The Memorandum of Association (MoA) is a legal document prepared at the time of registering a company to define the company’s relationship with its shareholders. MoA specifies the objectives of the company that is being registered.
The Memorandum of Association of a Company –
1. Explains all the rules and powers of the owner in a systematic formal representation
2. Lays down the boundary beyond which the actions of the company cannot go
3. Represents the charter of the company
The Memorandum of Association restricts the company’s activities to only those activities that are mentioned in the Memorandum of Association
As per section 2 of the Companies Act, 2013 Memorandum means the Memorandum of Association of a company as originally framed or as altered from time to time in pursuance of any previous company law or of this Act.
Memorandum of Association is a legal document that states the scope of business activities of the company and furnishes the information of shareholding of the company. It lays the foundation of the company’s authority and the terms of its functioning. It is a set of instructions that includes all of a company’s laws and regulations for its interactions with the outside world.
The Memorandum of Association of any company is formed or designed by considering the objective of the company being registered.The MoA is prepared at the time of the Company registration. It is also referred to as the Charter of the Company. As a part of the Ease of doing business initiative of the government, the Ministry of Corporate Affairs (MCA) has introduced completely online filing for company registration.
The MCA is striving to achieve One Day Company Formation with the new SPICe forms. After the SPICe form has been prepared, individuals wishing to register a company must submit the e-MoA (INC-33) electronic form along with e-AoA (INC-34) to complete the company incorporation procedure.
The Memorandum of Association describes and defines the company’s relationship with all its stakeholders including the shareholders, creditors and any person or business dealing with the company in any manner. It also provides information about the basic rights and powers of the company. MoA helps the investors in deciding whether to invest in the company or not by providing helpful details about the company. It also lays down the powers and limitations of the company.
It is the foundation upon which the business is built. The Memorandum of any company is easily accessible to its creditors or any person or business dealing with the company in any manner and the media. Therefore, any individual or business desiring to associate oneself with the corporation has to pay the required fees to the Registrar of Companies and receive the Memorandum of Association. One will familiarise oneself with all of the company’s information through the Memorandum of Association. Anyone who desires to make an entrance into the business with the firm must take the responsibility of being aware of its Memorandum.
The main purpose of the MoA is to limit the scope of activities and powers beyond which an entity would be incapacitated. Company registration is restricted without a MoA. Reaching out to anyone willing to enter into a contractual relationship with the company by providing a complete knowledge of the company. It is also called Articles of Incorporation as it contains all the details of the company, its members and their responsibilities. Shareholders and depositors of a company can apply to the company court to order the company to prohibit any conduct that may be viewed as violating the terms of his MoA of the company.
The MoA –
1. Defines the Scope of the Company’s Activities
Memorandum of Association permits the list of activities and powers that can be undertaken by an organisation. A company is authorised to perform only the mentioned acts within the scope of powers provided to it by the MoA. Apart from this list, any other operation will be considered void. Any act done by the company that is outside the scope of the MoA is ultra vires. The ultra vires act of the company means an act done by the company beyond its power.
2. Establishes the relationship of a Company with outside world
The sole purpose of this document is to disperse the necessary information to the shareholders, creditors and other stakeholders. It showcases the range of enterprise and the powers of it. It regulates the company’s relationship with the outside world.
3. Fixes the Charter of the company
The Memorandum of Association is considered as the fixed charter of the company (as per section 16 of the Companies Act, 2013).
4. Creates basis for the Incorporation of the Company
The company needs to file the Memorandum of Association with the Registrar of the Companies in order to get the company incorporated. For incorporation of the company, the Memorandum of Association should be signed by at least 7 persons in the case of a public company and 2 persons in the case of a private company.
The company can perform only the business activities specified in its Memorandum of Association (MoA). If the company desires to expand its business activities into other fields, the company will then have to make necessary alterations in the Memorandum accordingly.
Memorandum of Association is a legal document significantly applicable for the Limited Liability Companies. Limited Liability Companies comprises of Private Limited Company (Pvt Ltd) and Limited Liability Partnership (LLP). Under the Right to Information Act (RTI) Memorandum of Association is a public record document that is available to anyone willing to go through the company’s Memorandum of Association. Memorandum of Association describes the company’s name, the physical address of the registered office, the names of shareholders and the distribution of shares. Sometimes, MoA also contains the exemptions and tweaks for a particular company. For eg., Private Limited Companies have a lot of exemptions as compared to other companies. Read Exemptions Private Limited Company.
The Memorandum of Association and the Articles of Association when put together, serves as the constitution of the company. The Memorandum of Association is not applicable in the United States of America, but is a legal requirement for limited liability companies in European Countries including the United Kingdom, France, and the Netherlands, as well as some Commonwealth nations.
The format of a MoA is specified in Table A to Table E of Schedule 1 under Section 4(5) of the Companies Act,2013, depending upon the type of company.
Because of the various types of businesses, the tables are of various types.
Table A – It applies to a corporation with a share capital.
Table B – It applies to a corporation limited-by-guarantee that does not have a share capital.
Table C – It applies to a company with a share capital protected by a guarantee.
Table D – It can be used by any unrestricted corporation that does not have a share capital.
Table E – It can be used by any unrestricted company with a share capital.
The company Memorandum should be typed, counted, and broken down into chapters. It can also be signed by the company’s customers
The contents of the Memorandum of the association consist of different clauses. Each clause plays a vital role in the organisation. Let’s see all the classes in a detailed manner as given below –
1. Name Clause
2. Domicile Clause
3. Objects Clause
4. Liability Clause
5. Capital Clause
6. Association Clause
7. Subscription Clause
Name Clause
The specific name of any company is its first distinctive recognition. Therefore, the Name Clause of the Memorandum is composed of the authentic, legal and approved name of the company. At times the companies secure their registered name of the company via a Trademark Registration procedure, therefore the company’s names ought not to bear any resemblance to a company registered with a similar name.
