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.
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.
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
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.
4. Liability Clause:
A declaration that the share holders liability is limited.
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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