Incorporation of companies Obligation on companies under section 14 to get themselves registered...

MEMORANDUM OF ASSOCIATION

RECAP OF LAST LECTURE

Incorporation of companies Obligation on companies under section 14 to get

themselves registered Exceptions of Section 14 Documents to be submitted by a private and public

companies for the process of incorporation. Conversion of status of companies Effect of Incorporation Commencement of business under section 146

INTRODUCTION

There are three basic legal documents issued by a company these are.I. Memorandum of association.II. Article of association.III. Prospectus.

INTRODUCTION

Memorandum of association is one of the basic documents of the company. It is known as charter of the company. It sets out the limits outside which company cannot go, Memorandum of association defines the constitution

of the company. It contains the fundamental conditions upon which a

company is registered.

INTRODUCTION

Memorandum of Association is a public document, and every person who deals with the company is presumed to have a sufficient knowledge of its

contents and provisions.

MEMORANDUM OF ASSOCIATION

Under Article [2(1)(22)]“Memorandum of association of a company as originally framed or as altered from time to time in pursuance of the provisions of any

previous Companies Act or of this Ordinance”

General Definition Memorandum of association is a document which sets out the

constitution of a company It is the foundation upon which the structure of the company is

made It describes the scope of the companies activities and its relation

with outsides.

PURPOSE OF MEMORANDUM OF ASSOCIATION

Memorandum of association is the constitution of a company

It is the charter which defines the limitations of the power of a company established under law

It contains the fundamental conditions under which company must be incorporated

It determines the powers, objects and limits of the company

It is the foundation on which the structure of the company is based

It states that the company can not go beyond its Memorandum

It enables the shareholders to know what is the permitted range of enterprise

It regulates the external affairs of the company

CLAUSES OF MOA

ClausesOf

MOA

NameRegistered

Office

Objects

Liability

Capital

Association or Subscription

CONTENTS OF MEMORANDUM OF ASSOCIATION

The Name Clause

Domicile Clause / Registered Office

The Object Clause

The Liability Clause

The Capital Clause

The Association or Subscription Clause

Format of Association and Subscription Clause

Printing, signature etc. of Memorandum

NAME CLAUSEThe memorandum shall state the name of the company with the word,

“limited”

“(Private) limited”

“(Guarantee)limited as the last word of the name of public, private or guarantee limited company”

NOTE Single Member Companies should have the last word as “(SMC-

Private limited” according to Single Member Companies Rule,2003

REGISTERED OFFICE

Registered office clause is also known as Domicile clause.

Under the following clause the part of country is mentioned in which the registered office of the company is to be situated.

OBJECT CLAUSE

Object clause is the major portion of the memorandum of association. It contains,

Main object of the company

Objects which company will undertake in the future

As the company cannot go beyond the objects mentioned in its memorandum so any objects that company can undertake in future should also be includes in the object clause.

LIABILITY CLAUSE

This clause defines the extent of the liability of each member. It states,

Liability of member is limited

Liability of member is unlimited or limited to the guarantee given by each member

CAPITAL CLAUSE

The capital clause is applicable for the company which has some share capital. It mentions,

Amount of authorized capital with which the company gets registered

The number of shares of the company

Also the nominal value of each share

SUBSCRIPTION CLAUSE

This clause provides that.

Those who have agreed to subscribe to the memorandum must signify their willingness to associate and form of a company.

The memorandum of company limited by shares and company limited by guarantee, each shall contain different statements.

Statement For Company Limited By Shares

We, the several persons whose names and addresses are subscribed, are desirous of being formed into a company, in pursuance of the memorandum of association, and we respectively agree to take the number of shares in the capital of the company set opposite to our respective names

Statement For Company Limited By Guarantee

We, the several persons whose names and addresses are subscribed, are desirous of being formed into a company, in pursuance of the memorandum of association

FORMAT OF SUBSCRIPTION CLAUSE

Dated the… day of… 200X…Witness to above signatures.……………………….. (full name, father’s/Husband’s name)Signature…….Occupation…….Full address…..

Present name in

full (block letters)

Father’s/Husband

full name

Nationality Occupation Usual residential address in

full

Number of shares taken by

each subscriber or agreed

to be taken

signature

REQUIREMENTS OF MOA

Under [Section 19]

Memorandum must be printed It should be divided into paragraphs Each paragraph should be consecutively (serially)

numbered It should be signed by the required number of subscribers

(three in case of public company and one in case of private company)

Subscriber must sign in the presence of at least one witness

REQUIREMENTS OF MOA

Under [Section 19]

Signature of each subscriber must be attested by witness

Every subscriber must add his address, description and occupation

Witness should write his address, description and occupation

Memorandum must be stamped

CONDITIONS TO BE FULFILLED FOR THE REGISTRATION OF MOA

Under [Section 30,31, 32 &33]

Memorandum shall be filed with registrar for registration. The registrar shall register the MOA only if the following conditions are fulfilled, Company is being formed for lawful purposes

None of the objects stated is inappropriate or deceptive

All legal requirements regarding registration are duly complied with

After the registration of MOA, registrar shall enter the name of the company in the registrar of companies and issue certificate of incorporation.

