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All Souls Day.

All Souls Day follows All Saints Day, and solemnly commemorates the faithful departed, i.e. those who die with God's grace and friendship. Catholics believe that not all those who die in God's grace are immediately ready for the Beatific vision, i.e. the reality and goodness of God and heaven, so they must be purified of "lesser faults," and the temporal effects of sin. The Catholic Church calls this purification of the elect, "purgatory." The Catholic teaching on Purgatory essentially requires belief in two realities: 1. that there will be a purification of believers prior to entering heaven and 2. that the prayers and masses of the faithful in some way benefit those in the state of purification. As to the duration, place, and exact nature of this purification, the Church has no official dogma, although Saint Augustine and others used fire as a way to explain the nature of the purification. Many faithful Catholics, including Pope Benedict XVI, grant that Purgatory may be an existential state as opposed to a temporal place. In other words, Purgatory may be something we experience instantaneously, because it is outside of the confines of created time and space. Many non-Catholics, including C.S. Lewis, have believed in Purgatory, and the official dogma of Purgatory is hardly offensive, even if the popular understanding of it has led to confusion. As a more everyday explanation, many liken Purgatory to a place or state where one gets "cleaned up" before entering into the presence of Almighty God.
The Church prays for, and remembers, the faithful departed throughout the entire year. However, All Souls is the general, solemn, day of commemoration, when the Church remembers, prays for, and offers requiem masses up for the faithful departed in the state of purification. Typically Christians will take this day to offer prayers up on behalf of their departed relatives and friends. Others may remember influential individuals that they never knew personally, such as presidents, musicians, etc. This may be done in the form of the Office of the Dead (Defunctorum officium), i.e. a prayer service offered in memory of departed loved ones. Often this office is prayed on the anniversary (or eve) of the death of a loved one, or on All Souls' Day.
Christians have been praying for their departed brothers and sisters since the earliest days of Christianity. Early liturgies and inscriptions on catacomb walls attest to the ancientness of prayers for the dead, even if the Church needed more time to develop a substantial theology behind the practice. Praying for the dead is actually borrowed from Judaism, as indicated in 2 Maccabees 12:41-42. In the New Testament, St Paul prays for mercy for his departed friend Onesiphorus (2 Timothy 1:18). Early Christian writers Tertullian and St. Cyprian testify to the regular practice of praying for the souls of the departed. Tertullian justified the practice based on custom and Tradition, and not on explicit scriptural teaching. This demonstrates that Christians believed that their prayers could somehow have a positive effect on the souls of departed believers. Closely connected to the ancient practice of praying for the dead is the belief in an explicit state called purgatory. The New Testament hints at a purification of believers after death. For example, Saint Paul speaks of being saved, "but only as through fire" (1 Corinthians 3:15). Over time, many Church Fathers, including St. Augustine, e.g. in Enchiridion of Faith, Hope, and Love and City of God, further developed the concept of a purgation of sins through fire after death.

In the early days, departed Christians' names were placed on diptychs. In the sixth century, Benedictine communities held commemorations for the departed on the feast of Pentecost. All Souls' Day became a universal festival largely on account of the influence of Odilo of Cluny in AD 998, when he commanded its annual celebration in the Benedictine houses of his congregation. This soon spread to the Carthusian congregations as well. The day was celebrated on various days, including October 15th in 12th century Milan. Today all Western Catholics celebrate All Souls' Day on November 2, as do many Anglicans and Lutherans. Initially many Protestant reformers rejected All Souls' Day because of the theology behind the feast (Purgatory and prayers/masses for the dead), but the feast is now being celebrated in many Protestant communities, in many cases with a sub-Catholic theology of Purgatory. Some Protestants even pray for the dead; many Anglican liturgies include such prayers. While the Eastern Churches lack a clearly defined doctrine of Purgatory, they still regularly pray for the departed. See the Oxford Dictionary of the Christian Church and The Catholic Source Book for more information.

http://www.churchyear.net/allsouls.html