Answer and Explanation:
The Memorandum of Association of a company limited by shares must contain the following contents or clauses:
1. The Name of the Company: The Name Clause:
The first clause of Memorandum of Association requires a company to state its name. The company being a legal person, must have a name to establish its identity.
The Memorandum of Association of every company must state the name of company with the word ‘Limited’ as the last word of the name in case of a public limited company and with “Private Limited” as the last word of the name in case of private limited company.
2. The Registered Office of the Company – Registered Office Clause or Situation Clause:
This clause of Memorandum states the name of the State where the registered office of the company is to situate. This is required in order to fix the domicile of the company, that is, the place of its registration. The actual address of the registered office is not required to be stated in the Memorandum of Association of the Company. But it is enough to mention in the Memorandum the name of the State in which the registered office is to be situated.
3. The Objects of the Company – The Object Clause:
This is the most important clause in the memorandum because it not only shows the object for which the company is formed but also determines the extent of the powers which the company can exercise in order to achieve the object or objects. Stating the objects of the company in the Memorandum of Association is not a mere legal technicality but is a necessity of great practical importance.
The objects clause must state separately:
(i) Main Object:
This sub-clause has to state the main object to be pursued by the company on its incorporation and objects incidental or ancillary to the attainment of main objects.
(ii) Other Objects:
This sub-clause shall state other objects which are not included in the above clause.
4. The Liability of Shareholders – The Liability Clause:
This clause of Memorandum of Association has to state the nature of liability that the members incur. In case of a company limited by shares, the members are liable only to the amount unpaid on the shares taken by them. In the case of company limited by guarantee the members are liable to the amount undertaken to be contributed by them to the assets of the company in the event of its winding up.
5. The Capital Clause:
Every limited company having a share capital must state the amount of its share capital with which the company is proposed to be registered and the division thereof into shares of a fixed denomination, in this clause This capital is described as “registered”, “authorised” or “nominal” capital and the stamp duty is payable on this amount. There is no legal limit to the amount of share capital.
It may be any amount running into crores of rupees but denomination of each share should be Rs. 10 or 100 in the case of equity shares and Rs. 100 in the case of preference shares. The amount of authorised capital should be sufficiently high so that further issue of shares may easily be done to finance the expanding business.
An unlimited company having a share capital is not required to have the capital clauses in its Memorandum of Association.
6. The Association or Subscription Clause:
Under this clause we have the “declaration of association”, which is made by the signatories of the Memorandum of Association under their signatures duly attested by witness, that they desire to be formed into a company and that they agree to the purchase of qualification shares, if any. Each subscriber must take at least one share.
The statement reads as follows:
“We, the several persons whose names and addresses are subscribed, are desirous of being formed into a company in pursuance to the Memorandum of Association and we agree to take the number of shares in the capital of the company shown against our names.”