What is Memorandum of Association?

Memorandum of Association is the most important document of a company. It states the objects for which the company is formed. It contains the rights, privileges and powers of the company. Hence it is called a charter of the company. It is treated as the constitution of the company. It determines the relationship between the company and the outsiders. The whole business of the company is built up according to Memorandum of Association. A company cannot undertake any business or activity not stated in the Memorandum. It can exercise only those powers which are clearly stated in the Memorandum.

Memorandum of Association is a documentclearly displays the company's relationship with the outside world. It enables the creditor and shareholders to know the range of activities that the company is permitted to be involved in and authorises them to learn about the company's objectives. It is the legal document that has to be filed with the registrar of companies at the time of incorporation of the company. It is mandatory for every company that wants to get registered as a private/public limited to prepare the memorandum of association. You need to file the memorandumofassociation with the registrar of the companies in order to get it incorporated. For this, it should be signed by at least 7 persons in the case of a public company and 2 persons in the case of a private company.

Once the document is prepared the company cannot perform anything beyond the limit as mentioned in the memorandum of association.

The Memorandum
Amemorandum (memo) is used to communicate something of immediate importance to people within a business or organization. A memo also can be sent to people or firms that have close or long-standing relationships, such as vendors or consultants. Like a business letter, a memo is a permanent record of your communication. Every company must have a memorandum in place, they will all be in the same format and contain the same information.
This includes:

• Company name
• Date of incorporation
• Type of company
• Act under which the company is registered
• Names and signatures of all subscribers (original shareholders or guarantors)
• Limited liability of shareholders or guarantors
• Any person who adds their name to the memorandum during incorporation will become a member of the company, and will continue to be members until they decide to leave. Details of members will be made public on the Companies House website under the company details. It is mandatory for every company to print its Memorandum of Association and have it signed by each of its members.

The key features of a successful memo are as follows:

• A memo should always start by representing the reason for the communication among companies.
• Focus on one key topic or subject at a time.
• Explain the total subject in short, simple, direct sentences.
• Use language that is clear and unambiguous with a polite tone.

What is the purpose of Memorandum of Association?

• It allows the prospective shareholders to get a basic idea about the company and understand the risks involved with their investments. It helps in understanding the law of the company.
• The outsiders dealing with the company can obtain the objects of the company and understand whether the contract between them falls within the object of the company. It determines whether the deal between the companies is profitable or not.

CONTENTS OF MEMORANDUM OF ASSOCIATION
According to the section 13 of Companies Act 2013.

The memorandum of every company should include:

• Name of the company
• State where the company is registered
• Objects of the company
• Limited Liability
• Amount of share capital of the company is registered with the division of them into fixed amount.

Under Section 4 of the Companies Act 2013, a Memorandum of Association should comprise of the following clauses:

• Name Clause: The Name of the Company
  • The first clause of Memorandum of Association requires a company to state its name.
  • A Public Limited Company should end with the word "Limited" and a Private Limited Company should end with "Private Limited".
  • A company cannot use a name that connects it to the government without prior permission.
• Situation Clause: The Registered Office of the Company
  • This clause states the name of the State where the registered office is located.
  • The company must have a registered office within 15 working days.
  • Verification of the registered office must be completed within 30 days.
• Object Clause: The Objects of the Company
  • The objective for which the company is formed must be mentioned.
  • Objects are classified as 'Main Objects', 'Ancillary Objects' and 'Other Objects'.
  • Objects must not be illegal or against public policy.
• Liability Clause: The Liability of Shareholders
  • This clause states the nature of liability that members incur.
  • Liabilities may be limited by shares or by guarantee.
  • In an unlimited liability company, this clause can be eliminated.
• Capital Clause:
  • Every limited company must state its share capital.
  • This capital is described as "registered", "authorised" or "nominal" capital.
  • Stamp duty is applicable on the authorised capital.
  • Denomination per share is either Rs 10 (equity) or Rs 100 (preference shares).
• Association or Subscription Clause:
  • This clause contains the "declaration of association" by the signatories.
  • The amount of authorised capital and shares owned by each member must be mentioned.
  • Each subscriber must sign in the presence of at least one witness.

Form of Memorandum

The Memorandum of Association of a company should be divided into paragraphs, numbered consecutively and printed. The memorandum of a company should be formulated in accordance with the respective forms as mentioned in the tables A, B, C, D & E under Schedule 1 of the Companies Act, 2013.

• Table A is applicable to companies that are limited by shares.
• Table B is applicable to companies that are limited by guarantee and do not have an authorised share capital.
• Table C is applicable to companies limited by guarantee and have an authorised share capital.
• Table D is applicable to unlimited companies that do not have an authorised share capital.
• Table E is applicable to unlimited companies that have an authorised share capital.

