A Memorandum of Association (MoA) represents the charter of the company. It is a legal document prepared during the formation and registration process of a company to define its relationship with shareholders and it specifies the objectives for which the company has been formed. The company can undertake only those activities that are mentioned in the Memorandum of Association. As such, the MoA lays down the boundary beyond which the actions of the company cannot go.
Memorandum of Association helps the shareholders, creditors and any other person dealing with the company to know the basic rights and powers of the company. Also, the contents of the MoA help the prospective shareholders in taking the right decision while thinking of investing in the company. MoA must be signed by at least 2 subscribers in case of a private limited company, and 7 members in case of a public limited company.
Format of Memorandum of Association
The format of a MoA is specified in Table A to Table E depending upon the type of company. A company can adopt the table applicable to it; for instance, Table A is for a company limited by shares, and Table B is for a company limited by guarantee and having share capital etc.
Contents of Memorandum of Association
Memorandum of Association (MoA) consists of the following clauses :
Name Clause: This clause specifies the name of the company. The name of the company should not be identical to any existing company. Also, if it is a private company, then it should have the word ‘Private Limited’ at the end. And in case of public company public company, then it should add the word “Limited” at the end of its name. For example, ABC Private Limited in case of the private, and ABC Ltd for a public company.
Registered Office Clause: This clause specifies the name of the State in which the registered office of the company is situated. This helps to determine the jurisdiction of the Registrar of Companies. The company is required to inform the location of the registered office to the Registrar of Companies within 30 days from the date of incorporation or commencement of the company.
Object Clause: This clause states the objective with which the company is formed. The objectives can be further divided into the following 3 subcategories:
Main Objective: It states the main business of the company
Incidental Objective: These are the objects ancillary to the attainment of main objects of the company
Other objectives: Any other objects which the company may pursue and are not covered in above (a) and (b)
Liability Clause: It states the liability of the members of the company. In case of an unlimited company, the liability of the members is unlimited whereas in case of a company limited by shares, the liability of the members is restricted by the amount unpaid on their share. For a company limited by guarantee, the liability of the members is restricted by the amount each member has agreed to contribute.
Capital Clause: This clause details the maximum capital that a company can raise which is also called the authorized/nominal capital of the company. This also explains the division of such capital amount into the number of shares of a fixed amount each.
Is the MoA and Articles of Association (AoA) of a company the same?
No. The Memorandum of Association (MoA) and Articles of Association (AoA) are not the same. The MoA lays down the essential details about the company, while the AoA includes the internal rules and regulations of the company. The AoA is subordinate to the MoA.
Is MoA required for the registration of a company?
Yes. The company owners must prepare the MoA of a company before applying for the company registration. It is a mandatory document required to be submitted to the Registrar of Companies while applying for company registration. The MoA must be signed by all the directors and members of the proposed company.
What is the purpose of MoA?
The main purpose of the MoA is to limit the scope of activities and powers of the company. A company is authorised to do only the acts within the scope of the powers provided to it by the MoA. Any act done by the company that is outside the scope of the MoA is ultra virus. The ultra virus act of the company means an act done by the company beyond its power. The members and depositors of a company can apply to the company tribunal to restrain the company from doing an act that can be considered as a breach of the provisions of the company’s MoA.
Is the MoA required for a startup?
Yes. Every company, whether registered as a private company, public company or one-person company, requires an MoA. Thus, if the startup plans to register as a company under the Companies Act, 2013, the startup must prepare MoA before applying for registration.
Does an LLP (Limited Liability Partnership) need MoA?
No. The LLP is registered under the Limited Liability Partnership Act, 2008. Under the LLP Act, 2008, an LLP is required to prepare the LLP deed. Thus, LLPs do not have to prepare an MoA.
Do all the companies require MoA?
Yes, it is mandatory for every company to have an MoA as it defines the scope of its operations. The entire structure of the company is detailed in the MoA. It is to be submitted to the Registrar of Companies. It is a public document, and any person can view the MoA of the company by paying the required fees to the Ministry of Corporate Affairs (MCA).
What is the use of an MoA?
The MoA defines the scope and powers of a company beyond which the company cannot operate. It regulates the company’s relationship with the outside world. A company cannot be registered without having an MoA. It helps anyone who wants to enter into a contractual relationship with the company to gain knowledge about the company. It is also called the company’s charter, as it contains all the company’s details, its members and their liabilities.
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