The name clause of Memorandum of Association specifies that the titles of all the private limited companies should end with ‘private limited’. On the other hand, the titles of all the government companies should end with ‘limited’.
The companies under section 8 of the act, may need not to follow these rules. These companies can be identified by certain words like-
1. Association
2. Federation
3. Foundation
4. Confederation
5. Forum
6. Chamber
7. Council
8. Electoral trust
Domicile Clause
The domicile clause comprises all the details of the registered office of the company. It indicates the state of the registered office where the organisation is exactly located. It has the name of the State or Union Territory where the registered office is. The Domicile Clause might have or might not have the exact address of the office. It furthermore includes the names of the registrars enrolled. It is significant to specify the branch of the registered office where the organisation got registered.
Objective Clause
Objects Clause constitutes the main body of the Memorandum. It provides the motto, its activities and a list of all the operations of the company or of the organisation. Every motive and operation the company indulges in must be mentioned in the object clause. Also, any such operation which is not mentioned in the object clause is considered to be beyond the reach of the company. After a few months if there is a change in activities and operations, then the head of the institution needs to change the name of that organisation within 6 months. Otherwise, it will become an offence.
Company objectives fall into two categories, as described below –
1. Proposed goals of the company in which it was formed
2. Matters deemed necessary for its promotion
In addition to mentioning the company’s objectives, the company’s MoA also empowers those associated with the company to:
1. Provide protection to the subscribers because they know perfectly where their precious money is invested.
2. Make the indivisduals and/or companies aware of the scope of a company’s powers and therefore protect individuals and/or companies doing business with the company.
3. The company’s board of directors may only use company funds for the purposes specified in the memorandum.
Capital Clause
This clause refers to the share capital with which the company is registered. In addition, the capital clause must also state the classes of shares, the number of shares of each class, and the par value of each share. Private and public companies not intended to be listed can be taken at face value, depending on many factors. However, listed companies are stipulated by the face value of their shares
Liability Clause
It is another important clause of Memorandum of Association. Within this clause the liability of the company’s members is mentioned in a detailed manner, where the company explains whether the liability of its members is limited or unlimited in the firm.
– If the company is limited by shares, it is a necessity to specify the amount of shares held by its shareholders and whether they are paid or unpaid. All these aspects are obligatory to be mentioned in the MOA with transparency.
– If the company is restricted by guarantees, the MoA specifies that all contributors with a bonus have equal rights. Even during the winding up of a company, both assets and liabilities which include all the expenses while demolishing the firm need to be distributed equally.
Association Clause
In this clause of the Memorandum of Association, the exact idea and goals of the owner of the company are meant to be mentioned.
Subscription Clause
The last and final clause of the Memorandum of Association is called the subscription clause. The subscription clause basically lists down the motives of the shareholders behind the incorporation of the company and also states that the subscribers are agreeing to take up shares in the company. It also specifies the number of shares taken up by each subscriber. It is all according to the details specified in the MoA Subscriber Sheet.
The owners of the company must ensure that they have put together the MoA of the company before proceeding further to apply for the company’s registration. It is a mandatory document required to be submitted to the Registrar of Companies while applying for company registration. Before submitting the MOA to the ROC the owner must ensure that the MoA is signed by all the directors and members of the proposed company.
The Memorandum of Association is a vital document that consists of ample information of any company. The Memorandum of Association regulates the interaction of a company with its stakeholders.As mentioned in Section 3 of the Companies Act, 2013, a Memorandum is a necessity for the registration of any corporation.
Prior to registering a corporation with the Registrar, the parties involved may first agree to the Memorandum. The involved parties means –
1. Seven or more employees in the case of a public company.
2. Two or more people in the case of a private company.
3. Only one person in the case of a one-person business.
In accordance with Section 7(1)(a) of the Companies Act, 2013, a company’s Memorandum of Association and Articles of Association must be properly signed by the subscribers and registered with the Registrar to be incorporated.
In addition to this, a Memorandum contains other things in addition to what has been said. They are as follows:
1. It provides the shareholders enough information about the business before purchasing stock.
2. This assists the shareholders to determine what amount of money they can invest into the venture.
3. It provides information to any partners who are willing to collaborate with the firm in some way.
If any changes as mentioned below has to be taken place, then therefore is the need to Amend the Memorandum of Association:
1. If there are any alterations in the name of business.
2. If any changes in the office of registration happens.
3. If an alteration has to be taken place in the object clause of the business.
4. If an alteration has to be taken place in the authorised capital of the business.
5. If any kind of adjustments/modifications are made to be in the legal liabilities of the business members.
The procedures in accordance with any kinds/types of amendments to be made in the Memorandum of Association have been mentioned in the 13TH Clause of The Companies Act, 2013.
Hope this article has helped you to learn everything about the Memorandum of Association, it is clear that the Memorandum of Association is the fundamental public document of all kinds of organisations that includes the operational activities, rights, powers, etc of any company. From the definition of a Memorandum of Association, we can understand that it is essential to examine the format and all the clauses of the MOA without any fail. And the Memorandum of Association of your company should be verified and attested by the Memorandum of Association of company law.
In the end, we’d like to inform you that the Memorandum of Association is a very important document without which the incorporation of a company cannot be initiated. It is a charter document of the company and MOA and AOA both act as a constitution of the company.
Thank You!