|
Memorandum and articles of association are the documents needed to form a company. Before we discuss further about them let us know how a company can be formed.
Formation of a company:
Following are the steps by which a company can be formed:
- The proposed company name should be approved by the registrar of companies.
- Secondly, the memorandum and articles of association of articles should be prepared.
- Suitable persons should be appointed for the subscription of memorandum of association.
- Registration fees should be deposited to registrar of companies and receipt of certificate of incorporation should be collected.
- Business commencement certificate should be collected from the registrar of company.
Types of companies:
Basically the company can be classified into four types:
- Private company limited by shares
- Private company limited by guarantee
- Private unlimited company
- Private limited company
A company who wants to register with the registrar of companies should give the following details:
- Details of directors, company secretary and members.
- That company should have a registered office.
Procedure to set up a company:
Once all the details are provided to the registrar of companies the following procedure should be done to set up a company:
The first and foremost step to register a company is to choose a company name.
Before choosing a company name the following things should be kept in mind:
- The company name should not already exist in the registry.
- The names which are likely to cause offence should not be allowed.
- The use of certain words is also restricted.
Once the name is decided then the following documents should be given to the registrar of companies:
- A memorandum of association.
- Articles of association.
- Form 10.
- Form 12.
Memorandum of Association:
This document should contain
- The company name.
- The address where the registered office of the company is located.
- The objects of the company.
- The name and addresses of the directors of the company
Depending on the type of the company other clauses can be included in the memorandum.
Articles of association:
The rules regarding the company's internal affairs are prescribed in this document. The subscribers signed the company's articles in front of the witness which are ultimately delivering to the registrar. These witnesses also attest the signatures.
Form 10:
In this form the details of the first director, secretary and the address of the registered office is required. Also the directors have to give their birth and occupation details, as well as the details of the directorships they held within the last five years.
Form 12:
Form 12 must be signed at the last when all the registration requirements have been completed and this form is signed in the presence of commissioner.
So memorandum and articles of association play an important role in company registration process.
Advantages:
- Minimum subscription is not required.
- Company's can easily raise the sufficient capital through shares.
- These are appropriate for the business persons who have the limited capital.
- Even the non resident shareholders are not responsible for the additional tax on dividends.
- Accounts of any currency can be freely transferable without any exchange control restrictions.
Disadvantages:
- The expenses for the company formation are very high.
- The alteration of memorandum is not so easy.
- The procedure for the establishment and the legal formalities are very complicated.
- The administrative costs and the tax payment are very high.
- In the private company shares cannot be sold to the public.
- The problem of management occurs when directors are not able to manage the company as the sole traders do.
|
