MEMORANDUM OF ASSOCIATION
Section 2(56) - “Memorandum” means the memorandum of association of a company as originally framed or as altered from time to time in pursuance of any previous company law or this Act.
It defines the scope of the company. It defines the constitution and the scope of powers of the company. It is something that cannot be changed. It is the foundation on which the company is built. It is the whole structure of the company. MOA can be framed and altered under the 2013 Act with very strict regulations. It is a binding document. You cannot go beyond the objective of the company. E.g. name of the company, registered office, etc.
According to Palmer, the MOA is a doc of great importance concerning the proposed company. It has the following things:
1. Objects for which the company is formed
2. Identifies the possible scope of its operations beyond which its actions cannot go
3. Confines the powers of the company
If anything is done beyond the powers of MOA, it will be ultra vires and therefore void. The doctrine of ultra-vires was first laid down in:
· Ashbury Railway Carriage and Iron Co. vs. Riche
The object of the company provided that it was formed to make, sell, or lend on hire railway carriages to carry on the business of mechanical engineers and general contractors. The company entered into a contract with Richie for financing the construction of a railway in Belgium. Later on, the company repudiated the contract. Richie brought week action for damages for breach of contract.
Issues:
1. Whether the financing of the construction of railways come within the expression General Contractors
2. Whether entering into a contract of financing of the construction of railways was ultra vires the company
3. Whether subsequent unanimous ratification by the members of the company would make ultra vires contract intra vires.
The Court held that the term General Contractors must be taken to indicate the making, generally, of such contracts which are connected with the business of mechanical engineers. Therefore, the financing of the construction of railways is outside the purview of the object clause and cannot be included within the expression of general Contractors. Thus the contract for the same is ultra vires the company. A contract which is ultra vires the company is void an initio and has no legal effect. Therefore, actions that are forbidden by the MOA cannot be rendered intra vires even by unanimous consent or ratification by all the members.
Interpreting the issues, the court saw the object clause. The scope was making, selling, and hiring railway carriages. There was no incidental clause as well which was not even a concept back then. It was held that the Financing of railways was outside the scope and it was ultra vires was held by the court. The court stated that whatever is not allowed in MOA cannot be done by mere consenting. Ratification has no say for MOA. It needs a strict amendment. What was the liability of third liability? (Doctrine of constructive notice means outsider is not protected to something which is not on the contract.)
This Article Does Not Intend To Hurt The Sentiments Of Any Individual Community, Sect, Or Religion Etcetera. This Article Is Based Purely On The Authors Personal Views And Opinions In The Exercise Of The Fundamental Right Guaranteed Under Article 19(1)(A) And Other Related Laws Being Force In India, For The Time Being.
