Memorandum of Association &
Articles of Associations
Company Registration
Memorandum of Association (MoA)
• A Memorandum of Association (MoA) is a legal document prepared
during the formation and registration process of a company to define its
relationship with shareholders.
• It represents the charter of the company. It specifies the objectives for
which the company has been formed. It contains all the rules and
regulations that govern a company’s relations with the outside world.
• The company can undertake only those activities that are mentioned in
the Memorandum of Association. As such, the MoA lays down the
boundary beyond which the actions of the company cannot go.
• Memorandum of Association helps the shareholders, creditors and any
other person dealing with the company to know the basic rights and
powers of the company.
MoA…
In Ashbury Railway Carriage & Iron Co. Ltd v. Riche [(1875) LR 7 HL 653)] (A
UK company law case) and Egyptian Salt and Soda Co. Ltd v. Port Said Salt
Association Ltd [(1931) UKPC 47], it was held that memorandum of
association of a company is the main charter of a company and it defines
the limitation on the powers of a company. It states negatively that
nothing shall be done beyond that ambit which a memorandum of a
company prescribes.
Name clauses, objects clauses, main functions, provisions of capital etc.
must be stated in MoA.
The matters to be stated in MoA have been clearly mentioned in Section
18(1) and 18(2) of Companies Act, 2063 BS.
Matters to be stated in MoA…
Section 18 (1) of Company Act, 2063 BS. states that the Memorandum of Association of a
company shall contain the following matters:
(a) The name of company,
(b) The address of the registered office of the company,
(c) The objectives of the company,
(d)The acts to be carried out to accomplish the objectives of the company,
(e) The figure of the authorized capital of the company and the figure of the share capital to be
issued by the company for time being and the figure of undertaken to be paid by the
promoter of the company,
(f) Types of shares of the company, the rights and powers inherent in such shares, value of each
share and number of shares of different types,
(g) Restrictions, if any, in the purchase or transfer of shares,
(h) Number of shares which the promoters have undertaken to subscribe for the time being,
(i) Terms of payments of share amounts,
(j) Statements that the liability of shareholders shall be limited,
(k) The maximum number of shareholders in case of a private company,
(l) Other necessary matters.
Matters to be stated in MoA…
Section 18 (2) of Company Act, 2063 BS provides that if any of the following matters
shall be done or provided, in addition to those mentioned in Sub-section (1), the
memorandum of association shall also state such matters:
(a) If the promoter or any other person is entitled to subscribe shares or acquire title
thereto in any manner other than by making payment in cash, such matter,
(b) If the company is to acquire any property in any manner from the promoter or any
other person at the time of commencement of its transactions such matter,
(c) If the company itself to bear the expenses incurred on its incorporation, such matter,
(d) If the promoter or any other person is entitled to any special privilege or right from
the company, such matter.
Matters to be stated in MoA…
Section 19. Signature to be affixed on memorandum of
association:
(1)The memorandum of association of a company shall
state the full names and addresses of its promoters,
indicate the number of shares which each promoter has
undertaken to subscribe and be signed by each of them.
Ultra vires is made up of two Latin words Ultra and Vires
‘Ultra’ means ‘beyond’ and ‘Vires’ means ‘power or authority’
So, the meaning of Ultra Vires in English is beyond the power or authority.
In context of Company, any act done by the company or its directors which
is beyond their legal authority is ‘Ultra Vires’.
A Memorandum of Association of a company is a basic charter of the
company. It is a binding document which describes the scope of the
company among other things.
Any act beyond the objectives of the company as specified in MoA is ‘Ultra
Vires’
If a company departs from its MOA such an act is ultra vires.
The Doctrine of Ultra Vires is a fundamental rule of
Company Law.
It states that the objects of a company, as specified in its
Memorandum of Association, can be departed from only
to the extent permitted by the Act.
Hence, if the company does an act, or enters into a
contract beyond the powers of the directors and/or the
company itself, then the said act/contract is void and not
legally binding on the company.
Articles of Association (AoA)
The articles of association (AoA) can be considered the “constitution of a
company.” It outlines the rules and regulations that stipulate a company’s
internal affairs.
AoA is also considered a user’s manual for an organization that states the
purpose of the organization and its strategies to accomplish its short-term
and long-term goals.
