December 06, 2017

Memorandum and Articles of Association

December 06, 2017

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 and articles of association

 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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