Memorandum of Association

Director Identification Number (“DIN”): Every

director of a company is required to obtain a unique
identification number called DIN from Ministry of
Corporate Affairs (“MCA”).
 Digital Signature Certificate (“DSC”): The MCA,
India launched an e-governance Project in the
beginning of year 2006. With the implementation of
this project e- filing of all the documents with the
Registrar of Companies (“RoC”) has been made
mandatory using digital signatures with effect from
16 September 2006.
Consequently, the person authorized to sign any
document under the company law would be required
to obtain DSC to digitally sign the same.
Process of Company Incorporation
Step 1 - Name approval
Submission of application for name availability
• An application is required to be submitted online in
Form No. 1A to RoC to ascertain the availability of
the name along with filing fee of Rs 500.
Step 2 – Steps for incorporation post name approval
On receipt of name approval from RoC the following
steps should be taken for the incorporation of
the company:
Drafting of Memorandum of Association (“MoA”)
and Articles of Association (“AoA”) of the company:
The draft MoA and AoA should be prepared. MoA
and AoA should be printed, divided into paragraphs
and numbered consecutively.
Stamping of MoA and AoA
The MoA and AoA should be stamped as per the
Indian Stamp Act and at the notified rate as per
provisions of Stamp Duty rates of that state in which
Proposed Registered Office Lies.
Submission of Documents
Online filing
Within 30 days from the date of intimation of name
clearance by the RoC, following documents are
required to be filed online with RoC:
1. Declaration of compliance in Form No. 1 duly
signed using DSC by a person named in the
AoA as a director or manager or secretary of the
company.
2. Situation of the registered office of the company in Form No. 18.
3. Particulars of Directors, Managers and Secretary in Form No. 32.
4. Duly signed and stamped MoA and AoA of the company.
5. Power of attorney in favour of M/s K R A & Co. to act as an authorized representative on
behalf of promoters.
6. RoC Registeration fee.
All these documents are required to be digitally signed by a Proposed Director of the Company and
certified by counter signature of a Practicing Chartered Accountant or a Company Secretary.
Manual Filing:
Following documents shall be further required to be submitted manually with concerned office of
RoC after online filing:
1. Form 1 (Declaration of Compliance on incorporation of the company) executed on a nonjudicial
stamp paper of appropriate duty amount.
2. Form 18 (Notice of situation of the registered office of the company).
3. Form 32 (Particulars of the first Directors of the company).
4. Duly executed stamped copy of MoA and AoA.
5. Stamped copies of Power of Attorneys in favour of M/s K R A & Co.
6. Proof of payment of RoC registration fee i.e. RoC Challans.
Certificate of Incorporation
The RoC shall verify the documents and suggest
modifications wherever required. The authorised
person should duly carry out such modifications. The
modified documents should be e – filed again.
Thereafter, Registrar on being satisfied that all the
requirements for the registration of the company
as laid down under the Act and rules made there under
have been duly complied with shall certify
under his hand that company is incorporated and issue a
certificate of incorporation to the company.
Memorandum Of Association Is the constitution or
charter of the company and contains the powers of the
company.
 No company can be registered under the Companies Act,
1956 without the Memorandum Of Association.
Under Section 2(28) of the Companies Act, 1956 the
memorandum means the Memorandum Of Association of
the company as originally framed or as altered from time
to time in pursuance with any of the previous companies
law or the Companies Act, 1956.
Foreign Direct Investment (“FDI”) up to 100% is
allowed under the automatic route in all
activities/sectors except certain specified
activities/sectors which require prior Foreign
Investment Promotion Board (“FIPB”) approval
The Memorandum Of Association should be in any of the
one form specified in the tables B,C,D and E of Schedule
1 to the Companies Act, 1956.
Form in Table B is applicable in case of companies
limited by the shares , form in Table C is applicable to
the companies limited by guarantee and not having share
capital, form in Table D is applicable to company limited
by guarantee and having a share capital whereas form in
table E is applicable to unlimited companies.
Purpose of MOA

Two Fold Purpose

1.To know what

company’s powers
are & what is the
range of its
activities.

