moa, aoa
TRANSCRIPT
Group 3
MEMORANDUM OF ASSOCIATIONARTICLE OF ASSOCIATION
DOCTRINE CERTIFICATE OF COMMENCEMENT OF
BUSINESS
Memorandum of Association
Memorandum of Association is the constitution of the company
Any action beyond the powers given in the memorandum is void
Reason for existence
Purpose of Memorandum
There are two purposes of the MOA
1. Share holder purpose Field of investment Risk of investment
2. Outsider’s Purpose Objects of the company Contractual Relation
Format of Memorandum
Divided into paragraphs and numbered consecutively
Signed by subscriber For Private company 2 subscriber For Public company 7 subscriber In the presence of at least 1
witness
Printed
Should be accepted by the Registrar
Clauses of Memorandum
The memorandum should contain following clauses
Name clause Registered office clause Capital clause Liability Clause Objects clause Association Clause
Name Clause
Avoid Undesirable Names Too similar to the name of another company Misleading
Prohibition of use of certain names Ex: Name, emblem or official seal of UNO WHO Central and State government President and Governor
Key WordsKey Words Req. Authorized CapitalReq. Authorized Capital
CorporationCorporation 5 Crore5 Crore
International, Globe, Universal, International, Globe, Universal, Continental, Inter – Continental Continental, Inter – Continental , Asiatic, Asia, being the first , Asiatic, Asia, being the first words of the namewords of the name
1 Crore1 Crore
If any of the above words used If any of the above words used in the name within or without in the name within or without the bracketthe bracket
50 Lakh50 Lakh
Hindustan, India, Bharat, being Hindustan, India, Bharat, being the first word of the namethe first word of the name
50 Lakh50 Lakh
If any of the above words used If any of the above words used within the name within or within the name within or without bracket without bracket
5 Lakh5 Lakh
Industries/ Udyog Industries/ Udyog 5 Lakh5 Lakh
Enterprise, Products, Business, Enterprise, Products, Business, ManufacturingManufacturing
10 Lakh10 Lakh
Name Clause
Limited Public Company
Private Limited Private Company
If the company is promoting art, science, religion etc Limited and Private Limited can avoided with the permission of central government.
Registered Office Clause
State in which Registered office will be situated.
Exact location of registered office should be intimated within 30 days
Rs 500 fine everyday
Capital Clause
Share capital amount should be specified
Cannot issue more shares for the time being
Equity or Preference shares
Private company can issue any type of shares
Object clause
Divided in main objects
Company should commence its business with the main object
In case of non-trading companies ,state to which the objects extend should also be mentioned
In case of trading companies, this need not be mentioned
Liability Clause
MOA of company
Limited by shares or Limited by guarantee
Association Clause
Subscriber’s name, address should be mentioned in the MOA
Each subscriber must take at least 1 share
MOA should be signed by
At least 7 subscriber for Public company
At least 2 subscriber for Private company
Attested by at least 1 witness
Alteration of MemorandumChange of Name
By special resolution
For deletion or addition of Private, Central government approval is not necessary
Ordinary resolution Similar name Within 12 months of registration
Rs 100 is punishing amount for everyday for every responsible in case of default
Alteration of MemorandumChange of Registered Office
Within a State
Confirmed by the regional office
Approach Registrar with Confirmation letter from regional director
within 2 months Original MOA
Outside the state
By special resolution
Procedure of Alteration
1. Special Resolution2. Confirmation by National Company Law Tribunal3. Notice to affected parties4. Notice to registrar 5. Power of tribunal6. Rights & interests of members and creditors7. Approach to registrar with Special resolution Certified copy from NCLT within 3 months of the
order MOA
Alteration of Objects1. To carry out business more economically or more
efficiently2. To attain its main by new improved means3. To enlarge the area of operation4. Adding to objects of MOA5. To restrict or abandon a object6. To sell or dispose7. To amalgamate
Procedure1. Special Resolution2. Filing the Special Resolution3. Certification of Registration
Change in Liability Clause
A Company limited by shares or guarantee cant change its memorandum so as to impose any additional liability on the members or to compel them to buy additional shares of the company….. Unless all the members agree in writing to such change either before or after change..
