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Purpose of Memorandum of Association

The very basic purpose of a MEMORANDUM OF ASSOCIATION of a company, is to make aware its reader (that is generally its stakeholder or investor) of the objects of a company, which are permitted under the law. This particular thing has been discussed in one of the acknowledged case Cotman v Brougham [1918] AC 514.

A Company can not act beyond the above said purpose, unless approved under the law, otherwise it would lead to an ultra vires action of the company. 

In accordance with the section 245 of the companies act 2013, member(s) or depositor(s) can file an application before the Tribunal (NCLT) for seeking an order to restrain the company from committing an act which is ultra vires the articles or memorandum of the company;

An Investor like a shareholder or a stakeholder like bank, usually checks the memorandum of a company to know about the permitted activities/business to that company, to finally decide whether to fund that company or not.

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