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Student's Book Form Five

Memorandum of association
A memorandum of association is a legal document that outlines the key principles and
objectives upon which a company is formed. It serves as the constitution of a company
and it contains all essential information about the company’s structure, purpose, and
powers. The memorandum of association consists of the name, purpose, types of shares,
and amount of capital of the company. It is usually prepared with the help of a lawyer.
FOR ONLINE READING ONLY
Table 2.2 shows the components of the memorandum of association.

Table 2.2: Components of the memorandum of association

1. Name clause:
The name should be unique and must be differentiated from other existing
registered business names.

2. Place of operation/address/situation/location clause:
Information on the registered office where the books of accounts will be kept
and physical address is also added under this clause.
3. Objective clause:
The aims and objectives of the company are stated here. It includes both primary
and secondary goals.
4. Capital clause:
(a) Information on the authorised or registered capital of the business is provided.

(b) Information on the amount of share capital, the unit into which share capital
is divided and types of shares to be issued (common or preference share).
Note: The capital clause can be altered only after a meeting of the shareholders
and agreeing on the alterations by their majority (above fifty-one per cent).
5. Liability clause:
Information on the extent of liability to the owners is provided in this clause.

6. Declaration clause:
Declaration of the promoter or owners of the business on their desires to
establish the business.

Articles of association
Articles of association outline the internal rules and regulations governing the management
and operation of a company. These rules detail how the company will be operated,
including procedures for directors’ appointments, meetings, issuing shares, and distribution
of profits. Articles of association work in concurrence with the memorandum of association
to provide a thorough framework for the company’s structure and governance. Table 2.3
shows the components of the Articles of Association.

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