Group 3

MEMORANDUM OF ASSOCIATION
ARTICLE OF ASSOCIATION
DOCTRINE
CERTIFICATE OF COMMENCEMENT OF
BUSINESS
Memorandum of Association

 Memorandum of Association is the constitution of the

company

Any action beyond the powers given in the

memorandum is void

 Reason for existence

 Purpose of Memorandum

There are two purposes of the MOA

1. Share holder purpose

 Field of investment
 Risk of investment

2. Outsider’s Purpose
 Objects of the company
 Contractual Relation
 Format of Memorandum

 Divided into paragraphs and numbered consecutively

 Signed by subscriber
 For Private company 2 subscriber
 For Public company 7 subscriber
In the presence of at least 1 witness

 Printed

 Should be accepted by the Registrar

 Clauses of Memorandum

The memorandum should contain following clauses

 Name clause
 Registered office clause
 Capital clause
 Liability Clause
 Objects clause
 Association Clause
 Name Clause

 Avoid Undesirable Names

 Too similar to the name of another company
 Misleading

 Prohibition of use of certain names

Ex: Name, emblem or official seal of
UNO
WHO
Central and State government
President and Governor
 Key Words Req. Authorized Capital
Corporation 5 Crore
International, Globe, Universal, 1 Crore
Continental, Inter – Continental ,
Asiatic, Asia, being the first
words of the name
If any of the above words used 50 Lakh
in the name within or without
the bracket
Hindustan, India, Bharat, being 50 Lakh
the first word of the name
If any of the above words used 5 Lakh
within the name within or
without bracket
Industries/ Udyog 5 Lakh
Enterprise, Products, Business, 10 Lakh
 Name Clause

 Limited  Public Company

 Private Limited  Private Company

 If the company is promoting art, science, religion etc

Limited and Private Limited can avoided with the
permission of central government.
 Registered Office Clause

 State in which Registered office will be situated.

 Exact location of registered office should be intimated

within 30 days

 Rs 500 fine everyday

 Capital Clause

 Share capital amount should be specified

 Cannot issue more shares for the time being

 Equity or Preference shares

 Private company can issue any type of shares

 Object clause
 Divided in main objects

 Company should commence its business with the

main object

 In case of non-trading companies ,state to which

the objects extend should also be mentioned

 In case of trading companies, this need not be

mentioned
 Liability Clause

MOA of company

 Limited by shares
or
 Limited by guarantee
 Association Clause
 Subscriber’s name, address should be mentioned in the
MOA

 Each subscriber must take at least 1 share

MOA should be signed by

 At least 7 subscriber for Public company

 At least 2 subscriber for Private company

 Attested by at least 1 witness

 Alteration of Memorandum
Change of Name
 By special resolution

 For deletion or addition of Private, Central government

approval is not necessary

 Ordinary resolution
 Similar name
 Within 12 months of registration

 Rs 100 is punishing amount for everyday for every

responsible in case of default
 Alteration of Memorandum
Change of Registered Office
Within a State

 Confirmed by the regional office

 Approach Registrar with

 Confirmation letter from regional director
within 2 months
 Original MOA

Outside the state

 By special resolution
 Procedure of Alteration

1. Special Resolution
2. Confirmation by National Company Law Tribunal
3. Notice to affected parties
4. Notice to registrar
5. Power of tribunal
6. Rights & interests of members and creditors
7. Approach to registrar with
 Special resolution
 Certified copy from NCLT within 3 months of the
order
 MOA
 Alteration of Objects
1. To carry out business more economically or more
efficiently
2. To attain its main by new improved means
3. To enlarge the area of operation
4. Adding to objects of MOA
5. To restrict or abandon a object
6. To sell or dispose
7. To amalgamate

Procedure
1. Special Resolution
2. Filing the Special Resolution
3. Certification of Registration
 Change in Liability Clause

A Company limited by shares or guarantee cant change

its memorandum so as to impose any additional liability
on the members or to compel them to buy additional
shares of the company….. Unless all the members
agree in writing to such change either before or after
change..
 ARTICLES OF ASSOCIATION
The Articles of Association (AOA) is a contract
between the company and its members and also
between the members themselves that they shall
abide by the rules and regulations of internal
management of the company specified in the AOA.

