A memorandum of association is a document issued by a company for the guidance of the general public. It is a charter explaining to the public name, address, capital, objectives, and liability of the company. It defines its limitations and powers and guides shareholders and creditors of the company. It is divided into five clauses as under:
Name Clause
A company may adopt any name subject to the conditions laid down in the Companies Ordinance, 1984. One condition prohibits a company to adopt names like Quide-e-Azam or Mohammed Ali Jinnah and cannot use words like federal, or state. An already registered name can not be adopted either. The word limited must follow the name of the company.
Domicile Clause
Every company must have a registered office. A memorandum must mention the name of the province where the company has its registered office. A company may shift its registered office within the province without any legal implications.
Objective Clause
A company must mention its objectives for which it has been formed. It has no authority or power to do a business beyond those mentioned in the objective clause of the memorandum. Every objective must be specifically, expressly, and clearly mentioned. To avoid any difficulty in future, a company includes those objectives which it does not have at present but is likely to start any of them some times in future.
Capital Clause
This clause mentions the authorized capital of the company. The company s subscribed, called up, and paid up capital should not exceed it. To avoid any future difficulty and legal implications most companies get their authorized capital registered in much higher amount than required at present.
Liability Clause
This clause shows that the liability of shareholders of the company is limited to the amount invested by them in the company. It also means that the liability of the company to pay off its debts is limited to its capital.
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