The Memorandum of Association is the fundamental law of the company and provides the foundation on which its construction is built. It is the chief papers of the company and no company can be registered without the memoranda of association. It defines the range of the company’s activities every bit good as its relation with the outside universe.
Harmonizing to Lord Macmillan. “The intent of the memoranda is to enable the stockholder. creditors and those who deal with the company to cognize what is permitted scope of endeavor. ” The chief intent of the memoranda is to explicate the range of activities of the company. The prospective stockholders know the countries where company will put their money and the hazard they are taking in puting the money. The foreigners will understand the bounds of the working of the company and their traffics with it should stay within the prescribed range.
Importance of Memorandum-
Memorandum is the cardinal papers of a company which contain conditions upon which the company is incorporated. This papers is of import for the undermentioned grounds. Memorandum defines the restrictions on the powers of the company established under the Act. The whole construction of the company is built upon memoranda. It explains the range of activities of the company. The investing knows where their money will be spent and foreigners besides know the nature of activities the company is authorized to take up. It is a basic papers of the company with respect to its fundamental law. a Charter of the company which sets out its written ends.
The Articles of Association of a company or merely the Articles contains regulations and ordinances. which govern the internal direction of the Company. The Article of Association is low-level to the Memorandum. Therefore. any commissariats of the Articles which go against or beyond the commissariats of Memorandum are void and nothingness. The Articles of a company contains the organisation and its control. issue of portions. voting rights of different categories of stockholders. Director’s powers. the assignment of managers. the director’s meetings. the quorum and per centum of ballot. transferability of portions. the dividend policy. weaving up. etc. The Articles is adhering non merely on the bing members. but besides on the future members who may fall in in future. The Article binds the company and its members every bit shortly as they sign the papers. as it is a contract between the company and its members. Just like a Company has certain duties towards the members. so besides members have certain rights and responsibilities to execute towards the company for smooth operation of the company.