Notes, Exercises, Videos, Tests and Things to Remember on Main Documents of Joint Stock Company
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Things to remember
The main documents for incorporation of a joint-stock company are as follows:
Memorandum of Association
Article of Association
Memorandum of Association
Memorandum of Association is the constitution of the joint stock company. It directs or instructs joint stock company. The joint stock company runs in accordance with the memorandum of association. Activities of the joint stock company are directed by the Memorandum of Association. Memorandum of Association is regarded as a blueprint as it is needed for the incorporation of the joint stock company. Memorandum of association is submitted to Company Registrar Office. Basic information and provision of the company are clearly mentioned in the memorandum of association. It defines scopes, objectives, functions of the joint stock company.
Main Clauses/ Contents of Memorandum of Association
Name clause: In the clause, a name of the company is clearly stated. Generally, the unique, attractive, short name is selected by promoters to attract the attention of the general public. Name of the company must be registerable. The name of the company should not match with some other registered company.
Address clause: Address of the company is clearly stated in the address clause. Basically, an address of the head office must be mentioned in the address clause. The address must be same as mentioned at the time of registration of the company.
Objective clause: Plans, policies, and objectives are formulated by the top level management. Major objectives/goals are clearly stated in this clause. The pointwise arrangement should be made if there are many objectives and goals. The objective of the company must be stated in this clause properly.
Functional clause: The organization has to perform different functions and activities. Those functions and activities are performed by different level staffs. Functions and activities are performed to achieve pre-determined goals. Functions and activities to be performed by the organization are clearly mentioned in this clause.
Capital clause: There must be an appropriate capital structure to run the activities of an organization. Authorized capital, issued capital, debt capital, equity capital, working capital, fixed capital etc. are mentioned in this clause.
Liability clause: Provision of liability is clearly mentioned in this clause. Basically, the joint stock company has a provision of limited liability which is clearly stated in this clause.
Restriction on transfer of share clause: In public company, shares are fully transferable whereas in private company shares are not transferable to outsiders. In this clause, the provision of transfer of share is clearly mentioned.
Article of Association
Different activities are performed in a joint stock company. Harmony and coordination are needed for the effective operation of business activities. The joint stock company is rigidly observed by the government so it must follow rules and regulations of a company. An article of association contains rules and regulations of a company. It regulates the management of the company. The article of association must be submitted to Company Registrar Office for the incorporation of business organization. The article is the outcome of mutual consent of the promotion. When promoters sign in this article then it is submitted to the concerned department of Nepal Government for legal validity.
Contents of Article of Association
Director related particulars: Number of directors to be elected in the company must be mentioned in this particular. Remuneration, appointment, facility of directors are clearly mentioned in this content. Here, the right of a number of directors, a role of directors and promoters, delegation of authority are also mentioned.
Meeting related particulars: The annual general meeting of the joint stock company is a very important meeting. In this particular quorum of a meeting is clearly stated and provision of conduction of the meeting is also mentioned. Basically, in the public company before the 21 days of conduction of meeting, shareholders are informed about the meeting. Agenda is also attached while informing shareholders about the meeting. Majority shareholders are needed to pass the agenda of the meeting.
Shares related particulars: Nature of share, transfer of share, an issue of share etc. are clearly depicted in the share related particulars. The way of transferring share related particulars and the way of transferring share is also stated.
Other particulars: In this procedure of appointment of an auditor, use, and formation of the common seal, the way of taking loan are clearly stated.
A prospectus is an invitation to the general public for purchasing the share of the public company. There is no any legal obligation to publish a prospectus in a private company. The prospectus provides a summary of past history. It helps to convert potential shareholders into existing shareholders. In a competitive market, a business must be able to draw the attention of the public.
Prospectus plays the role of advertisement. It plays a vital role to promote the activities of the company. General people/ outsiders observe the prospectus then decide to purchase a share.
In conclusion, a document which is issued to public people for informing about the company is called prospectus.
According to the Company Act, 2053, the prospectus must contain the following matters:
The main objectives of the company and other important matters mentioned in the Memorandum of Association and Article of Association.
A minimum number of share required to be subscribed to become the director and their salaries and allowances.
Description of cash receipt as the remuneration of share or reward by the promoters and directors.
The provision relating to bonus shares.
Provision if any regarding reservation of shares for any shareholder, employee or other persons.
Name and address of the directors and number of the shares subscribed.
A number of shares to be issued to the general public on par or premium.
A minimum number of shares to be subscribed advance payment along with the application.
Brokerage on shares and debentures.
Estimated expenditure for the company and estimated income at least for coming 3 years.
The net worth of the company.
Name and address of the auditors and the audit report, if any.
Date of opening and closing of the subscription list.
The balance sheet and profit and loss account of the company and time and place for inspecting the same.
Details of the underwriting of shares and commission of their earning.
Memorandum of Association Memorandum of Association is the constitution of Joint stock company. It describes the objectives and right of the company, and also regulates the relationships of the company with other parties.
Article of Association Article of Association is another important document of the company. It defines the mode and manner in which the company's business is to be carried out to achieve its objectives as stated in the Memorandum of Association.. The article is the outcome of mutual consent of the promotion.
Prospectus A prospectus is an invitation is a general public for purchasing share of the public company. There is no any legal obligation to publish a prospectus in a private company. Prospectus provides a summary of past history. The prospectus also highlight share transfers and share forfeiture of the company to protect the right of prospective shareholders.
According to______,"It is a person created by law,separated and distinct from its stockholders and in certain sense,it is citizen".
R.N ownes A.N Agrawal L.H Haney W.A . Wood
According to_______,"A company is a voluntary association of many persons who contribute money or money's worth to a common stock and employ it for a common purpose"
Lord Lindley R.N ownes L.H Haney Wheeler
A_______is an artificial person created by law.
Sole Trading concern Patnership Firm Multinational Company Joint stock company
A_______can collect a huge amount of capital than a sole trading concern and partnership firm by selling shares and debentures to the general public.
Multinational Company Sole Trading Concern Joint stock company Partnership Firm
______are the following matters that are discussed and passed under special resolution.
Changes in the memorandum and articles of association All Changes in the name,objectives and capital of the company Winding up the company
The process of collecting all the assets to pay the total liabilities in order to close the company permanently is called__________.
None Beginning up of a joint stock company Opening up of a joint stock company Winding up of a joint stock company
The agreement of all the shareholders at special general meeting to wind up the company is called____________.
Voluntary liquidation Special liquidation Compulsory liquidation Memorandum liquidation
The liquidation made by the office of the company Register is called____________.
Compulsory liquidation Memorandum liquidation Special liquidation Compulsory liquidation