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Class : 11
Unit : Business


What do you mean by memorandum of association? Discuss its main contents.

Ans : Memorandum of association is the charter or constitution of company. It contains all the contents necessary for company formation and operation. It is the foundation of company structure. It is also provide information of capital, liabilities of shareholders, a nature of business objectives and other external rules and regulations. According to Lord Coins “The memorandum of association of a company is its charter and defines the limitation of power of the company established under the act. The memorandum contains the fundamental conditions upon which alone the company is allowed to be incorporated. Company management cannot go against the term and condition mentioned in it for operation of business. Contents of Memorandum of Association i) Name clause:- This clause includes name of the organization. If it is private limited company then Pvt. Ltd. is written at the end of its name and if it is public limited company then Ltd is written at the end of its name. The name should not match with other company’s name. ii) Location clause:- This clause contains the address of the headquarter of the company because it is the headquarter where all the legal documents are kept safely. If anyone has to contact with the company they will contact in the same address. iii) Objective clause:- In this close the goals and objective of the company most be written very clearly and the objective mostly legal. The organization has to mention short term, Mid term and long term objective very clearly. iv) Capital clause:- In capital clause the authorized capital of the company must be written very clearly. If states the amount of total capital with which the company is registered. v) Liabilities clause:- This clause clearly states that the liabilities of the shareholders are limited to the face value of the shares. In case of company is limited by guarantee the liabilities are limited to the guarantee given by the shareholders. vi) Subscription/ Association clause:- This clause includes the name and address of the subscribers who are going to sign the memorandum of association. At least seven promoters in public limited company and one promoter in private limited company more sign the memorandum of association. vii) Function clause:- the functions for attainment of objectives are stated. The function should be within the scope of objectives. viii) Number clause:- In case of a private company, maximum number of shareholders is stated. It cannot exceed 50.