What is Memorandum of Association? How will you make alteration in Memorandum?
One of the most important steps in the formation of a company is to prepare the documents called the memorandum of Association. It is a life-giving document, because no company can be registered without the memorandum.
The memorandum sets out the constitution of the company, which contains the fundamental conditions upon which alone the company is registered. It is described as the charter of the company, which defines the company’s objectives and powers. Its purpose is to enable shareholders, creditors and those who deal with the company to know the scope of the Company’s operations. The importance of the memorandum lies in the fact that it defines the scope of company’s activities as well as its relation with the outside world. It is a public document to the concerned persons.
According to Section 2(28) of the Companies Act, 1956, “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 laws or of this Act.”
The Memorandum of Association must be a
a) Printed
b) Divided into paragraphs, numbered consecutively and
c) Signed by each subscriber in the presence of at least one witness, who shall attest his signature. [Sec.15]
The purpose of a Memorandum
The prospective share holders know the field in which or the purpose for which their money is going to be used by the company and what risk they are undertaking in making the investment.
Outsiders who deal with the company can know the objects of company and whether the objects and powers of the company are favor to them.
Procedure for Alteration of Memorandum
Since it is a document of fundamental importance, the Memorandum of Association of a Company can not be altered easily. The Companies Act lays down that the matters contained in the Memorandum shall not be altered except in case in the mode and to the extent for which express provision is made in the act-Se.. 16.
The provisions are as follows
1. Alteration of Name clause
A company may after its name by passing a special resolution and with the approval of the Central Govt. in writing. But no approval of the Central Government is needed where the only change in the name is the addition there to or deletion there from, the world ‘private’ consequent on the conversion of a public company into a private company or vice versa – Sec.21. However if through inadvertence a company is registered under a name similar to or identical with that of an existing company, the alteration can be effected by passing an ordinary resolution and with previous consent of the Central Govt. Similarly, if the Central Govt. directs the company to change its name within 12 months of its registration with a new name the company must do so within three months of that direction by passing an ordinary resolution. ....and more....
