What is Memorandum of Association?

Memorandum of Association is the fundamental document prepared by the company during the time of registration at the Office of Company registrar. It is the most basic document of the company which contains the fundamental conditions upon which the company has been incorporated. It sets out the constitution of the company and limits the scope of activities of the company. It enables the shareholders, creditors and other stakeholders of the company to know the purpose for which the company has been established and its permitted scope of its activities.

Contents of Memorandum of Association

The Companies Act of Nepal has stated the following matters to be included in the Memorandum of Association:

(a) The name of company,

(b) The address of the registered office of the company,

(c) The objectives of the company,

(d) The acts to be carried out to accomplish the objectives of the company,

(e) The figure of the authorized capital of the company and the figure of the share capital to be issued by the company for time being and the figure of undertaken to be paid by the promoter of the company,

(f) Types of shares of the company, the rights and powers inherent in such shares, value of each share and number of shares of different types,

(g) Restrictions, if any, in the purchase or transfer of shares,

(h) Number of shares which the promoters have undertaken to subscribe for the time being,

(i) Terms of payments of share amounts,

(j) Statements that the liability of shareholders shall be limited,

(k) The maximum number of shareholders in case of a private company,

(l) Other necessary matters.  

Also, the Act has mentioned that the Memorandum of Association can also mentioned the following additional matters:

(a) If the promoter or any other person is entitled to subscribe shares or acquire title thereto in any manner other than by making payment in cash, such matter,

(b) If the company is to acquire any property in any manner from the promoter or any other person at the time of commencement of its transactions such matter,

(c) If the company itself to bear the expenses incurred on its incorporation, such matter,

(d) If the promoter or any other person is entitled to any special privilege or right from the company, such matter,

Can the promoter subscribe shares by making payment through other means than cash?

If the promoter subscribes share by providing property, such property should be valued by the engineer or accountant holding certificate to conduct valuation work. Such criteria for valuation shall be prescribed by the Office of Company Registrar.

Signature to be affixed on Memorandum of Association

The memorandum of association of a company should state the full names and addresses of its promoters, indicate the number of shares which each promoter has undertaken to subscribe and be signed by each of them. Also, the memorandum of association should clearly contain the names and address of a witness for each promoter and also bear the signature of such witness. Each promoter should undertake to subscribe the shares as mentioned in the articles of association of the company and at least one hundred shares if no provision is mentioned.

What is Articles of Association?

Articles of Association is the set of rules and regulations of the company to carry out the objectives of the company. This document is signed by the promoters and submitted to the Office of the Company Registrar at the time of incorporation of the company. It clearly sets the duties and responsibilities of the Board of Directors and how the shareholders can exercise control over the Board of Directors.

Contents of Articles of Association

The Companies Act of Nepal has stated the following matters to be included in the Articles of Association:

(a) Procedures for convening the general meeting of the company and notice to be given for such meeting,

(b) Proceedings of general meeting,

(c) Number of directors, provision of alternate director, if any, and tenure of directors,

(d) Provisions relating to the minutes of decisions of the general meeting and the board of directors, and duplicate copies and inspection thereof,

(e) If a person has to subscribe shares to become a director of a company, minimum number of shares,

(f) In the case of a public company, qualifications and number of independent director,

(g) Where any professional persons, other than shareholders, are to be appointed as directors, provisions relating to the number, tenure, qualifications and procedures of appointment of such persons,

(h) Powers and duties of the board of directors and the managing director,

(i) Authority of directors and delegation of authority,

(j) Quorum for a meeting of the board of directors, notice of meeting and proceedings of meeting,

(k) Lien on shares,

(l) Different classes of shares and the rights, powers and restrictions attached to such shares,

(m) Provisions relating to calls on shares and forfeiture of shares,

(n) Provisions relating to the transfer of shares,

(o) Matters on alteration in share capital,

(p) Matters on buying back of shares by the company, if the company is to buy back its shares,

(q) Appointment of a company secretary,

(r) Provisions relating to remuneration, allowances and facilities of directors,

(s) Use of the company’s seal in its transactions, if it is to be so used,

(t) Accounts, books of accounts and audit of the company,

(u) Provisions on powers to raise loans or debentures,

(v) Amalgamation of the company,

(w) Such matters, if any, as required by the prevailing law to be mentioned in the articles of association of a company carrying on any specific business,

(x) Such other necessary matters as required to be mentioned in the articles of association.

Amendment of the Memorandum of Association and Articles of Association

The general meeting of the company can amend the Memorandum of Association and Articles of Association by adopting a special resolution in the meeting. The shareholders who are dissatisfied with the amendment can file a case to the court within 21 days of the adoption of the resolution. This provision is available only in the case of public companies.

Publication of the Memorandum of Association and Articles of Association

The public companies must publish its Memorandum of Association and Articles of Association within three months after getting license to commence its business. The time period is also same in the case of amendment of the Memorandum of Association and Articles of Association.

The published Memorandum of Association and Articles of Association of the public company should be kept at the registered office and be made available on the request of any person.

Format of the Memorandum of Association and Articles of Association

The standard format of the Memorandum of Association and Articles of Association is available at the website of the Office of Company Registrar and can be downloaded for the reference purpose for our own company.