They are framed with the object of carrying out the

aims and object as set out in the MOA

They are next in importance to MOA it contains the

fundamental conditions upon which a company is
allowed to function.
 IMPORTANCE OF AOA

 They are subordinate to, and controlled by, the

memorandum.

 While framing care must be taken to see the

regulations framed do not go beyond the powers
of company or MOA.
 CONTENTS OF AOA

 Powers, duties, rights and liabilities of Directors

 Powers, duties, rights and liabilities of members
 Rules for Meetings of the Company
 Dividends
 Borrowing powers of the company
 Calls on shares
 Transfer of shares
 Forfeiture of shares
 Voting powers of member
 Appointment of directors and their qualifications
 COMPANIES WHICH MUST
HAVE THEIR OWN ARTICLES

 Unlimited companies
 Companies limited by guarantee
 Private companies limited by shares

 Public company may adopt Table A given in

schedule 1 to the Act
 REGULATIONS REQUIRED
A. Unlimited company

- The number of members with whom the company

has to be registered
- If it has share capital, the amount of share capital
with which the company is to be registered.

B. Company limited by guarantee

- The articles shall state the number of members with

which the company is to be registered.
 REGULATIONS
REQUIRED(cont.)

C. Private company

For companies having a share capital the

following provisions apply
- Restrict the rights to transfer shares.
- Limit the members to 50.
- Prohibits any invitation to public to subscribe for
shares or debentures in company.
 FORM AND SIGNATURE OF
ARTICLES

The articles should be

 Printed
 Divided into paragraphs
 signed by each subscriber of memorandum with
his details in the presence of a witness and
registered with the memorandum
 ALTERATION OF ARTICLES

1. Alteration in articles can be done by passing a

special resolution using which it can alter its
articles anytime.
2. A copy of every resolution should be sent to the
registrar within 30 days of passing

3. Alteration is to be registered within 3 months

 LIMITATIONS TO ALTERATION
 Must not be inconsistent with the act
 Must not conflict with the memorandum
 Must not sanction anything illegal
 Must be for the benefit of the company
 Must not increase liability of the members
 Alteration by special resolution only
 Approval of central government when a company is
converted into a private company
 Breach of contract
 Must not result in expulsion of members
 Memorandum cannot be altered with retrospective effect.
 LEGAL EFFECT OF
MEMORANDUM AND ARTICLES
 The Memorandum and Articles when registered, bind a
company and the members to the same extent as if it
has been signed by the company and each member.

 The effect of these provisions is to constitute, through

the Memorandum and the Articles of a company, a
contract between each member and the company.
HOW FAR THESE DOCUMENTS
BIND?

 Members to the company

 Company to the members
 Members inter se
 Company to the outsiders
 CONSTRUCTIVE NOTICE OF
MEMORANDUM & ARTICLES

 Outsiders dealing with the company have rights to know

about the contents of MOA and AOA
 As soon as they are registered with the registrar they
become public documents.
 This is known as constructive notice of memorandum and
articles.
 The office of the registrar is a public office. The MOA and
AOA will be open and accessible to all.
 CONSTRUCTIVE NOTICE OF
MEMORANDUM & ARTICLES
(Contd)
 It is the duty of every person dealing with the
company to inspect these documents and
whether it is within its powers to enter into the
proposed contract.

 All special resolutions when registered with the

registrar become public documents, so that an
outsider is on notice of the contents like MOA and
AOA
 DOCTRINE OF
CONSTRUCTIVE NOTICE
 It is regarding the contents of
 MOA and AOA

 Every outsider dealing with the company is deemed

to have notice of the contents of Memorandum and
Articles of Association.

 These documents, on registration with the Registrar,

assume the charter of public documents. This is knows
as constructive notice of Memorandum and Articles.
 DOCTRINE OF
CONSTRUCTIVE NOTICE

 Outsiders are on notice of the contents of the

Memorandum and Articles which is open and
accessible to all.

 Thus doctrine of constructive notice protects the

company against outsiders.
 DOCTRINE OF INDOOR
MANAGEMENT
 It is regarding the internal proceedings

 The outsiders dealing with the company are entitled

to assume that as far as the internal proceedings of the
company are concerned, everything has been regularly
done.

 They are presumed to have read these documents

and they need not inquire into the regularity of the
internal proceedings as required by the Memorandum
and the Articles.
 DOCTRINE OF INDOOR
MANAGEMENT
 They can presume that all is being done
regularly.

