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Incorporation of a Private Company

Memorandum o f Association

Meaning and Purpose of Memorandum

An important step in the formation of a company is to prepare a document called memorandum of association. It is the charter of the company and is very important document as it contains the basic conditions on which the company is incorporated.

The Memorandum contains the name, registered office, main and other objects of the company, liability of the members and the authorized capital of the company. The main purpose of the memorandum is to limit the scope of activities and powers of the company. Thus, any act outside the memorandum is ultra vires the company. Such an act is not enforceable and directors involve personal liability for it.

Requirements with respect to Memorandum.

(1)The memorandum of every company shall state -

  • the name of the company with "Limited" as the last word of the name in the case of a public limited company, and with "Private Limited" as the last words of the name in the case of a private limited company;
  • the State in which the registered office of the company is to be situated;
  • in the case of a company in existence immediately before the commencement of the Companies (Amendment) Act, 1965, (31 of 1965) the objects of the company;
  • in the case of a company formed after such commencement, -
  • the main objects of the company to be pursued by the company on its incorporation and objects incidental or ancillary to the attainment of the main objects;
  • other objects of the company not included in sub-clause (i); and
  • in the case of companies (other than trading corporations), with objects not confined to one State, the States to whose territories the objects extend.
  1. The memorandum of a company limited by shares or by guarantee shall also state that the liability of its members is limited.
  2. The memorandum of a company limited by guarantee shall also state that each member undertakes to contribute to the assets of the company in the event of its being wound up while he is a member or within one year after he ceases to be a member, for payment of the debts and liabilities of the company, or of such debts and liabilities of the company as may have been contracted before he ceases to be a member, as the case may be, and of the costs, charges and expenses of winding up, and for adjustment of the rights of the contributories among themselves, such amount as may be required, not exceeding a specified amount.
  3. In the case of a company having a share capital -
  4. unless the company is an unlimited company, the memorandum shall also state the amount of share capital with which the company is to be registered and the division thereof into shares of a fixed amount;
  5. no subscriber of the memorandum shall take less than one share; and
  6. each subscriber of the memorandum shall write opposite to his name the number of shares he takes.

Obtain Registrarís Guidance

The company Law Board in its Circular No. 128/ HCC/64 dated 27-7-1964 has directed that the Registrars should to the extent possible offers their help and advise to those who may approach them in drawing up the Memorandum and Articles. This is specifically desirable in case where promoters have no prior experience of company promotion.

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