public and, therefore, not allotted. Section 94(1)(e) provides that a company may, if its articles authorise, by resolution in general meeting, cancel shares which have not been taken or agreed to be taken by any person and diminish the amount of the share capital by the amount of the shares so cancelled. This constitutes diminution of capital and it does not amount to reduction of capital.

Procedure for Alteration of Capital Clause: -

The articles should authorize the alteration of capital clause

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The company must pass an ordinary resolution

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Notice of alteration must be given to the RoC within 30 days of alteration in Form No. 5