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Difficulty: MediumPrivate Limited Companies: Characteristics, Formation Documents, and Capital

In the legal formation of a private limited company, the promoters must submit fundamental documents to the Registrar of Companies. Which incorporation document governs the external relationship of the business with the outside world and contains the Objects Clause defining its authorized scope of activities?

  1. Memorandum of AssociationAnswer
  2. B
    Articles of Association
  3. C
    Prospectus
  4. D
    Certificate of Trading

Answer

The Memorandum of Association is the constitutional document that sets out the external relations of a private limited company, including its registered name, objectives (Objects Clause), liability statement, and authorized capital.
The Memorandum of Association establishes the company's external legal identity and defines the specific line of business it is legally permitted to pursue under its Objects Clause. Any activity outside this clause is deemed ultra vires.

Step-by-Step Solution

1
Identify the legal document regulating external relationships and business scope.
The Memorandum of Association serves as the constitution defining company powers relative to third parties.
It contains fundamental clauses including the Name Clause, Registered Office Clause, Objects Clause, Limitation of Liability Clause, and Capital Clause.
2
Differentiate the Memorandum from internal governing documents.
The Articles of Association handle internal administration such as voting rights, director duties, and share transfer rules.
Confusing internal regulation with external constitutional boundaries is a common misconception.

Key Concept

Functions of Formation Documents in Private Limited Companies
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Topics

Private Limited Companies: Characteristics, Formation Documents, and Capital

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