12.3.2 (Form and Contents)

Section 14 requires that the memorandum of a company shall be in such one of the Forms in Tables B, C, D and E in schedule I to the Act, as may be applicable in the case of the company, or in Forms as near thereto as circumstances admit. Section 15 requires the memorandum to be printed, divided into paragraphs, numbered consecutively and signed by at least seven persons (two in the case of a private company) in the presence of at least one witness, who will attest the signature. Each of the members must take at least one share and write opposite his name the number of shares he takes. section 13 requires the memorandum of a limited company to contain: (i) the name of the company, with 'limited' as the last word of the name in the case of a public company and 'private limited' as the last words in the case of a private company; (ii) the name of the State, in which the registered officer of the company is to be situated; (iii) the objects of the company, stating separately 'Main objects' and 'other objects'; (iv) the declaration that the liability of the members is limited; and (v) the amount of the authorised share capital, divided into shares of fixed amounts. These contents of the memorandum are called compulsory clauses and are explained below.

The name clause. The promoters are free to choose any suitable name for the company provided:

  (a) the last word in the name of the company, if limited by shares or guarantee is 'limited' unless the company is registered under s.25 as an 'association not for profit' [s.13(1) (a) & s.25].

  (b) In the opinion of the Central Government, the name chosen is not undesirable

[s.20(1)].

The Department of Company Affairs has issued guidelines and laid down certain principles for deciding availability of names. However these are not exhaustive but only illustrative of what is considered an undesirable name under s.20

Too similar name. In case of too similar names, the resemblance between the two names must be such as to be calculated to deceive. A name shall be said to be calculated to deceive where it suggests some connection or association with the existing company.

            Examples. (i) In Society of Motor Manufacturers and Traders Ltd. v. Motor             Manufacturers and Traders Mutual Assurance Ltd. (1925) 1 Ch. 675, the           plaintiff company brought an action to restrain the defendant company to use      the said name. But, Lawrence, J., held "any one who took the trouble to think             about the matter, would see the defendant company was an insurance company     and that the plaintiff society was a trade protection society and I do not think      that the defendant company is liable to have its business stopped unless it         changes its name simply because a thoughtless person might unwarrantedly            jump to the conclusion that it is connected with the plaintiff society."

            (ii) In Asiatic Govt. Security Life Insurance Co. Ltd. v. New Asiatic Insurance          Co. Ltd. (1939) 9 Comp. Cas. 208, the court held the two names were not too            identical and therefore did not restrain from using their name.

            (iii) In Ervind v. Buttercup Margarine Co. Ltd. (1977), the plaintiff who      carried on business under the name of the Buttercup Dairy Co. succeeded in          obtaining an injunction against the defendant on the ground that the public             might think that the two businesses were connected, since the word 'buttercup'      was an unnecessary and fancy one.

            (iv) In Executive Board of the Methodist Church India .Union of India (1985)        57 Comp. Cas. 443 (Bom), the Methodist Church in India sought registration     of a company in the name of 'Methodist Church in India Trust Association'.    There was already existing a company bearing the name Methodist Church in         Northern India Trust Association (P) Ltd.' in Calcutta. The former secretary of        the later's association informed the Registrar that the said company had not       functioned since 1970; that no annual reports or minutes had been filed with          the Registrar since 1970; and that some directors had died and some had left. The question was whether in these circumstances the Calcutta company was a    bar to the registration of the new company.

Held, if a company is practically defunct, it is not a bar to registration of a new company with a similar name.

Use of certain key words as part of the name. The Department of Company Affairs vide its Circular dt.7.3.1989 has clarified that if a company used any of the following

key words in its name, it must have a minimum authorised capital mentioned against the key words:

Key words

Required authorised capital (Rs.)

(1)        Corporation      (ii)        International, Globe, Universal                Continental, Inter-continental,                  Asiatic, Asia, being the first word               of the name   (iii)      If any of the words at (ii) above is               used within the name (with or               without brackets)   (iv)      Hindustan, India, Bharat, being the               first word of the name    (v)       If  any of the words at (iv) above is              used within the name (with or                 without brackets)          (vi)      Industries/Udyog           (vii)     Enterprises, products, Business,               Manufacturing

5 crores                                   1 Crore                                   50 Lakhs                                   50 lakhs                                   5 lakh                                   1 crore                                   10 lakhs

Publication of name (s.147). Every company shall: (a) Paint or affix its name and the address of its registered office and keep the same painted or affixed, on the outside of every office or place of business in a conspicuous position in letters easily legible and in the language in general use in the locality.

Department of Company Affairs has clarified that exhibition of its name in English

alone, without at the same time showing it in the local language will not be sufficient compliance with the requirements of the Section.

The words 'outside of every office' do not mean outside the premises in which the office is situated [Dr. H.L. Batliwala Sons & Co. Ltd. a. Emperor (1941) 11 Comp. Cas.154 (Bom)]. Where office is situated within a compound, the display outside the office room though inside the building is sufficient.

            (b) have its name engraven in legible characters on its seal.

            (c) have its name and address of its registered office mentioned in legible characters in all business letters, bill heads, negotiable instruments, invoices, receipts, etc. of the company.

Penalty. If a company does not paint or affix its name and the address of its registered office in the prescribed manner, the company and every officer of the company who is in default shall be punishable with fine.