ALTERATION IN MEMORANDUM OF ASSOCIATION

Under [Section 21(1)]

Following the circumstances under which a company is enable to alter its memorandum,

To carry on its business more efficiently

To attain the main purpose by improved means

To change or enlarge the local area of its operation

To carry on some other business which may be combine with the existing business of the company

To restrict or abandon any of the objects of the company

To amalgamate with any other company

PROCEDURE FOR AMENDMENT IN MEMORANDUM OF ASSOCIATIONThe process of amendment of memorandum of association is different for all the clauses,

THE NAME CLAUSECompany can change its name in the following manner,STEPS TO BE FOLLOWED Pass a special resolution

Get written approval of Registrar of Joint Stock Companies [Sec 39]

An altered certificate of incorporation (Certificate of Incorporation on change of Name) is issued by the registrar [Section 40]

Write the old name of the company along with the new name on all documents for a period of one year from the date of issue of certificate [Sec 40]

THE CAPITAL CLAUSE

By passing an ordinary resolution, company may increase, consolidate, sub-divide or cancel its share capital if authorized by its articles of association

Under [Sec. 94], company shall file a notice of alteration with the registrar within 15 days

REGISTERED OFFICE CLAUSE

Following steps should be taken while altering registered office clause, Pass a special resolution

Obtain confirmation from SECP by filling petition within 60 days

Give certified copies of order of Commission to the registrar of old and new provinces within 90 days

Request the registrar of the old province for transfer of file to the registrar of new province

Under (section 142), intimate to the registrar of the new province on Form-21 within 28 days of change

THE OBJECT CLAUSE

While changing the object clause of the memorandum of association, following steps must be taken,

Pass a special resolution

Obtain a confirmation from SECP by filling a petition within 60 days of resolution

File certified copy of the order of Commission with the Registrar within 90 days of confirmation

SUBSCRIPTION CLAUSE

The subscription clause never changes because the subscribers remains the same throughout the life of the company.

THE LIABILITY CLAUSE

The liability clause cannot be changed because company is formed on the basis of the limited liability. While, transferring from limited liability company to the unlimited liability company this clause is deleted.

ROLE OF SECURITY EXCHANGE COMMISSION OF PAKISTAN IN ALTERATION

OF MOA

The SECP may make an order confirming the alteration [Section 22]

The SECP may confirm the alteration of MOA either wholly or in parts or may put some conditions on alteration. [Section 22]

The SECP may adjourn the proceedings of alteration if considers necessary [Section 23]

Certified copy of order of SECP confirming the alteration along with the printed copy of altered memorandum shall be filed with the Registrar within 90 days of order [Section 24]

Under [section.25], the alteration shall not be effective if the certified copy of SECP’s order is not filed within 90 days

The points discussed under MOA are

1. Definition of MOA

2. Contents of MOA

3. Alteration in MOA can be done in certain cases

4. Procedure for the amendment in MOA

5. Role of SECP in alteration of MOA

ARTICLES OF ASSOCIATION

DEFINATION

Sec 2(1)(1)(1) of the Company Ordinance, 1984 defines the

articles as the Articles of Association of a company as originally framed or as altered in accordance with the provisions of the law.

AoA are the: rules and regulations subordinate to the Memorandum of

Association. cannot go beyond the objects mentioned in the

memorandum. deals with the internal matters relation to the business of the

company.

CONTENTS

DefinitionsBusinessShares

Alteration of CapitalGeneral Meetings and Board

MeetingsVotes of Members

DirectorsThe Seal of the Company

Dividend and ReserveAccounts and Audit

NoticesIndemnityArbitrationWinding up

This clause contains:• The definitions of the words and phrases

used in the articles.

1. DEFiNiTIONS

CONTENTS

DefinitionsBusiness

SharesAlteration of Capital

General Meetings and Board Meetings

Votes of MembersDirectors

The Seal of the CompanyDividend and Reserve

Accounts and AuditNotices

IndemnityArbitrationWinding up

This clause contains: • The brief contents of the objects of the

company.

2. BUSINESS

CONTENTS







This section contains the matters relating to:

The classes of shares ,Offer to and subscription by the general public ,the procedure to be adopted for allotment, issuance of original or duplicate and transfer of the shares.

3. SHARES

CONTENTS







Following points to be mentioned in the articles of the company:

The powers of the company to alter its share capital.