At least seven persons in the case of a public company and at least two in the case of a private company must subscribe to the memorandum.

Alteration of Memorandum of Association of a Company

The Companies Act 1862 permitted a company to change its name and its authorized share capital, but forbade any other alteration. Subsequent acts have extended the range of alteration that may be made. A company desiring to change its name may do so according to the provisions of Section 13 read with Section 4 of the Act by passing a Special Resolution and getting the name approved by the Ministry of Corporate Affairs (MCA) on a prescribed application. The power of the Central Government under Section 13(2) to approve a change in name has been delegated to the Registrar of Companies (ROC). The expression "alter" means to modify/change or vary; to make or become different in some respect. As per Section 2(3) of the Companies Act, 2013 (the Act), "alter" and "alteration" shall include the making of additions, omissions, and substitutions.

Cases where a company has to/can alter its Memorandum of Association (MOA):

• Change of Name of the company
• Alteration of Authorized Capital of the company
• Change in Objects of the company
• Shift of Registered Office

Change in Name of the Company

A company desiring to change its name may do so in accordance with the provisions of Section 13 read with Section 4 of the Act by passing a Special Resolution and getting the name approved by the Ministry of Corporate Affairs (MCA) on a prescribed application. The power of the Central Government under Section 13(2) to approve the change in name has been delegated to the Registrar of Companies (ROC).

Alteration of Authorized Capital of the Company

A company may alter its Authorized Capital (Capital Clause) by virtue of Section 13 read with Section 61 by passing an Ordinary Resolution. The Capital Clause will be altered according to the prescribed process as per rules and payment of relevant stamp duty as applicable in the concerned state where the registered office is situated.

Change in Objects of the Company

A company may alter its object by passing a Special Resolution. The alteration can be done for reasons such as:

• Carrying out the business more efficiently and economically
• Improving the local area of operations
• Abandoning any object mentioned in the Memorandum of Association

However, Section 13(8) restricts the change in the object of a company that has raised money from the public through a prospectus. A special resolution is passed, and details of the resolution must be published in one vernacular and one English language newspaper in circulation at the registered office location, as well as on the company's website.

Shift in Registered Office

Every company, within 30 days of incorporation or any change in the registered office address, must furnish verification of its registered office in INC-22 as prescribed under the Companies (Incorporation) Rules, 2014. A company may change the location of its registered office for business efficiency. Such changes can be:

• From one place to another in the same city or town (Board of Directors resolution required)
• From one town to another in the same state (Special Resolution required)
• From one state to another (Involves alteration of the Memorandum and compliance with Section 17)

Case Law

The Supreme Court in Mackinnon v. Mackenzie & Co. refused to sustain the contention of the state and allowed the transfer of the company to another state. The court held that there is no statutory right of the state to intervene in an application made under Section 17 for alteration of the place of the registered office of a company.
Landmark Cases On Memorandum Of Association

• In the case of K. Leela Kumar v. Government of India, the Court held that the Memorandum of Association cannot contain anything contrary to the Companies Act, 1956. However, the Articles of Association in many cases deal with personal matters and may not be challenged on the above ground.
   
• In NEPC India Ltd. v. Registrar of Companies, the Court held that a complaint alleging that a company was indulging in activities not mentioned in the objects clause of the Memorandum of Association had to be filed within six months of the date of knowledge.
   
• In Siva Shanmugam v. Butterfly Marketing (P.) Ltd., the Court held that where the objects clause provided that the company may enter into any partnership for any purpose which may benefit the company, it was held that this enabled the company to enter into a partnership for manufacturing garments.
   
• In Ashbury Railway Carriage and Iron Co. Ltd. v. Riche, Lord Cairn defined the Memorandum of Association as the charter of the company which provides the limitations of the company. Lord Cairn stated that it contains both negative and positive limitations, meaning it positively states the limitations of the powers and also negatively states the consequences of crossing those limitations.
   
• In Ewing Buttercup Margarine Co. Ltd., the company Buttercup Dairy Co. successfully obtained an injunction against Buttercup Margarine on the ground that "Buttercup" being a fancy word might lead people to construe that the company may be connected.

Conclusion:
Memorandum of Association is an important document which is necessary for every organization. This document should be printed and divided in to paragraphs and serially numbered. regulations framed cannot go beyond the powers of the company mentioned in Memorandum of Association. It has to be maintained by the company because it advises the company in various aspects. It also helps in managing administration of the company. It forms a necessary part in the incorporation of the company. If any alteration is done then the company has to follow a legal procedure which is mentioned under the Companies Act 2013.