As per section 2(28) of the Companies Act, 1956, “Memorandum” means “Memorandum of Association of a company as originally framed and altered from time to time in pursuance of any provisions of company laws or of this Act”. This definition does not give any idea as to what memorandum really is.
According to Palmar, “the Memorandum of Association is a document of great importance in relation to the proposed company. It contains the objects for which the company is formed and therefore identifies the possible scope of its operations beyond which its action cannot go. It defines as well as confines the power of company. If anything is done beyond these power that will be ultra vires the Company and so void. Thus, it is evident that the memorandum is the charter and defines the limitation of the power of a company.
Requirement to be stated in the memorandum: According to section 1, for the incorporation of the company, there must be at least 7 persons in case of the public company and at least 2 persons in case of the private company. Section 13 requires the Memorandum of a limited company to contain the following clauses:-
1. The name of the company with limited as the last word in case of a public limited company and with Private Limited as the last word in the case of a Private Limited Company.
2. The state in which the registered office of the company is to be situated.
3. The objects of the company must be separated on two basis :-
(i) The main objects of the company to be pursued by the company on its incorporation and objects incidental to be fulfillment of the main object
(ii) Other objects which are not included above.
4. The amount of authorized share capital divided into shares of fixed amounts.
5. The liability of members is limited if the company is limited by shares or by Guarantee.
6. In case of companies with objects not confined to one state, the state to whose territories the objects extend.
Clause 4 and 5 will not be included in the Memorandum of Association of an unlimited company.
In case of a company limited by Guarantee, its Memorandum of Association should state that each members undertakes to contribute to the asset of the company in the events of its being wound up while he is a member or within one year after he ceases to be a member for –
- Payment of debts of the company
- Payments of liabilities of the company, the costs, charges and expenses of winding up and
- Adjustment of right of contributories among themselves, such amount as may be required not exceeding a specified amount.
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