Also, every officer of a company or any person on its behalf who signs or authorizes to be signed on behalf of the company any bill of exchange, hundi, promissory note or cheque, etc., wherein the name of the company is not mentioned in the prescribed manner, shall be personally liable to the holder of such bill of exchange, hundi, promisory note, cheque, etc., for the amount thereof unless it is paid the company. It is for the Registrar to take appropriate proceedings against the company if the provisions of s.147 are violated [C. Hansa Koya v. Shakti Automobiles (P) Ltd. (1992) 73 Comp. Cas 97 (Mad). Personal Liability will, howeve4, be not incurred in the following cases:

            (a) The holder of a negotiable instrument, on which the company's name has been incorrectly stated, will not be able to enforce the personal liability under s.147(4) against the officer concerned if the error was due to the holder's own act [Durham Fancy Goods Ltd. v. Michael Jackson (Fancy Goods) Ltd. and Another (1968) 2 Q.B.839]

            (b) The word 'Limited' is abbreviated to 'Ltd.’ (P. Stacey & Co. v. Wallis (1912)28 T.L.R.219.

            (c) There is an accidental omission of the word 'limited' [Dermatine Co. v. Ashworth (1905) 21 T.L.R. 510]. In this case, a bill of exchange was accepted on behalf of a limited company. The rubber stamp of the company was longer than the paper. As a result, the word 'limited' did not appear on the instrument. HeId, the directors who accepted the bill of exchange were not personally liable because omission was neither deliberate nor of negligent origin. It was an obvious error of most trifling kind and the mischief aimed at by the Act did not here exist.

The registered office clause [s.13(1) (b)]. This clause states the name of the State in which the registered office of the company will be situated. Every company must have registered office which establishes its domicile and it is also the address at which company's statutory books must normally be kept and to which notices and all other communications can be sent. The notice of the exact situation (address) of the registered office may be given to the Registrar within thirty days from the date of incorporation (s.146).

As in the case of publication of the company's name, s.147 also makes similar provisions regarding publication of the Registered Office of the company.

The objects clause [s13 (1) (d)]. The objects clause defines the objects of the company and indicates the sphere of it activities. A company cannot do anything beyond or outside its objects and any act done beyond them will be ultra vires and void and cannot be ratified even by the assent of the whole body of shareholders. However, a company may do anything which is incidental to and consequential upon the objects specified and such act will not be ultra vires. Thus, a trading company has an implied power to borrow money, draw and accept bills of exchange.

Section 13, read along with Tables 'B','C','D' and 'E', requires the company to divide its objects clause into three parts: (a) Main objects of the company to be pursued by the company on its incorporation; (b) Objects incidental or ancillary to the attainment of the main objects; and (c) Other objects of the company not included in (a) and (b) above. A company, may on receipt of certificate to commence business, pursue any business given in the 'main objects'. In the case of companies (other than trading companies) with objects not confined to one State, the Memorandum must give the name of the State/(s) to whose 'territories the objects extend'. No business given in 'other objects' can, however, be commenced unless prior approval of shareholders with regard thereto is obtained by way of special resolution passed in general meeting [s.149 (2A)]. Where special resolution is not passed, the Central Government, may on an application made by the Board of directors, allow a company to commence business in the 'other objects', provided the votes cast in favour of the resolution exceed the votes cast against the resolution, if any [s.149 (2B)].

The objects of the company must not be illegal, immoral or opposed to public policy or in contravention of the Act. For example, s.77 prohibits a company to purchase its own shares.

Liability clause [s.13 (2)]. This clause states the nature of liability of the members. In case of a company with limited liability, it must state that liability of members is limited, whether it be by shares or by guarantee. This means that in case of a company limited by shares, a member can be called upon at any time to pay to the company the amount unpaid on the shares held by him. In case of companies limited by guarantee, this clause will state the amount which every member undertakes to contribute to the assets of the company in the event of its winding up.

In the case of an unlimited company, this clause need not be given in the memorandum. In fact, the absence of this clause in the memorandum means that the liability of its members is unlimited.

specimen liability clause in a memorandum of association of guarantee company not having a share capital ¹. Every member of a company undertakes to contribute to the assets of the company in the event of its being wound up while he is a member or within one year after he ceases to be a member, for the payment of the debts and liabilities of the company contracted before he ceased to be a member and the costs, charges and expenses of winding up and for the adjustment of the rights of the contributories among themselves, such amount as maybe required, not exceeding one thousand rupees.

As per s.45, under certain circumstances the liability of members of a limited company becomes unlimited ².

The capital clause (s.13 (4 ) (c)].This clause states the amount of share capital with which the company is registered and the mode of its division into shares of fixed value, i.e., the number of shares into which the capital is divided and the amount of each share. If there are both equity and preference shares, then the division of the capital is to be shown under these two heads.

The association clause [s.13(4)(c)] At the end of the memorandum of every company there is an association or subscription clause or a declaration of association which reads something like this:

"We, the several persons whose names and addresses and occupations are subscribed, are desirous of being formed into a company in pursuance of this memorandum of association and we respectively agree to take the number of shares in the capital of the company set opposite our respective names".

Then follow the names, addresses, descriptions, occupations of the subscribers and the number of shares each subscriber has taken and his signature attested by a witness.