CONCTRUCTIVE NOTICE OF MEMORANUM AND ARTICLES

RAHUL

MEMORANDUM OF ASSOCIATION
FUNDAMENTAL DOCUMENT:
Great importance in relation to the proposed company. It contains fundamental conditions upon which alone the company is allowed to be incorporated. It is the charter of the company and defines its raison detre ( i.e., reason for existence). lays down the area operation. regulates external affairs of the company in relation to outsiders. contains rules regarding the capital structure, the liability of the members, the objects of the company.

Purpose:
1. The prospective shareholders shall know the field in, or the purpose for , which their money is going to be used by the company and what risk they are undertaking in making investment.

2. The outsiders dealing with the company shall know with certainty as to what the objects of the company are and as to whether the contractual relation into which they contemplate to enter with the company is within the objects of the company.

PRINTING AND SIGNING OF MEMEORANDUM (SEC. 15)

Printed Divided into two paragraphs Numbered consecutively Signed by 7 to unlimited for government company (2 to 50, in case of private company)

Each subscriber shall sign in presence of at least 1 witness who shall attest the signature and shall likewise add his address, description and occupation.

Association clause
Name clause(sec 20):

1.undesirable name to be avoided.

A company cannot registered by a name which, in the opinion of the central government, is undesirable or rejected if it is either. Too similar to the name of the another company. . Misleading, i.e., suggesting that the company is concerned with a particular business or that it is an association of particular type when it is not the case.

2. Injunction if identical name adopted.

. If a company gets registered with a name which resembles the name of an existing company, the other company with whom the name resembles can apply to the court for an injunction to restrain the new company from adopting identical name. an injunction will not be granted to prevent the use of a purely descriptive word with a definite meaning and in common use. . Where the names of the two companies contain a word which is in common use, its use cannot be restrained and even a very trifling distinction between their names.

3. Limited or private limited as the last word or word of the name:

Memorandum shall state the name of the company with limited as the last word of the name in case of a public company, and with private limited as the last word in case of private limited company.

4. Prohibition of use of certain names and the Emblems:

The Emblems and Names Act, 1950 prohibits, the use of or registration of a company or firm with, any name or emblem specified in the Schedule to that Act. The schedules specifies amongst others , the following items, i.e., the name , the emblem, official seal of the UNO, WHO, UNESCO, National Flag, central government ,State Government, President of India and governor of any state.

5. Use of some key words according to authorised capital:

Key words Required authorised capital 5 crores 1 crore

(i) Corporation (ii) International, globe, universal, continental, inter- continental, Asiatic, Asia, being the first words of the name (iii) If any of the words at (ii) above is used within the name ( with or without brackets) (iv) Hindustan , India, Bharat, being used first word of the name (v) If any of the words at (iv) above is used within the name ( with or without brackets) (vi) Industries/udyog (vii) Enterprises , products, business, manufacturing

50 lacs

50 lacs 5 lacs 1 crore 10 lacs

 Registered office clause(sec.146)

Every company shall have a registered office from the day on which it begins to carry on the business, or as from the 30th day after the date of its incorporation, whichever is earlier. All communications and notices are to be addressed to that registered office. Notice of the situation of the registered office and every change shall be given to the Registrar within 30 days after the date incorporation of the company or after the date of change.

Object clause [sec. 13(1)]

The object clause both defines and confines scope of the companys powers, and once registered, it can only be altered as provided by the Act .

Purpose : (a) to enable subscribers of the memorandum to know the uses to which their money may be put. (b) to enable creditors and person dealing with the company to know what its permitted range of enterprise or activities is.
Object clause state: 1. Main objects: Pursued by the company on its incorporation and
objects incidental or ancillary to the attainment

2.

Other objects

 Capital clause [sec. 13(4)]:

I. The memorandum of company, having a share capital, shall state the amount of share capital with which the company has to be registered and the division thereof into shares of a fixed amount.

II. The capital with which a company is registered is called registered, authorized or nominal capital. III. A company cannot issue more shares than are authorized for time being by the memorandum. The shares issued by a company can only be equity shares and preference shares. IV. The equity share capital may be with voting rights; or with differential right as to dividends, voting or otherwise, (secs.85 & 89). A private company which is not a subsidiary of a public company may issue shares of any kind and with disproportionate rights (sec.90).

