Memorandum
of Association defines the scope and ambit of the Company. Memorandum binds the
Company and outsiders. As per section 36(1) of the Companies Act, 1956
–Subscribers to the MOA
“Effect of memorandum and articles: Subject to the provisions of this Act, the
memorandum and articles shall, when registered, bind the company and the
members thereof to the same extent as if they respectively had been signed by
the company and by each member, and contained covenants on its and his part to
observe all the provisions of the memorandum and of the articles.”
The
section very clearly states that “Signing by the Company and Each member”. And
it also uses the term “Covenants”. Covenants mean Agreement. As it is used in
law it is a Contract. Hence we know as per the provisions of the Contract law –
Acceptance once given cannot be revoked. On understanding this general
principle of the Contract law – Revocation after registration is impossible.
Such
revocation shall be treated as the breach of the Contract. Only way by which
such withdrawal shall be permissible is acceptance by all other subscribers. I
again clarify; this is a procedural permission i.e. by FACT and not by LAW. In
order to prove such permission is erroneous by law, I hereby draw the words of
Sec.41 of the Companies Act,1956 “The subscribers of the memorandum of a
company shall be deemed to have agreed to become members of the company, and on
its registration, shall be entered as members in its register of members”.
Note:
Buckley says, "The subscriber is liable by virtue of the contract, which,
under this section, arises immediately upon his signature."
Coming
back to the query, Whether all by agreement could do so is a question it is not
necessary to consider, as such a step would destroy the proposed company
altogether, and the question of the protection of the public, which is the object
of the Act, would not arise as the literal meaning of the section is clear.
Even
by the PEEL’s case law, we have understood that Registration of the MOA is
conclusive evidence. Even though alteration of every other clause is possible
by law, one such provision is intentionally omitted in the ACT for subscribers
to the MOA to prohibit such alteration.
As
it is a breach of the Contract, Specific performance shall be the solution. As
per Sec. 15(h) and 19(e) of the Specific relief Act, it is an agreement. Hence
specific relief can be claimed.
Lord
Romilly in Drummond's Case 4 Ch. App. 772 at p. 776 note "The persons
signing the memorandum are required by the Legislature to do so as an earnest
that there are certain persons personally liable to pay money to the
company."
Sec.36(2)
of the Act says that “All money payable
by any member to the company under the memorandum or articles shall be a debt
due from him to the company”.
Hence
by analysing all these, it shall be clear – Subscriber to the MOA is
irrevocable acceptance.
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