The procedure to be followed while exercising this power.

4. ALTERATION Of CAPITAL

CONTENTS


Alteration of CapitalGeneral Meetings

and Board MeetingsVotes of Members




Following points to be mentioned in the articles of the company:

The types of meetings of the company and of the directors.

The rules and regulations in this connection.

5. GENERAL MEETINGS AND BOARD MEETINGS

CONTENTS







The articles should contain:

The rules regarding the voting powers of the members of the company

The procedure of the voting in the meetings of the company.

6. VOTES OF MEMBERS

CONTENTS







The articles should contain:1. The number and the name of the first

director.2. The qualifications of the subsequent

directors.3. The appointment of directors.4. Filling of the casual vacancy in the office of

directors.5. The rules for fixation of the remuneration

of the directors.6. Their powers and duties and the way in

which directors can be removed.

7. DIRECTORS

CONTENTS




DirectorsThe Seal of the

CompanyDividend and Reserve



Following points should be mentioned in the articles:

The rules regarding the safe custody of the common seal of the company

The procedure to be adopted while affixing it on the documents.

The documents upon which the seal is to be affixed and the record to be maintained in this regard.

8. THE SEAL OF THE COMPANY

CONTENTS





Dividend and Reserve



Following points should be mentioned in the articles:

The rules regarding the declaration and payment of dividend (both the interim and the final).

Transfer of any amount to various reserves.The utilization of such reserves.

9. DIVIDEND AND RESERVE

CONTENTS







This section contains the rules and regulations regarding:

The books of accounts to be maintained.Their safe custody.The place where these books are to be

kept.The inspection of books by the members.Preparation of financial statements.Approval of the accounts by the company.The appointments of the auditors of the

company and fixation of their remuneration, etc.

10. ACCOUNTS AND AUDIT

CONTENTS







This section contains the rules and regulations regarding:

The notices to be issued to the members, directors and the creditors of the company.

The contents of such notices.Ways of giving the notices.

11. NOTICES

CONTENTS






NoticesIndemnity

ArbitrationWinding up

This clause contains:

• The rules regarding the indemnity to or by the company for damages.

12. INDEMNITY

CONTENTS






NoticesIndemnity

ArbitrationWinding up

• The procedure to be adopted in case

there is a difference of opinion between the company and its members.• The matters to be referred to arbitration.

13. ARBITRATION

CONTENTS






NoticesIndemnityArbitration

Winding up

This section deals with:

The circumstances and the ways in which a company can wound up the

appointment of the liquidator.The procedure to be adopted in disposal

of assets, settlement of liabilities and distribution of remaining assets among the members of the company.

14. WINDING UP

GENERAL PROVISONS REGARDING THE ARTICLES

1. It is optional on the company limited by shares to get the articles registered. But the registration of the articles of association is necessary for a company limited by guarantee and an unlimited company. [26(1)]

2. The articles of an unlimited company or a company limited by guarantee (If both have a share capital) shall state the amount of share capital with which the company proposes to be registered. [26(3)]

3. The articles of an unlimited company or a company limited by guarantee (If both have a share capital) shall state the number of members with which the company proposes to be registered. [26(4)]

GENERAL PROVISONS REGARDING THE ARTICLES (Cont.)

4. The articles shall be printed, divided into paragraphs numbered consecutively, signed by every subscriber to the memorandum and dated. [S-27]

5. The articles and the memorandum, when registered , bind company and its members to the same extent as if they respectively had been signed by each member. [S-31]

6. Every copy issued after the date of the alteration in memorandum or articles of a company shall contain such alteration. Every company and its officer who contravenes this provision shall be liable to a fine up to Rs. 1000/- for every copy issued. [S-36]

GENERAL PROVISONS REGARDING THE ARTICLES (Cont.)

• 7. Where the alteration is made after the date on which a person became the member of a company and the

alteration requires him to take more shares than the number held by him at the date of such alteration, the member shall not be bound to take such shares as are required by such alteration. However, if the member agrees in writing either before or after the alteration he is bound to fulfill his agreement. [S-34]• 8. Every company, upon the request and payment of a

prescriber amount by its member, shall supply within a period of fourteen days a copy of the memorandum

and articles of the company. [S-35]

ALTERATION OF ARTICLES [SECTION 28]

Alteration in any clause of the articles can be made only if the

same is permitted by the memorandum and the Ordinance. The company may alter its articles by passing a special

resolution. Where the alteration affects the substantive rights or liabilities of members or a class of members, It can be carried out only if at least three-fourth of the affected members or class of members vote in favor of such alteration.

THANK YOU FOR ATTENTION!

Incorporation of companies Obligation on companies under section 14 to get themselves registered...

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