Unit3.

Documents of a companies and secretarial duties:-

Memorandum of association

Definition :- section 2 (28) of the Companies Act 1956 define it thus : “ Memorandum means
the memorandum of association of a company as originally framed or as altered from time to
time in pursuance of any previous company law or of this act”.

According to Lord Cairns “ Memorandum is the document which sets out the constitution of the
company and defines the scope of its activities”.

In the words of palmer, “ The memorandum of association is a documents of great importance in

relation to the proposed company. It contains the objects for which the company is formed and
therefore identifies the possible scope of its operations beyond which its activities cannot go”.

Importance of Memorandum of Association:- The memorandum of association also defines its

relation with the outsider the relation with the outsider world and the scope of the its activities.
The purpose of the memorandum is to enable the shareholders, creditors and the those who deal
with the company to know what is its permitted range of activities.

The importance of memorandum of association is as follows :-

1. It define the objects of the company.

2. It lays down the capital structure of the company.
3. It shows the place, districts and the state in which its registered office is located.
4. It states that the liability of the members of the company is limited (or unlimited).
5. It define and confine the powers of the company.
6. It severs as the constitution or charter or life giving documents of the company.
7. It defines the relation of the company with outsiders and scope of the activities of the
company.
8. It is unalterable document of the company.

The clause of memorandum of association : The clause and contents of the memorandum vary
according to the type of the company. Section 13 of the Act lays down that the memorandum of
association of every company must contain the following clause:

1. The name clause

2. The domicile clause or situation clause
3. The objects clause
4. The liability clause
5. The capital clause and
6. The association clause or subscription clause.
Among the various types of companies that can be registered under the act, the companies
limited by shares are the most popular and are in the largest number. Therefore, a detailed
description of the memorandum of a company limited by shares is given below:

1. The name clause: this the first clause in the memorandum of association of a
company. It describes the name of the company. A company can adopt any name it
likes subject however to the following restrictions:
 The name of the company must contain the word ‘ limited’ at its end if it is a
public company and the words ‘Private limited’ at its end if it is private
company.
Licene to drop the word ‘limited’: But a company which is to be formed for
the purpose of promoting art, science, culture, sports, religion, commerce etc.
and which intends to apply its profit and other income in promoting its objects
and prohibit the payments of any dividend to its members can be registered
without the word ‘ limited’ or the words’ private limited’ as the last words in its
name under special licence from the central government. (Sec 25).
 Undesirable name : no company can be registered by name which, in the
opinion of the central government, is undesirable (sec.20). A name is deemed
undesirable when the name of the company includes words like ‘Government’,
State, municipality etc. which imply patronage of such bodies without the
express permission of the Government
 Further, no company can adopt a name which is identical with, or which too
closely resembles(look like, or like someone) the name of an existing company,
which is already registered.
 Section 147(1) lays down that every company shall paint or affix its name and
keep it painted or affixed on the outside of every office or place of business in a
attractive manner and in letters easily legible (can be ready easily).
Failure to comply with the above requirements makes the company liable to be
punished with fine not exceeding Rs 50 per day default.
2. The domicile clause: domicile (where a person lives). This is the second clause in the
memorandum. It states the name of the state in which the registered office of the
company is to be situated. It is sufficient if the name of the state is mentioned in the
memorandum. The name of the city and the exact address of the head office, etc. may
be filed with the registrar within 30 days of incorporation or on the day on which it
begins its business whichever is earlier(Sec.146).
3. The objects clause: This is the third clause in the Memorandum. It is the most
important clause since its define and confine the scope of the activities of the company.
It not only enumerates a series of the objects and purposes for which the company is
formed but also determines the extent of the powers and the authority which the
company can excise to achieve its objects.
According to the companies amendment act 1965 the objects clause must state separately:

 The main objects of the company;

 The objects incidental or ancillary to the attainment of the main objects;
 Other objects not included in above.

The following points should be noted while drafting the objects clause of the company:

1. The objects of the company must be legal.

2. They must not be against the provisions of the companies Act.
3. They must not be against public policy or general law.
4. They must be stated clearly and definitely to avoid ambiguity.
5. They must be sufficiently elaborate also.
4. The liability clause: it states that the liability of the member is limited to the face of
the shares held by them. Section 45 of the act lays down that if the number of members
is reduced below two in private company and below seven in public company and the
company carries on its business for more than six months in spite of the reduction in
the membership below the required, every such continuing member becoming severally
liable for the whole of the debts of the company contracted during that time.
5. The capital clause: It states the total amount of share capital with which company
proposes to register and division thereof into shares of fixed amount.
6. The association or subscription clause: this is the last clause in the memorandum. the
association clause generally reads as :
“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 number of shares in the capital of the company
set opposite our respectively names”.

