Lecture 3 - Memorandum of Association

MEMORANDUM OF
ASSOCIATION
Farzana Yeasmin Mehanaz

Faculty of Law
Eastern University
MEMORANDUM OF ASSOCIATION
■ Sec.2 (1) (n) of 1994 Act provides, "memorandum" means the
memorandum of association of a company as originally framed or as
altered in pursuance of the provisions of this Act;
■ The Memorandum of association is a document which contains the

fundamental rules regarding the constitution and activities of a company.
■ “it contains fundamental conditions upon which alone the company is

allowed to be incorporated. They are conditions introduced for the benefit
of the creditors and outside public as well of the shareholders”. Guinnes
vs. Land Corporation of Ireland[1882]22ch.D.359
MEMORANDUM OF ASSOCIATION
■ “The purpose of Memorandum of Association is to enable the
share holders, creditors and those who deal with the company to
know what its permitted range of enterprise is.” - Lord
Macmillan in the case of Eggyptisn Salt and Soda Co. Ltd.
■ “Memorandum of Association of a company defines the
limitations of the powers of a company. It contains the
fundamental condition upon which alone the company is
allowed to be incorporated” - Lord Cairns.
CONTENTS OF MEMORANDUM OF ASSOCIATION
Sec.7 Memorandum of Company Limited by Guarantee
■ In the case of a company limited by guarantee–
(a) the memorandum shall state–
(i) the name of the company, with "limited" as the last word in its name.
(ii) the address of the registered office;
(iii) the objects of the company, and, except in the case of trading companies, the territories to which they extend;
(iv) that the liability of the members is limited;
(v) that each member undertakes to contribute to the assets of the company in the event of its being wound up while
he is a member or within one year afterwards, for payment of the debts and liabilities of the company contracted
before he ceases to be a member, and of the charges and expenses of winding up, and for adjustment of the right of
the contributories among themselves, such amount as may be required, not exceeding a specified amount;
(b) if the company has a share capital–
(i) the memorandum shall also state the amount of share capital with which the company proposes to be registered
and the division thereof into shares of a fixed amount;
(ii) each subscriber of the memorandum shall take at least one share;
(iii) each subscriber shall write opposite to his name the number of shares he takes.
Sec.8 Memorandum of Unlimited Company
■ In the case of an unlimited company
(a) the memorandum shall state-
(i) the name of the company;
(ii) the address of the registered office of the company;
(iii) the objects of the company and, except in the case of trading companies, the
territories to which they extend.
(b) if the company has a share capital-
(iv) each subscriber of the memorandum shall take at least one share;
(ii) each subscriber shall write opposite to his name the number of shares he takes.
Contents of MOA of an Unlimited Company
■ If a company is limited by guarantee having no
share capital it is not required to state S.7(v).
1. Name of the company
2. Place of registered office
3. Objects of the company
4. Association and subscription clause
DOCTRINE OF ‘ULTRA VIRES’
■ The words :
• Ultra means beyond
• Vires means the powers
• Ultra Vires means beyond the powers
■ A company which stipulates/owes its incorporation to statutory

authority cannot effectively do anything beyond the powers
expressly or impliedly conferred upon it by the statute or
Memorandum of Association.
Ashbury railway carriage & iron company ltd.
V. Riche (1875) LR 7 HL 653
■ The company has been formed with the object :
• ‘to make or sell, or lend, or hire, railway carriages and waggons, and all
kinds of railway plants, fittings, machinery and rolling stock; to carry on
the business of the mechanical engineers and the general contractors; to
purchase and sell, as merchants, timber, coal, metals, or other materials;
and to buy and sell any such materials on commission, or as agents.’
• The company contracted with Riche to finance the construction of
Railway line in Belgium. The company repudiated the agreement and was
sued for breach of contract.
Cont…
■ Question arose as to whether the company doing anything
beyond the powers expressly or impliedly conferred upon it by
the Memorandum of Association?
■ Riche Contended :
• Firstly, that the contract in question came well within the
meaning of the words ‘general contractors’, and, was therefore,
within the powers of the company;
secondly, that the contract was ratified by the majority of the
shareholders.
Cont…
■ HoL held: If a company pursues objects beyond the scope of the
memorandum of association, the company's actions are ultra
vires and void.
■ In this case, the contract was ultra vires and, therefore, null and void. The
Judge stated that, the term general Contractors must be taken to indicate
the making generally of such contracts as are connected with the business
of the mechanical engineers, otherwise it would authorize the contracts of
any and every description, even fire & marine insurance.
■ Regarding ratification by the shareholders, the court said that a thing
cannot be ratified which is outside the powers of the company. Even all
the shareholders cannot attempt to do something, which by law, they are
prohibited to do.
Attorney General vs. Great Eastern Rly Co. 1880
 But in this case, House of Lords reduced the rigidity of the
principle and observed that, this doctrine should be reasonably
applied. Whatever may be fairly incidental to the objects
authorized ought not to be held as ultra vires, unless it is
expressly prohibited.
 Thus a company may do an act which is—
 necessary for; or incidental to the attainment of its main object,
or
 Otherwise authorized by the Act.
EFFECTS OF DOCTRINE OF ULTRA
VIRES
1. Injunction
2. Personal Liability of Directors
3. Constructive notice
4. Breach of warranty of authority
5. Ultra vires acquired property
6. Ultra vires contract

