Companies Act - Memorandum of Association (Definition and It's Importance)

Introduction

Memorandum of Association is crucial topic in Company law. It is also bit lengthy. We will Cover this in different blogs.

Here we will have a look at definition of Memorandum, it's purpose and it's importance.

Before going into legal technicalities, let's first understand what exactly is the meaning of memorandum.

In legal sense it's a legal  document recording the terms of a contract or other legal details. It will contain some details. In terms of Memorandum of Association details will of course be related to Company, it's objective etc.

Now let's have a look at the definition of Memorandum of Association.

Definition of Memorandum of Association

We will first have a look at a definition given in Section 2(56).

It States that Memorandum means Memorandum of Association
  • Originally Framed
  • Or Altered after initial framing from time to time
In persuance
  • Of Old Company Act
  • Or Companies Act 2013
Well, if you look it doesn't sort of give exact definition. This starts with "Memorandum means Memorandum of Association". It's like "Gravitational waves mean Gravitation waves". :D

However some scholars tried to define what exactly it is.

Sir Francis Beaufort Palmer in His book Said something like Below about memorandum of Association.




Another definition is by Bowen which states that Memorandum of Association contains the fundamental Condition upon which company is allowed to be incorporated.


Purpose of Memorandum of Association.

First, it enables the Shareholder, Creditors and other parties who are dealing with the company to know the powers of companies and range of activities they are involved in.

Second, it enable anyone who are dealing with company to know that whether the transaction they are doing with company is within the object of the company.

Lord Caims included above things as definition of Memorandum of Company.'

Importance of Memorandum of Association

Purpose above might have illustrate how important MoA is.

It's crucial and fundamental document. It's like Charter of Company. What is charter anyway ? It defines rights, liabilities. It also describes power. Remember Charters in Legal History ? 

It's public document. It's available for everyone. Here is MoA of Reliance Ltd. Since it's public, it provides vital information about company to everyone dealing with the company. 

Without MoA, you cannot register a Company. See the importance.


Conclusion

MoA in short is super duper important document. In this post we have covered What's the definition, what's the purpose of MoA and whats the importance. 

In Next blog we will have have look at content and forms of MoA.



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