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The first thing in the formation of a Joint Stock Company
is the preparation of the Memorandum Of Association.
It is a document which sets out the constitution of
the company and as such, is really the foundation on
which the structure of the company rests. That is why
Memorandum Of Association has often been called the
charter of the company in its relation to this outside
world. The promoters of the company prepare this document.
The Memorandum of association must contain the following
clauses.
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1. Name Clause:
In this clause the full name of the company is shown
and the last word of the name of the company must
be "Limited". The company can adopt any
name but there are certain restrictions and the words
like ROYAL, IMPERIAL, EMPIRE, ESTATE etc. cannot be
used without the special permission of the government.
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2. Object Clause:
This clause is quite important and must be very carefully
drafted as it determines the activities of the company.
In the object clause each and every detail of activities
of the business to be carried out must be laid down.
Once the object clause is completed, it becomes very
difficult to make any amendment. The value of the
shares, the allotment money must be given in detail.
Memorandum
Of Association
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3. Situation Clause:
This act provides that the company must have a registered
office so that the registrar may be able to send notice
etc. to the company at the registered office.
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4. Liability Clause:
A declaration that the share holders liability is
limited.
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5. Capital Clause:
This clause must contain a statement as to the amount
of capital with which the company proposes to be registered
and the division thereof into shares at certain fixed
amount.
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