[ecis2016.org] Memorandum of Association helps shareholders or anyone interested in dealing with the company to have a basic knowledge of the rights and powers of the company.
A Memorandum of Association (MoA) is a company’s charter. It is a legal document defining the objectives of the company and its relationship with shareholders. A company can only perform activities that are included in the Memorandum of Association or MOA.
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Memorandum of Association helps shareholders or anyone interested in dealing with the company to have a basic knowledge of the rights and powers of the company. The contents of a Memorandum of Association also helps potential stakeholders to take the right decision to invest in the company. Memorandum of Association must be signed by 2 members if it is a private limited company and 7 members if it is a public limited company.
What is a Memorandum of Association for?
The main purpose is to scale down the scope of activities and powers of the company. A company is only authorised to do the activities within the scope of powers given to it by the MoA. A company cannot be registered without a MoA. It is also called the company’s charter as it has details of the company, its members and liabilities.
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If a company does an activity that is outside its scope, the members and investors can apply to the company tribunal and restrain the company from doing such an act since it violates the company’s MoA.
Memorandum of Association: Contents
Memorandum of Association contains clauses given below:
Name clause
The name of the company is specified in this clause. It shouldn’t be identical to an existing company. If it is a private company, then the words “Private Limited” should be added to the end of the company name, and if it is a public company, then the word “Limited” should be added to the end.
Registered Office clause
Specifies the state’s name in which the office of the company is to be located. This helps to figure out the jurisdiction of the Registrar of Companies. The company is obliged to inform the Registrar of Companies about the location of the office within 30 days of incorporation or commencement of the company.
Object clause
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The objectives can be divided into 3 sub categories:
- Main objective: States the main business of the company.
- Incidental objective: These are objects additional to the main objective of the company.
- Other objectives: Other objectives that the company may pursue and are not included in (a) or (b).
Liability clause
States the liabilities of the members of the company. Taking the example of an unlimited company, the liability of the members is unlimited. If a company is limited by shares, the liability of the members is the amount unpaid in their shares.
Capital clause
This clause covers the maximum capital a company can bring together, also called the authorised/nominal capital of the company. This clause also explains how capital amount is divided into shares of a fixed place.
Memorandum of Association: Format
The format for a Memorandum of Association differs depending on the type of company from Table A to Table E. For instance, Table A is meant for a company limited by shares while Table B is for a company limited by guarantee.
FAQs
Are MoA and articles of association the same?
No, the Memorandum of Association and Articles of Association are not the same. The Memorandum of Association details essential information about the company. AoA contains the internal rules and regulations of the company and in this sense, it is subordinate to the MoA.
Is the MoA required for a startup business?
Yes, it is compulsory for every company to have a MoA because it defines the scope of its activities. It has to be submitted to the Registrar of Companies and is a public document. Thus, if the startup is going to apply for registration as a company under the Companies Act 2013, they must prepare a Memorandum of Association in advance. Anyone can view the MoA of the company by paying the required money to the Ministry of Corporate Affairs (MCA).
Is it necessary for an LLP (Limited Liability Partnership) to have a MoA?
No. 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, no MoA is required for an LLP.
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