2.Whether, the
transaction they
intend to make with
the company is
within the objects of
the company
 Contents of Memorandum :
The Memorandum Of Association of every company must contain the following clauses

Name clause
The name of the company is mentioned in the name clause.
 A public limited company must end with the word 'Limited' and a private limited
company must end with the words 'Private Limited'.
 The company cannot have a name which in the opinion of the Central Government
is undesirable.
 A name which is identical with or the nearly resembles the name of another
company in existence will not be allowed.
 A company cannot use a name which is prohibited under the Names and Emblems
(Prevention of Misuse Act, 1950 or use a name suggestive of connection to
government or State patronage.
 Domicile clause/ Office Clause

 The state in which the registered office of company is to be situated is mentioned in this
clause.
 If it is not possible to state the exact location of the registered office, the company must
state it provide the exact address either on the day on which commences to carry on its
business or within 30 days from the date of incorporation of the company, whichever is
earlier.
 Notice in form no 18 must be given to the Registrar of Companies within 30 days of the
date of incorporation of the company.
 Similarly, any change in the registered office must also be intimated in form no 18 to the
Registrar of Companies within 30 days.
 The registered office of the company is the official address of the company where the
statutory books and records must be normally be kept.
 Every company must affix or paint its name and address of its registered office on the
outside of the every office or place at which its activities are carried on in. The name must
be written in one of the local languages and in English.
 Objects clause


This clause is the most important clause of the company. It specifies the
activities which a company can carry on and which activities it cannot carry
on. The company cannot carry on any activity which is not authorized by its
MA. This clause must specify :-
 Main objects of the company to be pursued by the company on its
incorporation
 Objects incidental or ancillary to the attainment of the main objects
 Other objects of the company not included in (i) and (ii) above.
 In case of the companies other than trading corporations whose objects are not
confined to one state, the states to whose territories the objects of the company
extend must be specified.
 Doctrine of the ultra-vires

 Any transaction which is outside the scope of the powers specified in the objects
clause of the MA and are not reasonable incidentally or necessary to the attainment
of objects is ultra-vires the company and therefore void.
 No rights and liabilities on the part of the company arise out of such transactions
and it is a nullity even if every member agrees to it.
 Consequences of an ultravires transaction :-
 The company cannot sue any person for enforcement of any of its rights.
 No person can sue the company for enforcement of its rights.
 The directors of the company may be held personally liable to outsiders for an
ultra vires
 Ashbury Railway Carriage & Iron Co. V. Richie

Ashbury Railway Carriage & Iron Co. v. Riche

In this case the objects set out in the company's memorandum
were "to make and sell, or lend on hire, railway carriages and
wagons, and all kinds of railway plant, fittings, machinery and
rolling stock; to carry on the business of mechanical engineers
and general contractors; to purchase, lease, work and sell
mines, minerals, land and buildings; to purchase and sell as
merchants, timber, coal, metals, or other materials, and to buy
any such materials on commission or as agents."
 Case Background

Asbury Railway Carriage & Iron Co. entered into a contract with
Riché under which he would construct a railway in Belgium.
Two years later, after construction had started, Asbury Railway
Carriage & Iron Co. repudiated the contract.
When sued, Asbury Railway Carriage & Iron Co. claimed the
contract was ultra vires.
What is Ultra Vires?
What is Ultra Vires?
 However, the doctrine of ultra-vires does not apply in the following cases :-
 If an act is ultra-vires of powers the directors but intra-vires of company, the company is
liable.
 If an act is ultra-vires the articles of the company but it is intra-vires of the memorandum,
the articles can be altered to rectify the error.
 If an act is within the powers of the company but is irregualarly done, consent of the
shareholders will validate it.
 Where there is ultra-vires borrowing by the company or it obtains deliver of the property
under an ultra-vires contract, then the third party has no claim against the company on the
basis of the loan but he has right to follow his money or property if it exist as it is and obtain
an injunction from the Court restraining the company from parting with it provided that he
intervenes before is money spent on or the identity of the property is lost.
 The lender of the money to a company under the ultra-vires contract has a right to make
director personally liable.
 Liability clause

 A declaration that the liability of the members is limited in case of the company limited by
the shares or
 guarantee must be given.
 The MA of a company limited by guarantee must also state that each member undertakes to
contribute to the assets of the company such amount not exceeding specified amounts as
may be required in the event of the liquidation of the company.
 A declaration that the liability of the members is unlimited in case of the unlimited
companies must be given.
 The effect of this clause is that in a company limited by shares, no member can be called
upon to pay more than the uncalled amount on his shares.
 If his shares are already fully paid up, he has no liabilty towards the company.
 The following are exceptions to the rule of limited liability of members :-
 If a member agrees in writing to be bound by the alteration of MA / AA requiring
him to take more shares or increasing his liability, he shall be liable upto the
amount agreed to by him.
 If every member agrees in writing to re-register the company as an unlimited
company and the company is re-registered as such, such members will have
unlimited liability.
 If to the knowledge of a member, the number of shareholders has fallen below the
legal minimum, (seven in the case of a public limited company and two in case of
a private limited company ) and the company has carried on business for more than
6 months, while the number is so reduced, the members for the time being
constituting the company would be personally liable for the debts of the company
contracted during that time.
 Capital Clause

