Memorandum of Association is the supreme basic legal document for a company due to the following reasons:
It is the basic of incorporation and a company cannot be registered without a Memorandum of Association. It contains the fundamental conditions upon which alone the company can be incorporated.
It is the charter of the company, which defines the objects of the company’s formation and the utmost possible scope of its operations beyond which its actions cannot go.
It can be said to be the foundation stone, upon which the future structure of the company will stand
It determines the limits of a Company’s activities. Any activity done outside the scope of the memorandum will be ultra vires and void. Even the whole body of members cannot make it avlid and binding for the company. This is known as the Doctrine of ultra vires.
It informs the investors of the purposes for which their money will be utilised by the company
It enables outsiders to know whether the company is authorised to enter into a particular transaction.
It indicates the names and addresses of the people who have promoted the company.
It makes known to the shareholders the extent of their liabilty.