Updated on: Sep 28th, 2023
173 min read
A group of people come together to form a company to achieve a specific purpose. A company is usually established to earn profits and is commercial in nature. An application must be filed with the Registrar of Companies (ROC) along with certain documents to register a company. One crucial document required to be submitted to the ROC while applying for registration is the company’s Memorandum of Association (MoA).
A Memorandum of Association (MoA) represents the charter of the company. It is a legal document prepared during a company's formation and registration process. It defines the company's relationship with shareholders and specifies the objectives for which the company has been formed. The company can undertake only those activities mentioned in the Memorandum of Association.
As such, the MoA lays down the boundary beyond which the company’s actions cannot go. When the company's actions are beyond the boundary of the MoA, such actions will be considered ultra vires and thus void. The MoA is a foundation upon which the company is established. The company's entire structure is written down in a detailed manner in the MoA.
The Memorandum of Association is a public document. Any person can get the MoA of the company by paying the prescribed fees to the ROC. Thus, it helps the shareholders, creditors and any other person dealing with the company to know the basic rights and powers of the company before entering into a contract with it. Also, the contents of the MoA help by the prospective shareholders make the right decision while considering investing in the company. MoA must be signed by at least 2 subscribers in the case of a private limited company and 7 members in the case of a public limited company.
Section 4(6) of the Companies Act, 2013 (‘Act’) states that the format of an MoA will be as specified in Table A to Table E of Schedule 1 of the Act. Every company needs to select the appropriate format provided in Table A to E depending on its business type. The different formats provided in Act are as follows:
Table A – It is applicable to companies with a share capital.
Table B – It is applicable to a company limited by guarantee but does not have a share capital.
Table C – It is applicable to a company limited by guarantee having a share capital.
Table D – It is applicable to an unlimited company but does not have a share capital.
Table E – It is applicable to an unlimited company with a share capital.
The MoA should be numbered, printed and divided into paragraphs. The subscribers of the company must sign the MoA.
The Memorandum of Association is a necessary document that includes the company’s crucial information. Section 3 of the Act states that the company can be formed when the following members subscribe to the memorandum:
A company can be registered only when the MoA is drafted and it is signed/subscribed by the minimum numbers as provided above. Thus, the MoA of all companies is required for company registration.
Section 7(1)(a) of the Act further provides that a company’s Memorandum of Association and Articles of Association (AoA) must be duly signed by the subscribers for the company to be registered with the ROC. The MoA copy should be given to the ROC while applying for company registration. The ROC can provide the certified copy of the MoA to the public upon payment of the prescribed fees. It helps shareholders in the following ways:
The following are the clauses in Memorandum of Association:
The memorandum of association clauses/contents are as follows:
1. 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. In the case of a public company, then it should add the word “Limited” at the end of its name. For example, ABC Private Limited in the case of the private, and ABC Ltd for a public company. The name should be in compliance with the provisions laid down in the Companies Act and Rules.
2. Registered Office Clause:
This clause specifies the name of the State in which the registered office of the company is situated. It helps to determine the jurisdiction of the Registrar of Companies. The company must inform the registered office location and address to the Registrar of Companies within 30 days from the date of incorporation or commencement of the company. The registered office is the official office of the company. All communications, legal notices and documents will be sent to the registered office address.
3. Object Clause:
This clause states the objective with which the company is formed. The company must carry out its business activities to fulfill the objectives mentioned in this clause. It helps to protect the interests of the stakeholders since the company must operate within the scope of its object clause and should not engage in any activities not specified in this clause. The objectives can be further divided into the following 3 subcategories:
4. Liability Clause:
It states the nature of liability of the members of the company in case of any loss or debts incurred by it. In the case of an unlimited company, the liability of the members is unlimited. Whereas, in the 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.
5. Capital Clause:
This clause details the maximum capital a company can raise, also called the authorized/nominal capital of the company. It provides the maximum amount of capital that can be issued to the company shareholders. It also explains the division of such capital amount into the number of shares of a fixed amount each. It should also specify the type of shares the company is authorised to issue, i.e. equity shares, preference shares, or debentures.
If there are any changes in the clauses of the MoA, the MoA must be altered or amended to include the changes. The following changes will lead to the alteration of the MoA:
The process of alteration of the MoA is as follows:
You can also have a look at the Articles of Association
The Memorandum of Association (MoA) is the foundation for all companies. It is a primary document for the incorporation of a company. It should be prepared before applying for company registration and signed by the founder members of the company.
The MoA of all companies begins with the ‘Name Clause’ followed by the ‘Office Clause’ and the other clauses.
The liability clause provides the extent of liability of the company's shareholders. It protects the shareholders from being held personally liable for the company's loss. The liability clause describes whether the company is limited by shares or limited by guarantee. If a company is limited by shares, the shareholders will only have to pay the unpaid share price they have subscribed to in case of a loss. If the company is limited by guarantee, the members give a guarantee of a fixed amount that they will be liable to pay in case of a loss.
The first clause of the MoA is the name clause. It states the official name of the company under which it transacts or conducts its business. A company can choose any name, but certain conditions need to be complied with. The name stated in the MoA should not be identical to the name of another registered company or resemble the name of an existing company.
The following persons can be members of a company and, thus, subscribe to the MoA:
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.
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.
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.
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.
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.
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).
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.