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What exactly is a Memorandum of Association?
MOA of a company is defined as a legal document that is drafted during the formation and registration process of a limited liability company to describe its relationship with the shareholders. The MOA is accessible to the public and explains the name of the company, the physical address of the registered office, shareholder’s names, and the distribution of shares. The Articles of Association and the Memorandum of association both are the constitutions of the company. In the US the Memorandum of association is not applied but is a legal requirement for limited liability companies in European countries, including the United Kingdom, France, the Netherlands, and some Commonwealth countries.
The reasons for registering it.
- The Memorandum of Association contains the object for which the company is formed. The Memorandum of Association identifies the scope of its operations and makes the boundaries which they should not cross.
- the scope of its operations and determines the boundaries it cannot cross.
- According to Section 399 of the Companies Act, 2013, it is a public document. Therefore, any person who enters into a contract with the company is expected to know MOA.
- It contains details about the rights and powers of the company.
What are the obligatory clauses of it?
The mandatory clauses are as follows:-
- Name clause
- Registered Office Clause
- Object Clause
- Liability Clause
- Capital Clause
- Association Clause
- One-Person Company Clause
The company can add additional clauses, such as rights attached to various classes of shares, if required.
Name Clause
- For a public limited company, the name of the company must have the word Limited as the last word
- For the private limited company, the name of the company must have the words Private Limited as the last words.
This does not apply to companies formed under Section 8 of the Act who must include one of the following words, as applicable:
- Foundation
- Association
- Federation
- Forum
- Council
- Chambers
- Confederation
- Electoral Trust, etc.
Registered Office Clause
It must indicate the state where the company's registered office will be situated.
Object Clause
It must indicate the objects for which the company is being incorporated. Further, if a company changes its activities that are not reflected in its name, then it can change its name within six months of changing its activities. The company must comply with all name-change provisions.
Liability Clause
It must indicate the liability of the members of the company, whether limited or unlimited.
- For a company limited by shares, it should specify if the liability of its members is limited to any unpaid amount on the shares that they hold.
- For a company limited by guarantee it should specify the amount undertaken by each member to contribute to:
- a.) The assets of the company when it winds up. This is provided that he is a member of the company when it winds up or the winding-up happens within one year of him ceasing to be a member. In the latter case, the debts and liabilities considered would be those contracted before he ceases to be a member.
b.) The costs, charges, and expenses of winding up and the adjustment of the rights of the contributors among themselves.
Capital Clause
This is valid only for companies having a share capital. These companies must indicate the amount of Authorized capital divided into shares of fixed amounts. Moreover, it must state the names of each member and the number of shares against their names.
Association Clause
The MOA must indicate the desire of the subscriber to form a company. It is the last clause.
For One-Person-Company
The Memorandum of Association shows the name of the person who is a member of the company even after any subscriber death occurs.
The following things are required just before submitting the Memorandum of Association:-
- Print the Memorandum of Association
- Divide it into paragraphs
- Arrange the pages in sequence
- Ensure that at least seven people sign it (two in the case of a private limited company and one in the case of a Person Company).
- One witness should be there for doing all kinds of attesting in the signatures.
- Provide information about the signatories and witnesses such as an address, description, occupation, etc.
