Memorandum, Articles & Incorporation of Comapny

Memorandum, Articles & Incorporation of Comapny

Today’s topic is Memorandum, Articles & Incorporation of the company, section 4, 5 & 7 of the companies act.

Section 4, Memorandum of Company

Meaning:

“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;

Memorandum defines the charter of the company and shall state the following:

  • The name of the company with the last word “Limited” in the case of a public limited company, or the last words “Private Limited” in the case of a private limited company.

But this point is not applicable to section 8 companies that is charitable or non profit organizations.

Also, the name of the company should not be identical to the existing company registered under this act. Using the similar name intentionally is a serious offense under this act.

  • The objects for which the company is proposed to be incorporated and any matter considered necessary in furtherance thereof or in simpler terms you can say that It describes the business for which the company has been formed.
  • The liability of members of the company, whether limited or unlimited.
  • In case the company is having share capital, the following disclosures should be there in the memo.
  • The initial amount of share capital at the time of registration of the company.
  • The division of share capital in multiple shares
  • In the case of One Person Company, the name of the person who, in the event of death of the subscriber, shall become the member of the company.

Section 5, Articles of Company:

Meaning:

“Articles” means the articles of association of a company as originally framed or as altered from time to time or applied in pursuance of any previous company law or of this Act.

The articles of a company shall contain the regulations for management of the company.

Contents of Articles of Association:

  • Classes of shares, their values and the rights attached to each of them.
  • Calls on shares, transfer of shares, forfeiture, conversion of shares and alteration of capital.
  • Directors, their appointment, powers, duties etc.
  • Meetings and minutes, notices etc.
  • Accounts and Audit
  • Appointment of and remuneration to Auditors.
  • Voting, poll, proxy etc.
  • Dividends and Reserves
  • Procedure for winding up.
  • Borrowing powers of Board of Directors and managers etc.
  • Minimum subscription.
  • Rules regarding use and custody of common seal.
  • Rules and regulations regarding conversion of fully paid shares into stock.
  • Lien on shares.

When we discuss about the articles of association of a company, there is a term known as Entrenchment which need to be discussed here:

Section 7, Incorporation of a company

For incorporation of the company, the following documents are required to be filed with the registrar:

  • The memorandum and articles of the company (MOA, AOA) duly signed by all the subscribers to the memorandum in such manner as may be prescribed.
  • A declaration in the prescribed form by an advocate, a chartered accountant, cost accountant or company secretary in practice, who is engaged in the formation of the company, and by a person named in the articles as a director, manager or secretary of the company, that all the requirements of this Act and the rules made thereunder in respect of registration and matters precedent or incidental thereto have been complied with.
  • An affidavit from each of the subscribers to the memorandum and from persons named as the first directors, if any, in the articles that he is not convicted of any offence in connection with the promotion, formation or management of any company, or that he has not been found guilty of any fraud or misfeasance or of any breach of duty to any company under this Act or any previous company law during the preceding five years and that all the documents filed with the Registrar for registration of the company contain information that is correct and complete and true to the best of his knowledge and belief.
  • If the registered office is not established, in that case, the address of correspondence should be given.
  • The particulars of name, including surname or family name, residential address, nationality and such other particulars of every subscriber to the memorandum along with proof of identity, as may be prescribed,
  • In the case of a subscriber being a body corporate: such particulars as may be prescribed the particulars of name, including surname or family name, residential address, nationality and such other particulars of every subscriber to the memorandum along with proof of identity, as may be prescribed, and in the case of a subscriber being a body corporate, such particulars as may be prescribed.
  • The particulars of the persons mentioned in the articles as the first directors of the company, their names, including surnames or family names, the Director Identification Number (DIN), residential address, nationality and such other particulars including proof of identity as may be prescribed.
  • The consent of the people to act as directors of the company in such form and manner as may be prescribed.
  • After submitting the above mentioned documents, if the registrar is satisfied then he will issue the Certificate of incorporation to the company. This certificate contains the unique identification of the company called as CIN i.e. Company Identification Number. It is the obligation of the company to maintain & preserve all the submitted documents to the registrar at the registered office.

Offences related to the Incorporation

If  the company has been got incorporated by furnishing any false or incorrect information or representation or by suppressing any material fact or information in any of the documents or declaration filed or made for incorporating such company, or by any fraudulent action, the promoters, the persons named as the first directors of the company and the persons making declaration under clause (b) of sub-section (1) shall each be liable for action under section 447.

where a company has been got incorporated by furnishing any false or incorrect information or representation or by suppressing any material fact or information in any of the documents or declaration filed or made for incorporating such company or by any fraudulent action, the Tribunal may, on an application made to it, on being satisfied that the situation so warrants:

  • Pass such orders, as it may think fit, for regulation of the management of the company including changes, if any, in its memorandum and articles, in public interest or in the interest of the company and its members and creditors; or
  • Direct that liability of the members shall be unlimited; or
  • Direct removal of the name of the company from the register of companies; or
  • Pass an order for the winding up of the company; or
  • Pass such other orders as it may deem fit

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