Both Memorandum and articles
of association are required for setting up a company under Company Ordinance
1984. The memorandum of association is a
document that provides fundamental information about company to general public.
While the articles of association is a document that explains how the company
is run and governed. These two documents need to be filed with registrar of the
companies. They are explained below.
Memorandum of Association
Memorandum of association
which is also known as charter of the company is a document that contains all
the basic information of the company. It contains name, address, capital,
objectives and liability of the company. It defines powers and limitations of
the company. It is issued to general public for their guidance.
Memorandum of association is
categorized into five clauses which are following:
1. Name Clause
A company may select any name
but it must not be registered by another company. The name of the company must end with the
word limited. The company must follow
other name conditions stated in the Companies Ordinance 1984.
2. Domicile Clause
A company is required to mention
exact address and name of the city where the registered office of the company
is located. It is also necessary to state the province name where the office of
the company is situated.
3. Objective Clause
The objectives of the company
must be clearly mentioned in the objective clause for which the company has
been established. The company has no authority to do a business beyond those mentioned
in the objective clause of the memorandum.
4. Capital Clause
The capital clause specifies
the authorized capital of the company. The authorized capital is divided into
shares of a certain value.
5. Liability Clause
The liability clause explains
that the liability of shareholders of the company is limited to the amount they
have invested in the company. It means their private property remains safe in
case of bankruptcy.
Articles of Association
Articles of Association is a document explaining rules
and regulations that governs the company. It is necessary for every company
registered by shares to have its own articles of association. In case, if a
company does not prepare its own articles then Table ‘A’ of the Company
Ordinance would adopt. While private
companies are not bound to prepare its articles of association.
The contents of articles of association are given below:
- Financial year of the company.
- Kinds of capital, shares and debentures.
- Premium on shares.
- Discount on shares.
- Manner of transfer of shares.
- Forfeiture and surrender of shares.
- Declaration of dividends.
- Name, address, qualification, powers and liabilities of directors.
- Appointment of directors.
- Salaries and allowances of directors.
- Appointment and qualification of agents and secretaries.
- Inventory valuation.
- Method of depreciation.
- Matters related to account and audit.
- Conduct of meetings.
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