basic legal documents

8/9/2019 Basic Legal Documents

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BASIC LEGAL DOCUMENTS

There are three basic legal of documents

1)Memorandum of Association2)Articles of Association3)Prospectus

1) MEMORANDUM OF ASSOCIATIONMemorandum of Association is the basic documents of a joint stock

company it is known as the Charter of the Company. Since it is the

constitution of the company; if therefore define as confines the powers of

a company.

Contents of Memorandum

The memorandum of association of a company limited by share must have following

clauses

1. Name clauseIt is a legal requirement that a company must state the name of the

company. A company mayselect any name but it should not resemble

the name of any other company. If should also notcertain the words

like king, queen, emperor, government bodies UNO; WHO etc.


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2. Situation clausesIt is also known as domicile clause. A company is requird to state the

name of the province inwhich the office is situated. It is also necessary

to give the exact address and name of the citywhere the company is

located. This clause has the following advantages.

3.Object clauseThis clause is the essence of the memorandum. If clearly defines the

sphere of the companysactivities. It indicates a series of objects for

which the company is started. Any business activitycarried outside theterritories specified in the object clause of memorandum is ultra vires

andvoid.

4.Liability clauseThis clause shows the nature of the liability of the member. In case of a

company limited byshare the liability of a member is limited to the

nominal value of shares held by him. In case of acompany limited by

guarantee.

2)ARTICLES OF ASSOCIATIONMeaning: Articles of association is a legal documents second in

importance to memorandumof association.

The articles of association are the regulations or by which govern the

internal organization andconduct of a company.

Contents of Memorandum(1)Amount of shares capital issued, transmission of shares.(2)Rights of shareholder regarding voting dividend of shares.(3)Rules regarding issue of share and debentures.(4)Procedure as well as regulations in respect of making calls on share


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(5)Manner of transfer of share(6)Rules regarding appointments in directors managing .(7)Number, qualification, remuneration power etc.(8)Declaration of diligence(9)Convening and conduct of meetings with reference to notice .(10) Rules regarding the forfeiture and surrender of shares(11) Matters relating to account and audit(12) Rules regarding the sanding up of the company.

3) PROSPECTUSThis notice advertisement or other documents inviting offers for the

subscriptions to the share capital of the company is called prospectus.Only public companies can issue a prospectus

(1)To bring to the notice the public that a new company has been(2)To convince those who have saving to invest about the genuineness

of the company and itd futures prospectus.

(3)To keep an authenticated record of the conditions on which thecapital has been raised .

(4)To secure that the directors of the company accept responsibility forthe statements in the prospectus.

1. Brief history of prospectus. It includes(i) Brief history if company(ii) The main objects of the company.(iii) The location of the plane.(iv) Information about project plant and its machinery raw materials

etc

(v) Economics justification and marketability if the goods to beproduced

2. Capital stature.


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(i) Share capital of the company(ii) Basis of allotment of shares.(iii) Facilities available to nonresident Pakistanis for purchase of

share etc

3. Financial information.(i) Auditors reports(ii) Shareholders(iii) Auditors certificate on share capital

4. General information(i) Appointment of chief executive(ii) Election of directors(iii) Powers of directors(iv) Borrowing power of the directors(v) Transfer of shares

5. Board of directors(i) Under this head, the names , address, and occupation of the board

of directors is given

6. Interest of directors(i) Interest of directors in dividends and others benefits(ii) Remunerations to be paid to the chief executive, directors and the

secretary.