The amount of share capital with which the company is to

be registered divided into shares must be specified giving
details of the number of shares and types of shares.
A company cannot issue share capital greater than the
maximum amount of share capital mentioned in this
clause without altering the memorandum
 Association clause

A declaration by the persons for subscribing to the

Memorandum that they desire to form into a company and
agree to take the shares place against their respective
name must be given by the promoters.
 Articles of Association

The Articles of Association (AA) contain the rules and

regulations of the internal management of the company.
The AA is nothing but 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 AA.
It specifies the rights and duties of the members and directors.
 MOA prevails over AOA
 The provisions of the AA must not be in conflict with the provisions of the MA.
 In case such a conflict arises, the MA will prevail.
 Normally, every company has its own AA.
 However, if a company does not have its own AA, the model AA specified in Schedule I -
Table A will apply.
 A company may adopt any of the model forms of AA, with or without modifications.
 The articles of association should be in any of the one form specified in the tables B,C,D and
E of Schedule 1 to the Companies Act, 1956. Form in Table B is applicable in case of
companies limited by the shares , form in Table C is applicable to the companies limited by
guarantee and not having share capital, form in Table D is applicable to company limited by
guarantee and having a share capital whereas form in table E is applicable to unlimited
companies.
 However, a private company must have its own AA.
 The important items covered by the AA include :-

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 & transmission of shares
Forfeiture of shares
Voting powers of members, etc
 Alteration of Articles of Association

A company can alter any of the provisions of its AA, subject to

provisions of the Companies Act and subject to the conditions
contained in the Memorandum of Association of the company.
A company, by special resolution at a general meeting of
members, alter its articles provided that such alteration does
not have the effect of converting a public limited company into
a private company unless it has been approved by the Central
Government.
 The articles must be printed, divided into paragraphs and numbered
consequently and must be signed by each subscriber to the Memorandum
of Association who shall add his address, description and occupation in
presence of at least one witness who must attest the signature and likewise
add his address, description and occupation.
 The Articles of Association of the company when registered bind the
company and the members thereof to the same extent as if it was signed by
the company and by each member.
 Registration of the Company

 Once the documents have been prepared, vetted, stamped and signed, they must be filed
with the Registrar of Companies for incorporating the Company.
 The following documents must be filed in this connection :-
The MA & AA
An agreement, if any, which the company proposes to enter into with any individual for
appointment as its managing director or whole-time director or manager.
A statutory declaration in Form 1 by an advocate, attorney or pleader entitled to appear before
the High Court
or a company secretary or Chartered Accountant in whole - time practice in India who is
engaged in the formation of the company or by a person who is named as a director or
manager or secretary of the company
stating that that the requirements of the Companies Act have been complied with in respect of
the registration of the company and matters precedent and incidental thereto.
 In addition to the above, in case of a public company, the following
documents must also be filed :-

 Written consent of directors in Form 29 to agree to act as directors

 The complete address of the registered office of the company in
Form 18
 Details of the directors, managing director and manager of the
company in Form 32.
 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.
 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.
 to be complied with :-

If a company has share capital and has issued a prospectus,

then :-
 Shares upto the amount of minimum subscription must be allotted
 Every director has paid to the company on each of the shares which he has taken
the same amount as the public have paid on such shares
 No money is or may become payable to the applicants of shares or debentures
for failure to apply for or to obtain permission to deal in those shares or
debentures in any recognized stock exchange.
 A statutory declaration in Form 19 signed by one director or the employee –
who is company secretary or a Company secretary in whole time practice that
the above provisions have been complied with must be filed
If a company has share capital but has not issued a
prospectus, then :-

 It must file a statement in lieu of prospectus with the Registrar of

Companies
 Every director has paid to the company on each of the shares which he
has taken the same amount as the other members have paid on such
shares
 A statutory declaration in Form 20 signed by one director or the
employee - company secretary or a Company secretary in whole time
practice that the above provisions have been complied with must be
filed
 Certificate of Commencement of Business

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.