Memorandum of Association

Introduction 

Section 2(56) of the Companies Act, 2013 defines the Memorandum of Association (MoA) as the memorandum of association of a company as originally framed or altered from time to time under any previous company law or the present Act. 

According to Palmer, it contains the objects for which the company is formed and defines the boundary beyond which the company cannot go. Lord Cairns described it as defining and confining the powers of the company.  

• The MoA is rightly called the Charter of the Company, providing the foundation upon which the company is built.

What are the Contents of a Memorandum of Association (Section 4)? 

• Name Clause: States the company's name ending with "Limited," "Private Limited," or "OPC" as applicable. Section 8 companies are exempt from adding these suffixes. 
• Domicile Clause: Specifies the State in which the registered office is situated. 
• Objects Clause: States the objects for which the company is incorporated and matters necessary for furtherance thereof. 
• Liability Clause: States whether member liability is limited or unlimited; in a company limited by shares, liability is limited to unpaid share amount. 
• Capital Clause (only for companies with share capital): States the authorised share capital and its division into fixed-value shares. 
• Nomination Clause (only for OPC): Names the person who shall become a member upon the subscriber's death. 
• Subscription Clause: Records the number of shares each subscriber intends to take.

What is the Doctrine of Ultra Vires? 

• The term "ultra vires" means beyond power. Acts ultra vires the MoA are those falling outside the company's objects clause and are absolutely void — they cannot be ratified even by unanimous shareholder consent. 
• In Ashbury Railway Carriage Co. Ltd v. Riche, where a company authorised to construct railway lines diverted to financing their construction, the act was held ultra vires, making directors personally liable.  
• In Lakshmanaswamy v. LIC of India (1963), the Supreme Court confirmed that any act beyond the objects clause is void and incapable of ratification. However, if ultra vires funds are used to acquire property, the company's rights over that property remain protected as it represents corporate capital.

How can the MoA be Altered? 

• Name Clause: Requires a Special Resolution and approval of the Central Government. Name reservation is done via web form RUN. 
• Domicile Clause: Change within the same city requires a Board Resolution; change to another city may require a Special Resolution and Regional Director's approval; inter-state change requires a Special Resolution and Central Government approval, with no objection from creditors. 
• Objects Clause: Where funds raised through public prospectus remain unutilised, alteration requires a Special Resolution, newspaper publication, website disclosure, and an exit opportunity for dissenting shareholders. 
• Capital Clause: Increase of authorised capital or consolidation requires an Ordinary Resolution authorised by the Articles; reduction of capital requires a Special Resolution and Tribunal approval after obtaining no-objection from creditors, SEBI, and the Registrar.

Conclusion 

The Memorandum of Association serves as the constitutional document of a company, demarcating the scope of its activities and safeguarding stakeholder interests. The doctrine of ultra vires ensures companies operate within their defined objects. Strict procedural requirements for alteration maintain transparency and protect members, creditors, and the public alike.