1. Introduction: “Memorandum of Association is an important document which is difficult to alter.”
Memorandum is important document not only for company but also for creditors, Investors, public etc.
2. (A) Importance of Memorandum of Association for Company:
(1) Important information regarding company: Company’s name, address, constitution, area of affairs of the company, objective, shareholders, liability, share capital etc. ean be known from Memorandum of Association. So it is an important document showing company’s information.
(2) Power limitation: Company’s constitution andareaof affairs is decided by Memorandum of Association. Any work done out of it is considered illegal and it, is considered void.
(3) Official capital and Members liability : The fficia1-capital and liabilities of members can be known through Memorandum of Association. The liability is limited àr unlimited can also be known through it.
(B) Importance from the viewpoint of Shareholders: Shareholders arethe real owners of the company. They are curious to know that where will their funds be invested. Memorandum defines, the object of company. So Shareholders decide to invest in the company on the basis of object clause of the memorandum of Association. Shareholders can stop company from carrying out any work, outside the purview of the Memorandum but the limits can be known only from Memorandum of Association. The liability of the shareholders is limited ‘to .he value of share held by them, is mentioned in the memorandum which helps to create trust in shareholders.
(C) Importance from the viewpoint of Suppliers, Creditors and Bank: It is very obvious that people supplying goods to the company or people lending money or bank has interest in the working of the company. Memorandum of Association is an important document for all such parties, as it establishes the relation of company with third parties. All the parties think about the security of their investments and then invest in the company.
(D) Importance from the viewpoint of Public: Memorandum is a public document. Any person can get a copy of it on paying prescribed fees at Registrar’s office. This provision of Memorandum itself an very important element for general public. Memorandum establishes the relation with the third party. So any investor desirous to invest in company can know about it through Memorandum. It provides the basic and important information about the company.
It is not impossible to make changes in Memorandum , but it is difficult to make changes in the Memorandum of Association. So care should be taken while framing it, as it is basic and public document.