What is Meant by Memorandum of a Company?
“A memorandum is the basic document of a company with regard to its constitution. A kind of candidness and transparency about the company is achieved in this way.”
A memorandum is the primary document of a company, which contains conditions upon which the company is incorporated. This document ensures that a company does not have unlimited powers and is established as per the regulations of a government act.
The whole structure of the company is built upon memorandum. It explains the scope of activities of the company. The investors know where their money will be spent and outsiders also come to know about the nature of activities that the company is authorized to take up.
So, a kind of candidness and transparency is achieved in this way. It is the basic document of the company with regard to its constitution. Memorandum is a charter of the company, which sets out its written goals.
The first important thing that a memorandum of association contains is the name clause. A company being a separate legal entity must have a name. A company may select a name, which does not resemble the name of any other company and does not contain the words like king, queen, and names of world bodies like U.N.O., W.H.O etc.
The name should not be objectionable in the opinion of the government. The word limited should be used at the end of the name of a public company and the words private limited should be used by a private company. These words are used to ensure that all persons of the company should know that the liabilities of its members are limited.
Every company should have a registered office, the address of which should be communicated to the registrar of companies. This helps the registrar to have communication with the company.
A company can shift the registered office from one place to another in the same town after intimating the registrar. But if the company wants to shift the registered office from one town to another town in the same state, a special resolution is required to be passed. If the company wants to shift the registered office from one state to another, a change in the memorandum is often required.
So, memorandum outlines certain basic tenets that are to be followed by every company to safeguard the interests of nation, society and business as a whole.
Author - DeeKay
Tags - Finance, Economy
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