Section 20 (1) of Company Act, 2063 BS states that a company shall frame
the articles of association in order to attain the objectives set forth in its
memorandum of association and carry out its activities in a well–managed
manner.
Generally, the AoA includes a company’s legal name, address, purpose,
equity capital, organization of the company, financial provisions, and
provisions regarding the shareholder meetings.
Components of AoA…
According to section 20 (2) of Company Act, 2063 BS, the articles of association
shall state the following matters:
(a) Procedures for convening the general meeting of the company and notice to be given for such
meeting,
(b) Proceedings of general meeting,
(c) Number of directors, provision of alternate director, if any, and tenure of directors,
(d)Provisions relating to the minutes of decisions of the general meeting and the board of directors,
and duplicate copies and inspection thereof,
(e) If a person has to subscribe shares to become a director of a company, minimum number of shares,
(f) In the case of a public company, qualifications and number of independent director,
(g) Where any professional persons, other than shareholders, are to be appointed as directors,
provisions relating to the number, tenure, qualifications and procedures of appointment of such
persons,
(h) Powers and duties of the board of directors and the managing director,
(i) Authority of directors and delegation of authority,
(j) Quorum for a meeting of the board of directors, notice of meeting and proceedings of meeting,
(k) Lien on shares,
Amendment to MoA & AoA
Section 21 of the Companies Act, 2063 has provided the provision of
amendment to memorandum of association and articles of association.
As per the provision, the general meeting of a company may, subject to Section
6, amend the memorandum of association or articles of association, by adopting
a special resolution to that effect.
Components of AoA…
(l) Different classes of shares and the rights, powers and restrictions attached to such shares,
Provisions relating to calls on shares and forfeiture of shares,
(m)Provisions relating to the transfer of shares,
(n)Matters on alteration in share capital,
(o)Matters on buying back of shares by the company, if the company is to buy back its
shares,
(p)Appointment of a company secretary,
(q)Provisions relating to remuneration, allowances and facilities of directors,
(r) Use of the company’s seal in its transactions, if it is to be so used,
(s) Accounts, books of accounts and audit of the company,
(t) Provisions on powers to raise loans or debentures,
(u)Amalgamation of the company,
(v)Such matters, if any, as required by the prevailing law to be mentioned in the articles of
association of a company carrying on any specific business,
(w)Such other necessary matters as required to be mentioned in the articles of association.
Differences between MoA and AoA
Memorandum of association Articles of Association
All the condition required for the registration All the condition for regulation of company
Primary document Supplementary
Power and objectives Internal rules and regulation
Brief in size Elaboration
If the provision of MOA contradicts with AOA, If the provision of MOA contradicts with AOA,
AOA is void. AOA is void
Application for Registration
Procedures for incorporation
Application
of a company
Inquiry/refusal
Incorporation/registration
Commencement
Application for Registration
Section 4, Companies Act, 2063
If any person desires to incorporate a company shall make an application to the Company
Registrar’s Office, in prescribed format and accompanied by such fees as prescribed, and along
with the following documents, as well:
(a) The memorandum of association of the proposed company,
(b) The articles of association of the proposed company,
(c) In the case of a public company, a copy of the agreement, if any, entered into between the
promoters prior to the incorporation of the company,
(d)In the case of a private company, a copy of the consensus agreement, if any, entered into
(e) Where prior approval or license has to be obtained from anybody under the prevailing law
prior to the registration of a company carrying on any particular type of business or
transaction pursuant to the prevailing law, such approval or license,
Application for Registration
(f) Where the promoter is a Nepalese citizen, a certified copy of the
citizenship certificate and where a corporate body is a promoter, a
certificate of registration of incorporation, decision of the Board of
directors, regulating the incorporation of the company and major
documents regarding incorporation.
(g) Where the promoter is a foreign person or company or body,
permission obtained under the prevailing law to make investment or
carry-on business or transaction in Nepal,
(h) Where the promoter is a foreign person, a document proving the
country of his/her citizenship,
(i) Where the promoter is a foreign company or body, a certified
copy of the incorporation of such company or body and major
documents relating to such incorporation.
1. MoA is an important document for incorporation of a company.
Give any four reasons for its importance.
2. Distinguish between MoA and AoA of company.
3. How can MoA and AoA of a company be amended ?
4. List out any four documents required for the registration of
company in Nepal.
Thanks !