Alteration of memorandum and procedure

The memorandum of association is a very important document of a company. It cannot
be easily altered by the sweet will of the company. It is extremely difficult to alter any
of the clauses of the memorandum and hence it is considered as an unalterable
document. However, it can be altered only following the procedure as prescribed in the
companies Act. It should be noted that the right of the company to after its
memorandum its strictly limited to the provision of the companies Act.

Alteration of the name of the company (sections 21, 22, &23).

A company can alter its name in the following ways:
(1) When company wants to change its name of its own-accord.
(2) When its name is identical with or too closely resembles the name of another existing
company.
(3) When the central government directs a company to change its name.
(4) When a company wants to add or delete the word ‘private’ from its name.
1. When company wants to change its name of its own-accord.(section 21)

A company can change its name of its own accord at any time whenever it wants. It can
do so by adopting the following procedure.

 By passing a special resolution, and

 By obtaining the approval of the central government.
2. When its name is identical with or too closely resembles the name of another
existing company. (section 22 (1) (a))

if a company is registered with a name which is identical with or too closely resembles
the name of an already existing company by mistake or inadvertence or which, in the
opinion of the central government , is undesirable , it can change its name to a new
name by adopting the following procedure. (section 22(1) (a))

 By passing a special resolution, and

 By obtaining the previous approval of the central government in writing.

The nature of the resolution will be as follows:

“ RESOLVED that the central government being of the opinion that the name of the
company too nearly resembles the name of ……….Ltd., which had been registered in
20…..as a joint stock company in the state of ……… and has been accorded necessary
approval, the name of the company of the company be and necessary changes be made
in the memorandum and articles and other documents of the company”.

3. When the central government directs a company to change its name. (section
22 (1) (b). when the central government comes to know the that a new company has
adopted the name of the existing company or when a representation has been made
to the central government by the existing company that the new company has
adopted its name inadvertently or otherwise, then the central government will direct
the new company to change the name. the company can change its name by the
following procedure.
 By passing an ordinary resolution.
 By obtaining the approval of the central government in writing.
4. When the company wants to add or delete the word “private” from its name. A
public company has to add the word “private” to its name when it is converted into a
private company and a private company has to delete the word “private” from its
name and it need not obtain the approval of the central government.
Alteration of the objects clause (section 17 and 18).
Section 17 (1) of the companies act, 1956 allows a company to alter its objects only for
the following purposes:

a) To carry on its business more economically or more efficiently.

b) To attain its main objects by new or improved means.
c) To enlarge or change the local area of its operations.
d) To carry on some business which, under existing circumstances, may
conveniently or advantageously be combined with the business of the company.
e) To restrict or abandon any of the objects specified in the memorandum.
f) To sell or dispose of the whole or any part of the undertaking of the company.
g) To amalgamate with other company or body of persons.

Procedure for alteration of the objects clause.

The procedure for the change of the objects of the company is contained in sections 17
and 18 of the companies act. The company may change its objects by adopting the
following procedure:

a) The company has to pass a special resolution ( section 1 (1)).

b) Then the company has to file a copy of the special resolution along with a
printed copy of the altered memorandum with the registrar of companies within
one month from the date of passing such resolution. (section 18 (1))
c) The registrar of the companies shall register the same and certify the
registration under his hand one month from the date of filling of such documents
( section 18 (1)(b)).
d) The certificate shall be the conclusive proof that all requirements of the act with
respect to alteration and confirmation of the objects clause have been complied
with hence forth and as the memorandum so altered is memorandum of the
company (section 18(2)).

Alteration of domicile clause, or situation clause (section 17, 18&146)

The following is the procedure for changing the registered office of the company .

Change in the situation may involve :

a. Change from one locality to another in the same town.

b. Change from one town to another in the same state.
c. Change from one site to another.

Procedure for change: if the company desire to shift its registered office from one
state to another state, it should take following steps.
 1. It must convene and hold an extra- ordinary general meeting and pass a
special resolution approving the change.
2. It must file with the registrar a printed or type-written copy of the resolution
within 30 days of passing the resolution.
3. It should then approach the company law board for conformation of the
alteration.
4. The company law board satisfies itself as to whether the consent of the
creditors has been obtained or their claims have been discharged in case they
objected.
5. If the company law board is satisfied , it issues the confirmation order either
wholly or in part and on such term and condition, as it thinks fit.
6. Within 30 days of the transfer of the office, the company must give a notice
of the new location of its registered office to the registrar of the state in
which it is now located.

Articles of association
Introduction:

This is the second documents which the promoters have to prepare and file with the registrar of
companies. it contains the articles i.e., the regulation and bye-law for the internal management of
the affairs of the company. They are framed with the object of carrying out the aims and objects
of the memorandum of association.

Definition:

Section 2 (2). Of the companies act 1956., define articles of association thus , “| articles means
the articles of association of a company as originally framed or as altered from time to time in
pursuance of any previous company law or of this act”. (Pursuance means the act of trying to
achieve something )