Cont…
■ Injunction: Whenever an ultra vires act has been or
about to be undertaken, any members of the company
may get an injunction to restrain it from proceeding it.
■ Personal liability of directors: It is the duty of the
directors to see that the corporate capital is used only for
the legitimate businesses of the Company. Consequently
for any ultra vires act, the directors will personally be
liable, not the company.
Cont…
■ Constructive notice: The memorandum is a public document
and anyone dealing with the company is presumed to have
knowledge about the object of the company from the
memorandum. Therefore, for any loss caused to him by an ultra
vires contract he cannot hold the Company liable.
■ Breach of warranty of authority: The directors are the agents
of the Company though whom company is run. Therefore, it is
their duty to keep within the limits of the Company’s power.
Anything done beyond the limit will be outside their authority
and company will not bear the liability.
Cont…
■ Ultra vires acquired property: If company’s money is
spent ultra vires in purchasing some property, the
company’s right over the property must be held secure.
For, that asset, though wrongly acquired, represents
corporate capital.
■ Ultra vires contract: A contract of a corporation which is
ultra vires is void ab initio and of no legal effect. It cannot
become intra vires (within the powers) by reason of
estoppel, lapse of time, ratification etc.
Sec.9 Printing and Signature of
MoA
■ The memorandum of every company shall–
(a) be printed;
(b) be divided into paragraphs numbered consecutively; and
(c) be signed by each subscriber, who shall add his address and
description in the presence of at least two witnesses who shall
attest the signature.
Sec.10 Restriction on Alteration of Memorandum
(1)A company shall not alter the conditions contained in its

memorandum except provisions is made in the Act.
(2)Only those provisions which by any other specific
provision contained in this Act, are required to be stated
in the memorandum of the company concerned shall be
deemed to be the conditions contained in its
memorandum.
Cont…
(3) Other provisions contained in the memorandum, including
those relating to the appointment of director, managing agent or
manager may be altered in the same manner as the articles of the
company, but if there is any express provision in this Act
permitting the alteration of such provisions in any other manner,
they may also be altered in such other manner.
(4) All reference to the articles of a company in this Act shall be
construed as including references to the other provisions contained
in its memorandum as referred to in sub-section (3).
ALTERATION OF NAME CLAUSE
 Special Resolution
Sec.11(6) Any company may, by special resolution and subject to the
approval of the Registrar signified in writing, change it name.
Sec.11(7) Were a company changes its name, the Registrar shall enter the new
name on the register in place of the former name, and shall issued a certificate
of incorporation in its new name to meet the circumstances of the case and on
the issue of such a certificate, the change of name shall be complete.
Sec.11(8) The change of name shall not change any rights or obligations of
the company, or render defective any legal proceedings by or against the
company;

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MEMORANDUM OF

Farzana Yeasmin Mehanaz

■ The Memorandum of association is a document which contains the

■ “it contains fundamental conditions upon which alone the company is

• Vires means the powers

• Ultra Vires means beyond the powers

■ A company which stipulates/owes its incorporation to statutory

2. Personal Liability of Directors

4. Breach of warranty of authority

5. Ultra vires acquired property

6. Ultra vires contract

(1)A company shall not alter the conditions contained in its

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