Capital clause of Memorandum of Association

Capital clause of Memorandum of Association

Capital clause of Memorandum of Association

A company’s memorandum of association, often simply called the “Memorandum”, is the document that governs relations between the company and the outside world. It serves as the constitution of the company. It is a public document and may be inspected by anyone, usually at the public office where it is lodged. The structure and formulation of Joint Stock Company are made on the basis of the memorandum of association.

Memorandum of Association is the most important document as it treated as a constitution of the company. No company can legally undertake activities that are not contained in its Memorandum of Association. According to the Companies Act-1994 and the Section-11, Name clause is placed in it as per below:

Capital clause: This clause contains the total amount of proposed capital and face value and number of the shares. It must contain a statement as to the amount of capital with which the company proposes to be registered and the division of share’ at the certain fixed amount. A company cannot issue share capital greater than the maximum amount of share capital mentioned in this clause without altering the memorandum. This clause states the total capital of the proposed company. The amount of capital as stated in the memorandum is known as the authorized capital of the company. A company cannot collect funds exceeding the authorized capital.

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