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 MoA. As such, the MoA lays down the boundary beyond which the actions of the company cannot go.
MoA 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 MoA
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 MoA
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 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.