 This limitation of the doctrine of constructive

notice is known as the “doctrine of indoor”
management”

 Thus doctrine of indoor management protects

outsiders against the company.
 Exceptions to the Doctrine
of Indoor Management
1. Knowledge of irregularity- Where the person
has actual or constructive notice of irregularity as
regards internal management. He cannot claim the
benefit under the rule of indoor management.

2. Acts outside the scope of apparent

authority- If an officer of a company enters into a
contract with a third party and if the act of the
officer is beyond the scope of his authority, the
company is not bound.
 Exceptions to the Doctrine
of Indoor Management
3. Negligence – Where a person dealing with a
company could discover the irregularity if he had
made proper inquiries. He cannot claim the benefit
of the rule of indoor management.

Anand Bihari Lal v. Dinshaw & Co., A.I.R. (1942)

Oudh 417.

Anand Bihari Lal an outsider accepted a transfer of

a company’s property from its accountant.
Held, the transfer was void as such a transaction
was apparently beyond the scope of the
accountant’s authority.
 Exceptions to the Doctrine
of Indoor Management
4. Forgery- A Company can never be held bound for
forgeries committed by its officers.
The leading case on the point is:
Ruben v. Great Fingall Consolidated Co. (1906) A.C.
439.
The secretary of a company issued a share
certificate under the company’s seal with his own
signature and the signature of a director forged by
him.
Held, The person who advanced money on the
strength of this certificate was not entitled to be
registered as holder of the shares.
DOCTRINE OF ULTRA VIRES
 Ultra means beyond and Vires means powers.

 Purpose of these restrictions is to protect –

 a) investors in the company so that they know the
objects in which there money is to be employed
 b) Creditors by ensuring that the company’s funds
are not wasted in unauthorized activities

 Doing of any act beyond legal power and authority

of the company is void.
 It does not create any legal relationship.
 It is not necessary that an act to be considered ultra
vires must be illegal
 DOCTRINE OF ULTRA VIRES
 Features of ultra vires

 1)The company being a corporate person should

not be fined or punished for its own acts or acts of
its agent.
 2) The directors of the company may be held
personally liable to outsiders for an ultra vires

 Ultra Vires the Directors-

 If an act is within the powers of company but

beyond the power of directors, then the
shareholders can ratify it by a resolution in a
general meeting.

 Ultra Vires the Articles-

 if an act is ultra vires the ARTICLES the
 Certificate of Incorporation

 Once all the above documents have been filed

and they are found to be in order, the Registrar of
Companies will issue Certificate of Incorporation of
the Company.

 This document is the birth certificate of the

company and is proof of the existence of the
company. Once, this certificate is issued, the
company cannot cease its existence unless it is
dissolved by order of the Court.
 Operational Guidelines for
Application for a Certificate of
Commencement
1. The documents thatof Business
need to be submitted are:
a) Form 18
Form 18 needs to be complete with the following
details:
- Number and name of the company.
- Signed in the presence of a Commissioner for
Oaths.
- Date and place where the declaration was made.
- Name, address and phone number of the person
who
submitted the documents.
b) Statement In Lieu Of Prospectus
c) Copy of the company’s certificate of incorporation
d) Two copies of the cover letter and
e) Fees of US $95
 Operational Guidelines for
Application for a Certificate of
Commencement
of Business
2. Documents that are complete/in order will be
processed for registration.

3. The certificate in the form of Form 23 will be issued

within five days from the date the complete set of
documents was received.
 COMMENCEMENT OF
BUSINESS
A private company or a company having no share
capital can commence its business immediately
after it has been incorporated.

However, other companies can commence their

activities only after they have obtained Certificate
of Commencement of Business.

For this purpose, the following additional

formalities have to be complied with :-
 COMMENCEMENT OF
BUSINESS

1. If a company has share capital and has issued a

prospectus
2. If a company has share capital but has not issued a
prospectus

Once the above provisions have been complied

with, the Registrar of Companies grants
"Certificate of Commencement of Business" after
which the company can commence its activities.
GROUP
• ANSHU YADAV
MEMBERS
• CHIRANJEEV CHATRY
• JAYENDRA KUMAR
• RAJESH THALLAM
• SANDHYA VARMA
• SHIVANI THAKUR
• SUSBHA SHETTY

THANK YOU