Memorandum of Association is considered as the Constitution or Charter of an incorporated company, as it contains all its legal details like name, registered address, and the primary purpose of its establishment. The entire document is drafted in a specific format on stamp paper. The format is such that the MOA is divided into 6 main clauses arranged in a certain order, that need to be filled out, and ultimately signed by all the shareholders of the company.
Table of Content
In this blog, we will explain the significance and utility of each and every clause in chronological order for your clear and complete understanding.
What is an MoA?
An MoA or Memorandum of Association is one of the most significant legal draftings of an incorporated company. It is popularly known as its “Constitution” or “Charter” as it is constituted by all the legal and foundational details of the company as registered with the Registrar of Companies, under the Ministry of Corporate Affairs.
Primarily these details include the name, registered office address, the objective of establishment, the liability of the owners, the capital of the company, and the name of the nominee, if applicable.
The draft is usually prepared by the authorized directors of the company on stamp paper and is signed by all the shareholders. You must note that anyone who does not sign the MOA, will not be considered a shareholder of the company under any circumstances.
The draft is considered legally acceptable only if it is stamped and notarized. This simply means that once the MOA has been drafted, the document should be signed by all the shareholders in the presence of a public notary and two other witnesses. The notary will then stamp the document to make it legally valid. For this, a stamp duty, as prescribed by the State Government, will have to be paid.
What is the Memorandum of Association(MOA) and Its Clauses?
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What Makes an MOA Relevant?
The relevance of a document like MOA is decided by its utility. So to know what makes an MOA relevant, you must know what all purposes the document serves.
Firstly, the registration of a company is not possible without a valid and accurately drafted Memorandum of Association. In fact, the MOA is one of the documents that is submitted with the application of company registration. When the application reaches the Registrar of Companies, he not only registers the name of the company, but also its Memorandum of Association.
Secondly, you cannot alter or change any foundational detail of the company without appropriately altering the MOA. For instance, if you are looking forward to changing the registered office address of the company, the application filed for the same to the ROC, will be supported by an altered or modified copy of the MOA consisting of the new registered address. Upon receiving the application, the ROC will not only change the address but also update the MOA registered with it.
Thirdly, the MOA of a company registered with the ROC, is a document that can be publicly viewed and inspected. This enhances the credibility of a company, especially for its investors and creditors, as each and every detail with which the company is operating on the ground can be easily and accurately verified.
Fourthly, the MOA is required to be kept at the registered office location of a company, so that it serves as a reliable source of information about the company for all insiders and external visitors.
Lastly, the MOA defines the powers of a company. Any act done by the company or any of its stakeholders that contradicts the provisions of the MOA shall be deemed null and void. Even the Articles of Association of the company, which contains the rules, regulations, and procedures of its internal management, should be drafted in complete adherence to the provisions of the MOA.
Also Read: Difference between MOA and AOA
Clauses of the Memorandum of Association
As mentioned above an MOA is divided into 6 clauses which are mentioned in their chronological order below.
| S.No. | Clause of MOA |
|---|---|
|
1. |
Name Clause |
|
2. |
Registered Office Clause
|
|
3. |
Object Clause |
|
4. |
Liability Clause |
|
5. |
Capital Clause |
|
6. |
Declaration Clause |
|
7. |
Nominee Clause (in case of one person company only) |
Name Clause: This clause contains the name of the company as reserved by the Registrar at the Central Registration Center. The name should be legally valid and approved by the registrar according to the legal guidelines and principles prescribed for naming a company under laws like the Companies Act, the Trademark Act, and the Names and Emblems Act. For detailed information on these guidelines refer to our blog or video.
Registered Office Clause: Also called the “Domicile “ clause, this clause mentions the state and jurisdiction in which the registered office of the company is situated. There is no need to mention the full address of the registered office here.
Object Clause: Objects and business activities of a company is the core matter of the MOA of the company. Hence, all the objects and business activities carried out by the company must be mentioned under this clause. You can mention the objects under three heads:
- Main object which contains the primary business activities
- Ancillary object which contains the secondary business activities carried out to fulfill the main object
- Other object which contains any other miscellaneous business activities carried out by the company which is not its primary or secondary activity
Remember that the company cannot carry any business activity for the fulfillment of any object which is not mentioned in the MOA. If such an activity is carried out, it will be deemed ultra vires. So, in a way, we can say that the object clause defines the purpose of establishment and the scope of activities of a company.
Liability Clause: This clause mentions the kind of liability that the owners have towards the company. A company can either be limited or unlimited and further a limited company can be either limited by shares or by a guarantee of the promoters.
So, if the company is limited by shares, then the liability of each shareholder will also be limited to the unpaid amount of their subscribed share capital, and the MOA will mention that the company is limited by shares.
If the company is limited by the guarantee of the promoters, then the MOA must mention the amount that the promoter will pay in the event of the company being wound while he is a member, or a year after he ceases to be a member. This amount will be used to pay off the debts and liabilities of the company that were accumulated while the promoter was a member, the charges and expenses of winding up the company.
If the company is unlimited, then the individual liability of every shareholder will also be unrestricted or unlimited, and this will be mentioned in the MOA as well.
Capital Clause: This clause contains the authorized capital and subscribed capital with which the company is to be registered. Also, the division of the subscribed capital into share capital and fixed investment is to be provided, with details of the total number of shares subscribed and the price of each share.
Declaration Clause: The sixth and the final clause in the MOA is the “Declaration of Association” This clause mentions the names of all the members/shareholders/promoters of a company along with their designations and shareholding in the company. The clause will be signed by all the shareholders in the presence of witnesses. The names, addresses, and occupations of all such witnesses must also be mentioned adjacent to the signatures of the shareholders.
Finally, the shareholders declare their desire to form a company as per the MOA, and agree to subscribe to the number of shares mentioned adjacent to their names in the MOA.
Owing to their signatures in this clause, the document is legally binding on the shareholders.
Nominee Clause: This clause is only applicable for One Person Companies, where these companies mention the name of the nominee of the sole shareholder. This nominee is entitled to own the OPC after the death of its only owner, affecting the perpetual succession of the OPC.
Conclusion
Concluding this blog, we hope that you now have a clear understanding of the Memorandum of Association, and its importance in incorporating and operating a company. If you still have any questions, you can send us your query and we will respond back in no time!