 Liability clause[sec. 13(2)]:

The memorandum of company limited by shares or by guarantee shall also state that the liability of its members is limited. This means that the members can only be called upon to pay to the company at any time the uncalled and the unpaid amount on the shares held by them or up to the maximum of the amount which they have guaranteed.

Association clause[sec. 13(4)]:

The association clause states that, We, the several persons whose names and addresses are subscribed, are desirous of being formed into a company in pursuance of this Memorandum of Association, and we respectively agree to take the number of shares in capital of the company set opposite our respective names.
This is followed by names, addresses and descriptions of the subscribers and the number of shares taken by each one of them. Each subscriber has to take at least 1 share.

ARTICLES OF ASSOCIATION:
The articles of association or just articles are the rules, regulations and bye laws for the internal management of the affairs of a company. They are framed with the object of carrying out the aims and objects as set out in the Memorandum of Association. In framing the articles of a company, care must be taken to see that regulations framed do not go beyond powers of the company itself as contemplated by the Memorandum of Association.

CONTENTS:
Share capital, rights of shareholders, variation of these rights , payments of commissions, share certificates. Lien on shares Calls on shares Transfer of shares Transmission of shares Forfeiture of shares Conversion of share into stock Share warrants Alteration of capital

Continued

General meetings and proceedings thereat. Voting rights of members, voting and poll, proxies. Directors, their appointment,renumeration, qualifications, powers and proceedings of board of directors. Manager, Secretary Dividends and reserves Accounts, audits and borrowing powers Capitalization of profits Winding up.

Companies which must have their own articles (sec. 26):

Unlimited companies Companies limited by guarantee Private company limited by shares

Regulations required in case of an unlimited company, a company limited by guarantee and a private company(sec. 27):

Unlimited company: in case of unlimited company, the articles shall be state1. The number of members with which company is to be registered. 2. If it has a share capital, the amount of share capital with which company is to be registered.

 Company limited by guarantee: the articles shall state the numbers of members with which company is to be registered. Private company: in case of a private company having share capital, the articles shall contain provisions which1. Restrict the right of transfer shares. 2. Limit the number of its members to 50( not including employee members) 3. Prohibit any invitation to the public to subscribe for any shares in, or debentures of, the company.

ARTICLES AND MEMORANDUM-THEIR RELATION:

The articles are subordinate to memorandum The terms of the memorandum cannot be modified or controlled by the Articles The memorandum must be read in conjunction with articles

Distinction
Memorandum of Association
It is the charter of the company indicating the nature of the business, its nationality, and its capital. It also defines the companys relationship with outside world.

Articles of Association
They are regulations for the internal management of the company and are subsidiary to the memorandum.

It defines the scope of the They are rules for carrying out activities of the company, or the the objects of the company as area beyond which the actions set out in the Memorandum. of the company cannot go It, being the charter of the company , is the supreme document. They are the subordinate to the memorandum. If there is a conflict between the articles and the memorandum, the later prevails A company limited by shares need not have articles of its

Every company must have its own memorandum

There are strict restrictions on its alteration. Some of the conditions of incorporation contained in it cannot be altered except with the sanction of the Company Law Board. Any act of the company which is ultra vires the memorandum is wholly void and cannot be ratified even by the whole body of the shareholders

They can be altered by a special resolution, to any extent, provided they do not conflict with the memorandum and the Companies Act. Any act of the company which is ultra vires the articles (but is ultra vires the memorandum) can be confirmed by the shareholders

CONSTRUCTIVE NOTICE OF MEMORANDUM AND ARTICLES:

Every outsider dealing with a company is deemed to have notice of the contents of the Memorandum and the Articles of Association. These documents, on registration with the Registrar, assume the character of public documents. This is known as constructive notice of Memorandum and Articles.

Office of registrar is a public office:

The memorandum and the articles are open and accessible to all. It is the duty of every person dealing with a company to inspect these documents and see that it is within the powers of the company to enter into the proposed contract. Likewise special resolutions, when registered with the registrar, and particulars of charges registered with the Registrar, become public documents, so that an outsiders is on notice of their contents in the same way as he is of the Articles and the Memorandum.

Presumption that outsiders has read Memorandum and Articles:

Every joint stock company has its Memorandum and Articles of Association, open to all who are minded to have any dealings whatsoever with the company and those who so deal with them must be affected with notice of all that is contained in these two documents.