ARTICLES OF ASSOCIATIONThe Articles of Association (AOA) is a contract between the company and its members and also between the members themselves that they shall abide by the rules and regulations of internal management of the company specified in the AOA.
They are framed with the object of carrying out the aims and object as set out in the MOA
They are next in importance to MOA it contains the fundamental conditions upon which a company is allowed to function.
IMPORTANCE OF AOA
They are subordinate to, and controlled by, the memorandum.
While framing care must be taken to see the regulations framed do not go beyond the powers of company or MOA.
CONTENTS OF AOA
Powers, duties, rights and liabilities of Directors Powers, duties, rights and liabilities of members Rules for Meetings of the Company Dividends Borrowing powers of the company Calls on shares Transfer of shares Forfeiture of shares Voting powers of member Appointment of directors and their qualifications
COMPANIES WHICH MUST HAVE THEIR OWN ARTICLES
Unlimited companies Companies limited by guarantee Private companies limited by shares
Public company may adopt Table A given in schedule 1 to the Act
REGULATIONS REQUIRED
A. Unlimited company
- The number of members with whom the company has to be registered
- If it has share capital, the amount of share capital with which the company is to be registered.
B. Company limited by guarantee - The articles shall state the number of members
with which the company is to be registered.
REGULATIONS REQUIRED(cont.)
C. Private company
For companies having a share capital the following provisions apply
- Restrict the rights to transfer shares. - Limit the members to 50. - Prohibits any invitation to public to subscribe for
shares or debentures in company.
FORM AND SIGNATURE OF ARTICLES
The articles should be Printed Divided into paragraphs signed by each subscriber of memorandum with
his details in the presence of a witness and registered with the memorandum
ALTERATION OF ARTICLES
1. Alteration in articles can be done by passing a special resolution using which it can alter its articles anytime.
2. A copy of every resolution should be sent to the registrar within 30 days of passing
3. Alteration is to be registered within 3 months
LIMITATIONS TO ALTERATION
Must not be inconsistent with the act Must not conflict with the memorandum Must not sanction anything illegal Must be for the benefit of the company Must not increase liability of the members Alteration by special resolution only Approval of central government when a company is
converted into a private company Breach of contract Must not result in expulsion of members Memorandum cannot be altered with retrospective effect.
LEGAL EFFECT OF MEMORANDUM AND ARTICLES
The Memorandum and Articles when registered, bind a company and the members to the same extent as if it has been signed by the company and each member.
The effect of these provisions is to constitute, through the Memorandum and the Articles of a company, a contract between each member and the company.
HOW FAR THESE DOCUMENTS BIND?
Members to the company Company to the members Members inter se Company to the outsiders
CONSTRUCTIVE NOTICE OF MEMORANDUM & ARTICLES
Outsiders dealing with the company have rights to know about the contents of MOA and AOA
As soon as they are registered with the registrar they become public documents.
This is known as constructive notice of memorandum and articles.
The office of the registrar is a public office. The MOA and AOA will be open and accessible to all.
CONSTRUCTIVE NOTICE OF MEMORANDUM & ARTICLES
(Contd) It is the duty of every person dealing with the
company to inspect these documents and whether it is within its powers to enter into the proposed contract.
All special resolutions when registered with the registrar become public documents, so that an outsider is on notice of the contents like MOA and AOA
DOCTRINE OF CONSTRUCTIVE NOTICE
It is regarding the contents of MOA and AOA
Every outsider dealing with the company is deemed to have notice of the contents of Memorandum and Articles of Association.
These documents, on registration with the Registrar, assume the charter of public documents. This is knows as constructive notice of Memorandum and Articles.
DOCTRINE OF CONSTRUCTIVE NOTICE
Outsiders are on notice of the contents of the Memorandum and Articles which is open and accessible to all.
Thus doctrine of constructive notice protects the company against outsiders.
DOCTRINE OF INDOOR MANAGEMENT
It is regarding the internal proceedings
The outsiders dealing with the company are entitled to assume that as far as the internal proceedings of the company are concerned, everything has been regularly done.
They are presumed to have read these documents and they need not inquire into the regularity of the internal proceedings as required by the Memorandum and the Articles.
