This is document that defines that relationship between the company and outsiders. It informs the outsiders what the company does, the amount that is required. The memorandum of association is the company’s chatter constitution and once the company is registered the memo becomes a legal document that can only be altered by law.
Contents of a Memorandum of Association.
1. Name clause – This states that name of the company ending with the work limited.
Any name may be selected to be used by the company as long as it is not prohibited by law.
This requirement is meant to protect people who may erroneously enter into a contract in the company believing it to be another company an also protects companies from possibly mis-use of their names.
2. Object clause – this clause outline the objectives of the company anything outside this objective will ultra virus.
Importance of the Memorandum of Association
- It defines the limits of company associations.
- It informs subscribers the purpose for which their money will be put.
- It protects subscribers form possible misuse of their money
- It protects outside parties dealing with the company by informing them the extent of its operation.
3. Situation clause- This clause discloses the locations of the legislative office and it contains the following elements.
- Where the company is situated
- Where the letters may be delivered
- Where sermons may be served.
4. Liability clause – This clause states the status of the member’s liability with regard to the debts of the company.
The clause enables people who may enter into contract with the company to determine the extent of the company’s liability. The statement of liability should clearly specify the members liability regard to
the company debts.
5. Capital clause
The clause states the total capital of the company is authorized capital into shares and their corresponding value.
Incase of a public company, the capital clause will give the minimum amount of capital hat the company must raise before it commences business.
6. Association of substitution clause- This contains a declaration by the promoters (original owners) that they desire to form a company to pursue the objects of the memorandum of association and that they agree to take payments of their shares.
The promoters are required to give details of their name addresses, occupation and no. of shares
ARTICLES OF ASSOCIATION
This document contains the rules and regulations pertaining the relationship between the shareholders and the company among the shareholders themselves. These rules regulate the internal relations of the company forming a binding contact between the members and the companies and as well as among the members themselves.
Content of Articles of Association.
1. The right of each member e.g voting rights.
2. The issue, transfer and for future of shares and the alterations of shareholders.
3. procedures of calling and conducting meeting
4. the methods of appointing or electing officials
5. Qualification procedures duties and rights of directors
6. Preparation of books of accounts and the auditor’s report.
NB whereas the memorandum of association is mandatory document of all companies, the articles of association are optional.
Where the company does not draw the articles of association, it can adopt the standard articles of association contained in the company Act. A company may alter or amend its articles of association and such amends shall be valid. The power to alter the articles of association is specified in the memorandum of association.
List of persons who have consented to the directors of a company
The directors are chosen from the founders of the company referred to as promoters and the list contains details of names addresses, occupations, shares subscribed and a statement of agreement to serve as directors. A statutory declaration of compliant with the requirement of the company’s Act.
The declaration must be signed by person’s names as directors or the company’s secretary. The declaration must be equally by signed by the advocate engaged in the formation of the company and must expressly state that the company is formed by lawful persons.