The Memorandum of Association
Section 16(1) of the Act states that every company must have a Memorandum of Association, and in Section 16(4) and Section 16(5), the Act further states that a company acquires legal status of a body corporate when its memorandum is registered.
Contents of a memorandum
Section 18 of the Act states that the memorandum of every company shall be printed and divided into numbered paragraphs, dated, and stating:
(a) the name of the company;
(b) the objects of the company;
(c) the amount of share capital, with which the company proposes to be registered and its division into shares of a fixed amount;
(d) that the liability of the members is limited, in the case of the company which is a company limited by shares;
(e) that the liability of the members is limited, and that each member undertakes to contribute to the assets of the company. This is so when the company is being wound up and the member is a member, or within one year after the cessation of being a member, for payment of the debts and liabilities of the company contracted before he ceases to be a member. This also applies to the cost, charges and expenses of winding up and for adjustment of the rights of the contributories among members, such amount as may be required not exceeding a specified amount in addition to the amount, if any, unpaid on any shares held by him as a member. This is so in the case of the company which is a company limited by guarantee;
(f ) if the company is an unlimited company, that the liability of the members is unlimited;
(g) the full names, addresses and occupations of the subscribers thereto; and
(h) that the subscribers are desirous of being formed into a company in pursuance of the memorandum and (where the company is to have a share capital) respectively agree to take the number of shares in the capital of the company set out opposite their respective names.
Subscribers of memorandum
The Act states that each subscriber to the memorandum of a company with a share capital, must sign the memorandum in his own handwriting and state the number of shares (not less than one) that he agrees to take as mentioned in Section 18(2).
Even if a registered company has no share capital, the subscriber must sign the memorandum in his own handwriting.
The signature of the subscriber on the memorandum must be done in the presence of at least one witness (not being another subscriber) who shall attest the signature and add his address.
The Act provides that a statement in the memorandum of a company limited by shares that the liability of members is limited shall mean that the liability of the members is limited to the amount, if any, unpaid on the shares respectively held by them as in Section18(3).
The object clause
(i) The Act states that the object clause of a company must be stated in the memorandum as mentioned in Section 18(1b).
(ii) An object clause defines the company’s capacity to carry out the permitted activities stated in the memorandum.
(iii) Object clause is of interest to an outsider as it can determine whether a company has acted ultra vires and rendering that act void ab initio (void even at the beginning)
(iv) The object clause will also give protection to the subscribers of the company who will learn and know the purposes to which their money can be applied.
(v) The object clause will also give protection to persons who deal with the company where they can infer the company’s capacity to enter into an activity.
(vi) The object clause must be lawful
Section 14(1) of the Act provides that the object clause must be lawful and as long as the objects are lawful, the Act is not concerned with the purpose of the company and shall not place restriction as to the purpose.
Figure 2.1 Constitution of a company
| Activity 2.1
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