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

The capital clause specifying the maximum amount of share capital a private limited company is authorized to issue is contained within its Articles of Association.

Answer: Answer

Answer

False. The maximum authorized share capital of a private limited company is stipulated in the Memorandum of Association, not the Articles of Association.
The statement is false because the capital clause, which specifies the maximum authorized (or nominal) share capital a company can issue, is legally mandated to be part of the Memorandum of Association. The Articles of Association only set out internal operational rules and regulations.

Step-by-Step Solution

1
Examine the legal role of the Memorandum of Association.
The Memorandum of Association defines the company's external constitution, legal name, registered office, objects, liability, and capital structure.
It acts as the external boundary specifying the powers and registered capacity of the business entity.
2
Examine the legal role of the Articles of Association.
The Articles of Association contain rules and regulations governing internal management, such as share transfer procedures, director duties, and meeting arrangements.
It serves as an internal contract between members and the company for administrative governance.
3
Evaluate the statement's accuracy.
The statement erroneously places the capital clause in the Articles of Association rather than the Memorandum of Association.
The limit of registered capital is a statutory fundamental clause belonging strictly in the Memorandum of Association.

Key Concept

Distinction between Memorandum of Association and Articles of Association regarding capital clause
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Topics

Private Limited Companies: Characteristics, Formation Documents, and Capital

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