Memorandum of Association

Memorandum of Association

A company needs to follow correct rules and regulations. But several companies out there perform activities that must not be done or executed. Therefore, MoA has been introduced. It is a legal document that specifies the scope of all the business activities of the company and information about the company’s shareholdings. Sometimes it is known as the company’s charter or just memorandum. 

It needs to be fined by the Registrar of Companies during the company incorporation. Let us find more about MoA in this article.

What is Memorandum of Association?

A company’s charter is represented by an MoA (Memorandum of Association). Being a legal document created during the registration and formation process of an enterprise or a company to define all its relationship with the shareholders, and the objectives for which the company has been established, are specified by it. Only the activities mentioned in the MoA can be undertaken by the company. In short, the Memorandum of Association creates the boundary beyond which the company’s actions must not go.

MoA helps all the creditors, shareholders, and any other people who deal with the organization or company to understand the general powers and rights of the organization. MoA’s contents help all the prospective shareholders to make the right decision as well while thinking about company investment. A minimum number of 2 subscribers can sign MoA if it is a private limited company and at least 7 members for a public limited company.

Prescribed forms of Memorandum of Association:

The forms that are prescribed are stated below:

  • Table A- A company that is restricted by shares.
  • Table B- A company that is restricted by guarantee and does not possess a share capital.
  • Table C- A company that is limited by guarantee and possesses a share capital.
  • Table D- An Unlimited company.
  • Table E- An unlimited company that possesses a share capital.

Format of Memorandum of Association

The Memorandum of Association’s format depends on the kind of the company. The format is there in Table A to Table E. An organization or a company can undertake the table that aligns with it. For example, Table A is for an organization or a company that is limited by the shares, while on the other hand, Table B is for the company that is limited by possessing share capital and guarantee, etc.

Contents of Memorandum of Association: A Memorandum of Association (MoA) consists of the following clauses:

MoA Name Clause

The company’s name is specified by the name clause. The company’s name must not be identical to any other existing company. If the company is private, then it must have the word ‘Private Limited’ at its end. On the other hand, if the company is a public company, the word “Limited” needs to be added at the end of the name. For instance, if ABC is a private company, it must write “ABC Private Limited”, and if it is a public company, it should write “ABC Ltd”.

MoA Registered Office Clause

The State where the company’s registered office is located is specified by the registered office clause. This particular clause helps in determining the Registrar of Companies’ jurisdiction. The company will have to inform the registered office’s location to the Registrar of Companies within 30 days, right from the incorporation date or the company’s commencement date.

MoA Object Clause

The objective with which the company is established is stated by this clause. Into three subcategories, the division of the objectives can be done. The subcategories are discussed below:

  • Main Objective: The company’s main business is stated by it.
  • Incidental Objective: All these objects are ancillary to the achievement of the company’s main objects.
  • Other Objectives: Any other kinds of objects that the company can pursue and are uncovered in the Main Objective and Incidental Objective.

MoA Liability Clause

This particular clause states the liability of all the company’s members. If it is an unlimited company, the members’ liability is unlimited. But on the other hand, if a company is limited by shares, the members’ liability is limited by the unpaid amount on the share. If it is a company that is limited by a guarantee, the members’ liability is limited by the amount that everyone has agreed to provide.

MoA Capital Clause

The maximum capital that an organization or a company can put up, which is also known as the nominal or authorized capital of the company, is detailed by the Capital Clause. The division of the capital amount into the shares’ number of a fixed amount is also explained by it.

MoA Association and Subscription Clause

At least seven members of the company need to subscribe to the memorandum if it is a Public limited company and a minimum of two members if it is a private company.

Importance of MoA (Memorandum of Association)

MoA plays a highly significant role when it comes to a company. The importance of the MoA is stated below:

  • The Memorandum of Association is a vital and fundamental document needed for a company’s registration.
  • The MoA defines clearly the operations’ spans and the company’s functions. MoA has complete control over the company’s operations. The company can never perform any activity outside the things mentioned in MoA unless the necessary amendments are made.
  • MoA brings in transparency and proves to be a medium through with every stakeholder gets complete information about the company.
  • The clauses that are mentioned offer the full details about the company’s promoters. It consists of the name and addresses of all the key persons related to the business.
  • MoA plays a crucial role to attract investors because they get a correct idea of the complete range of the objectives and activity of the company.
  • MoA defines all the liability of each of the shareholders of the company. This helps to understand the responsibilities and roles of every person.

Conclusion

Finally, to conclude, we can say that the MoA or Memorandum of Association is a highly crucial document for every company to be incorporated. The precisely defined functions of the charter, along with the rules, boost transparency and efficiency. Thus, MoA proves to be an indispensable element for every organization or company.

Are MoA (Memorandum of Association) and AoA (Articles of Association) of an organization or company the same?

No, the MoA and AoA are not the same. All the essential details of a company are stated by MoA. But on the other hand, AoA is included with the internal regulations and rules of an organization. The Articles of Association are nothing but a subordinate to the Memorandum of Association.

Is a Memorandum of Association needed for a company’s registration?

Yes, the owners of the company need to make the company’s MoA before applying for the registration of the company. MoA is a mandatory document that is required to be submitted to the Registrar of Companies when you apply for the registration of the company. The MoA needs to be signed by every member and director of the company.

What is MoA’s purpose?

The primary purpose of the Memorandum of Association is to restrict the scope of powers and activities of the company. A company is only authorized to do all the activities within the scope of powers that has been provided to it by the Memorandum of Association. Any activity that is performed by the company outside the MoA’s scope can prove to be an ultra-virus. The ultra-virus activity of a company is referred to as an action executed by the company that is beyond its powers. The depositors and members of the company apply to the tribunal of the company for restraining the company from performing any activity that is considered a breach of the MoA of the company’s provisions.

Is MoA necessary for any startup?

Indeed, any company, whether it is registered as a one-person company, public company, or private company, needs a Memorandum of Association. Therefore, in case a startup plans of registering as a company, it needs to prepare an MoA before applying for the company’s registration, as per the Companies Act, 2013.

Does a Limited Liability Partnership (LLP) need a Memorandum of Association?

The answer is No. The LLP has been registered under the Limited Liability Partnership Act, 2008. Under this act, an LLP is needed to make the LLP deed. Therefore, the LLPs do not need to make a Memorandum of Association.

Is it necessary for all the companies to have MoA?

Indeed, it is mandatory to possess an MoA for every company, regardless of its type and size, because MoA defines all the operational scopes. The company’s overall structure is detailed in the MoA. It needs to be submitted to the Registrar of Companies. MoA is a public document, and any individual can see the company’s MoA by paying the needful fees to the MCA (Ministry of Corporate Affairs).

What is the utility of the Memorandum of Association?

The powers and scope of a company beyond which the company cannot operate are defined by the Memorandum of Association. It regulates the relationship of the company with the outside world. Without an MoA, a company cannot get registered. MoA also helps anyone wanting to get into a contractual partnership with the company for gaining knowledge associated with the company. Also, it is known as the charter of the company because it consists of all the details of the company, its members, and all their liabilities.

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