Memorandum of Association — SPCC STD 11 Commerce — Question

It is compulsory for every company under the Companies Act to get its Memorandum of Association
registered. It gives basic information about the company which is important for the following parties :
1. For Company:

• It is a fundamental document for every company. It forms the base of a company.
• Memorandum of Association shows the constitution as well as area of affairs of a company.
• It contains name, objects, capital, liabilities, and state of the Registered Office etc.
• If a company does any act contrary to its objectives given in its Memorandum of Association, the same is called ultra virus act.
• This document also contains the information like official capital of company, liabilities of a company limited or unlimited etc.

2. For the Creditors, Traders Banks:

• Memorandum of Association determines relation of a company with the third parties.
• After having known the proposed activities of a company, creditors, Traders banks decide whether to lend money to the company or not.

3. For Shareholders of a Company:

• The shareholders are assured that the fund invested by them shall be utilized only for the activities specified in the Memorandum of Association of a company.
• If a company docs not function as per the Memorandum, the same can be challenged before the court.
• Shareholders feel secure with the determination that their liabilities will be limited to the extent of the amount of the shares purchased by them.

4. For Public at Large:

• Any person can get preliminary information for investing money in any company from its Memorandum of Association.
• He can also get a copy of the Memorandum.