DOCTRINE OF INDOOR MANAGEMENT
They can presume that all is being done regularly.
This limitation of the doctrine of constructive notice is known as the “doctrine of indoor” management”
Thus doctrine of indoor management protects
outsiders against the company.
Exceptions to the Doctrine of Indoor Management
1. Knowledge of irregularity- Where the person has actual or constructive notice of irregularity as regards internal management. He cannot claim the benefit under the rule of indoor management.
2. Acts outside the scope of apparent authority- If an officer of a company enters into a contract with a third party and if the act of the officer is beyond the scope of his authority, the company is not bound.
Exceptions to the Doctrine of Indoor Management
3. Negligence – Where a person dealing with a company could discover the irregularity if he had made proper inquiries. He cannot claim the benefit of the rule of indoor management.
Anand Bihari Lal v. Dinshaw & Co., A.I.R. (1942) Oudh 417.
Anand Bihari Lal an outsider accepted a transfer of a company’s property from its accountant.
Held, the transfer was void as such a transaction was apparently beyond the scope of the accountant’s authority.
Exceptions to the Doctrine of Indoor Management
4. Forgery- A Company can never be held bound for forgeries committed by its officers.
The leading case on the point is: Ruben v. Great Fingall Consolidated Co. (1906) A.C.
439. The secretary of a company issued a share
certificate under the company’s seal with his own signature and the signature of a director forged by him.
Held, The person who advanced money on the strength of this certificate was not entitled to be registered as holder of the shares.
DOCTRINE OF ULTRA VIRES
Ultra means beyond and Vires means powers.
Purpose of these restrictions is to protect – a) investors in the company so that they know the
objects in which there money is to be employed b) Creditors by ensuring that the company’s funds
are not wasted in unauthorized activities
Doing of any act beyond legal power and authority of the company is void.
It does not create any legal relationship. It is not necessary that an act to be considered ultra
vires must be illegal
DOCTRINE OF ULTRA VIRES Features of ultra vires
1)The company being a corporate person should not be fined or punished for its own acts or acts of its agent.
2) The directors of the company may be held personally liable to outsiders for an ultra vires
Ultra Vires the Directors-
If an act is within the powers of company but beyond the power of directors, then the shareholders can ratify it by a resolution in a general meeting.
Ultra Vires the Articles- if an act is ultra vires the ARTICLES the
company can ratify it by altering the Articles by a special resolution.
Certificate of Incorporation
Once all the above documents have been filed
and they are found to be in order, the Registrar of Companies will issue Certificate of Incorporation of the Company.
This document is the birth certificate of the company and is proof of the existence of the company. Once, this certificate is issued, the company cannot cease its existence unless it is dissolved by order of the Court.
Operational Guidelines for Application for a Certificate of
Commencementof Business1. The documents that need to be submitted are:
a) Form 18 Form 18 needs to be complete with the following
details: - Number and name of the company. - Signed in the presence of a Commissioner for
Oaths. - Date and place where the declaration was made. - Name, address and phone number of the person
who submitted the documents.b) Statement In Lieu Of Prospectusc) Copy of the company’s certificate of incorporationd) Two copies of the cover letter ande) Fees of US $95
Operational Guidelines for Application for a Certificate of
Commencementof Business
2. Documents that are complete/in order will be processed for registration.
3. The certificate in the form of Form 23 will be issued within five days from the date the complete set of documents was received.
COMMENCEMENT OF BUSINESS
A private company or a company having no share capital can commence its business immediately after it has been incorporated.
However, other companies can commence their
activities only after they have obtained Certificate of Commencement of Business.
For this purpose, the following additional
formalities have to be complied with :-
COMMENCEMENT OF BUSINESS
1. If a company has share capital and has issued a prospectus
2. If a company has share capital but has not issued a prospectus
Once the above provisions have been complied
with, the Registrar of Companies grants "Certificate of Commencement of Business" after which the company can commence its activities.
THANK YOU
• ANSHU YADAV• CHIRANJEEV CHATRY• JAYENDRA KUMAR• RAJESH THALLAM• SANDHYA VARMA • SHIVANI THAKUR• SUSBHA SHETTY
GROUP MEMBERS