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What is the memorandum of association in Business Studies? State the various clauses of the memorandum.

The memorandum of association in Business Studies and the various clauses of the memorandum.

Memorandum of association is the fundamental charter which defines the aims and objectives of a company. It contains fundamental rule regarding the constitution and the activities of a company. It is the most significant document on which the super-structure of the company is raised. It sets out the limits with in which the company may function and defines the relations of the company with the outside world. Any action beyond the scope of the memorandum of association is void. The following are the main clauses of the memorandum of association:

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Name clause: This clause contains the name of the company. The word limited is used after the name of a public limited company and private limited is used after the name of a private company. The name of the company should not be identical to the name of an existing company. The words like Royal, King, Imperials, Emperor and the words of patronage of the central government is not used in company.

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Object clause: This is an important clause of the memorandum of association which states the objects with which the company has been established. Any action beyond the stated objective is ultra vires and as such a great deal of care will be taken in drawing up this clause. It contains the broad objective along with subsidiary objectives.

Situation clause: This clause states the place at which the registered office will be situated. This clause is vital for determination of jurisdiction of the court for legal matters. The place of registered office should be intimated to the register within 30 days incorporation.

Capital clause: This clause states the amount of authorized capital with which a company is registered. The division of share capital into different shares must be stated in the capital clause. The face value of the share will be stated in this clause. This clause gives an idea of exact capital structure of the company.

Liability clause: This clause states that the liability of the shareholders is limited to the extent of the face value of shares. A company limited by guarantee should specify the amount of guarantee.

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Association clause: This clause state the names and addresses of the signatories of the memorandum of association and articles of association.

Each subscriber is required to take at least one share in the company. The memorandum of association is signed by at least seven persons in case of public limited company and at least by two persons in case of private company.

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