Answer in brief.
1) State any four clauses of Memorandum of Association.
Clause. of Memorandum :
(1) Name Clause 3 Name clause mentions the name of the company.
A company can choose any suitable name subject to the following restrictions :
(a) The name of the company should not resemble or be identical with the name of any other existing company.
(b) The name should not use words like ‘Government’, ‘State’, ‘Municipality’, Emperor, King, Royal, Imperial, President of India, or any words that denote the government support or the patronage of the ruling power.
(c) The name of a public company must end with the word ‘Limited’. The name of a private company must end with the words ‘Private Limited’.
(d) The name of the company should not be suggestive of the support of any political party.
(e) The name or its words should not offend any section of people or society.
(f) The name of the company should not be objectionable under the provisions of the Emblems and Name Act. 1950.
(g) The name of the company should not be related with a person. Leader or party.
(h) The company should. Suggest at least 3 names.
(i) The name of the company can be altered at any time by the company by passing a special resolution in general meeting and by getting the approval of the Central Government in writing.
(2) Address Clause (Registered Office Clause) :
This clause of the Memorandum of Association mentions the state in which the registered office of the company is to be situated. The company which is incorporated must have its registered office within 30 days of its incorporation. The address of registered office helps to :
(i) determine its domicile, nationality, and jurisdiction of the court under which it comes
(ii) know the place where its various statutory books such as the register of members, register of debenture holders, register of charges, minutes books, documents, and papers, etc., must be kept
(iii) show where all notices and other communications can be sent.
(3) The Objects Clause: According to Section 13 (1) (d) of the Companies Act, 1956, the objects clause of the Memorandum of Association states the objects and purposes of the company for which it is formed. It lays down the boundaries for the operations and the powers of the company. The shareholders also come to know as to how and where their investment is employed. The objects are classified as
(l) the main objects
(2) incidental objects and
(3) other objects:
Under the ‘main objects’, the main objects to be pursued by the company on its incorporation are stated. In ‘incidental objects’, the secondary’ objects to be achieved along with the attainment of the main objects are stated. Under the ‘other objects’, any other objects, not stated under ‘main objects’ and ‘incidental objects’ are stated.
(4) Liability Clause:
As per Section 13 (2) of the Companies Act, 1956, the liability clause of the Memorandum of Association of a company limited by shares states that the liability of its shareholders is limited to the face value of shares purchased by them. It means the shareholders are liable to pay the unpaid amount on their shares. In the initial stages, the company may make the liability of the Directors unlimited, if it is agreed by the Directors. This is to create confidence in the minds of the investors. An unlimited company does not have this clause in the Memorandum of Association. In the case of a company limited by guarantee, this clause states that the liability of its members is limited to the amount of the guarantee given by them. The amount payable by each member in the case of the winding-up of the company is mentioned in this clause.
(5) The Capital Clause:
The capital clause mentions the total share capital of the company with which it is registered, i.e. authorized capital. This is the maximum capital which the company is authorised to raise. This clause also mentions types of shares. The face value of each type of shares, their number, etc.. This clause further states the rights attached to each class of shares. According to provisions of the Companies Act, 1956, the company is permitted to Issue two types of shares, viz. Equity shares and Preference shares. The company has to alter this clause. if the company needs more funds than the amount of authorised capital. The Articles of Association of a company gives power to the company to alter its capital clause. A company can alter capital clause by passing an ordinary resolution in the General meeting of the company.
(6) The Association or Subscription Clause:
This clause states that the persons who sign the Memorandum are desirous of forming themselves into a company to achieve the objects mentioned in the Memorandum and those they’ agree to take up the number of shares in the company, mentioned against their names. This clause mentions the name, address. Occupation of each subscriber and also states that the signatories have agreed to purchase at least one share of the company. This clause may mention the number of shares agreed to be purchased by the signatories. This clause also contains signatures of signatories.
2) State any four contents of Articles of Association.
The Articles of Association lays down the procedure and rules regarding the following matters or issues:
(1) Company’s share capital and its division into the equity shares and preference shares. Rights of shareholders, a variation of these rights.
(2) Rights of each class of shareholders and procedure for changing their rights.
(3) Procedure relating to allotment and calls on shares.
(4) Rules relating to transfer and transmission of shares.
(5) Lien on shares.
(6) Increase, reduction, or alteration of share capital.
(7) Procedure for conversion of shares into stock. (8) Share warrants.
(9) Conducting General Meetings. (10) Voting rights of members, proxies, and polls.
(11) Directors and officers, their qualification shares, appointment, remuneration, etc.
(12) Conducting Board Meetings and General Meetings.
(13) Appointments, powers, duties, qualifications, remuneration, removal, etc. of Managing Directors, Manager, and Secretary.
(14) Audit of accounts, transfer of money to Reserves declaration of dividend, etc.
(15) Borrowing powers of the company and mode of borrowings.
(16) Issue of share certificate and procedure for issue of duplicate share certificate.
(17) Constitution and composition of various committees such as the Audit Committee, Remuneration Committee, Corporate Social Responsibility Committee.
(18) Books of Accounts, registers, annual accounts, and audits.
(19) Capitalisation of profit.
(20) Investments in the company.
(21) Use of Common Seal of the company.
(22) Notices, Indemnity.
(24) Arbitration provisions, if any.
3) State the Statutory requirements in relation to Prospectus.
The statutory requirements in relation to Prospectus :
(1) Availability to the public: Draft Prospectus to be made available to the public. The draft prospectus filed with the Securities Exchange Board of India (SEBI) should be made available to the public as well as to the Stock Exchanges where the company wants to list its shares and other securities.
(2) Signed by the Directors: Prospectus must be signed by all the directors or by the duly authorised attorney.
(3) Registration of Prospectus: The copy of the prospectus should be filed With the Registrar of Companies (ROC) before it is issued to the public.
(4) Dating of Prospectus: Prospectus must be dated. The date of publication of the prospectus is to be mentioned on the prospectus.
(5) Issuing prospectus to the public: The prospectus should be issued to the public within 90 days from the date of registering a copy with the Registrar of Companies (ROC).