Can The Object Clause Of Memorandum Of Association Be Changed?

It is the most important document of the company. It is the basis on which the super-structure of the company is based. It is also known as the constitution / charter of the company. This document is a sort of contract between the company and its shareholders. It defines the objects and determines the scope of the activities of the company. It sets out the limits outside which the company cannot go.

If the company works on a line, which is not given in the memorandum, then it will be considered as illegal. The memorandum should be printed and divided into different paragraphs. It is regarded as unalterable charter of the company as generally it is very difficult to change any clause of this document. This document must be signed by at least seven persons in case of public limited company and two persons in case of private limited company.

The memorandum must be prepared very carefully, printed and divided into different paragraphs, each paragraph must be numbered. It should stamp according to the provisions of the companies ordinance and signed by the subscriber in the presence of witness.

Since the Companies Act 2006 a Company can no longer be bound by its objects clause.

Some companies benefit by retaining an objects clause as then that company can impose restrictions on its freedom to contract. For example a company could choose to avoid ‘unfavourable’ contracts such as dealings with a tobacco company.

Also the Companies Act 2006 states that provisions that were originally part of the memorandum, such as the objects clause, are now deemed to be ‘article content’, despite the objects clause actually being in a company’s memorandum. Therefore these articles can now be altered by special resolution and therefore requires 75% of members support under s.21 of the Act.

Different between memorandum of association and article of association