Memorandum of Association
“Memorandum of association is a document issued by the company for the guidance of general public. It is a charter explaining to the public the name, address, capital, objective and liability of the company. It is a charter of the company which defines the relationship between the company and the outsiders”.
Clauses of memorandum of association:
A memorandum has five clauses which are as follow;
- Name clause
- Domicile / situation clause
- Objective clause
- Liability clause
- Capital clause
- Name clause:
Under this clause, the name of the company is announced. The name should be new and must not be the name of an already existing company. Nor it should be the names of national importance. The word “limited” must follow the name of limited company.
- Domicile / situation clause:
Every company must have a registered office. Under domicile clause, the address of the registered
office of the company and the name of province, where it is situated, are mentioned.
- Objective clause:
The objective clause of the company mentions the purpose for which it is formed. The objective clause is the most important clause of the memorandum of association. It defines the powers and limitations of the company. A company cannot do anything beyond the objectives mentioned in this clause.
- Capital clause:
This clause mentions the authorized capital of the company. The issued, subscribed, called up and
Paid-up capital cannot exceed its authorized capital. To avoid future complications, the companies get their authorized capital registered much higher amount than that of actually required at present.
- Liability clause:
This clause shows that the liability of the share holders is limited to the amount invested by them in the company. They cannot be required to pay the liabilities of the company in excess of their investment.