What is the Memorandum of Association?
A Memorandum of Association [MOA] refers to a legal document usually prepared during the incorporation. It clearly states the objective for which the company is formed. It clearly specifies its powers, privileges, and rights. This document includes information on the physical address of the registered office, the distribution of shares, and the name of shareholders. It is a legal requirement for limited liability companies in India to hold this crucial piece of document.
The memorandum of association is a crucial document that has to be framed with the utmost care. It governs the relationship that the company has with the outsiders. It clearly defines all the rules and regulations that the company has to abide by. It is mandatory for companies to prepare a memorandum of the association if they want to register themselves as a public/private limited company. Once this document is ready, the company cannot perform anything beyond the scope of the Memorandum of Association. Hence, it is believed to be a supreme document.
- The Memorandum of Association of a company comprises the object for which the company is formed. This document clearly identifies the scope of operations of the company and fixes legal boundaries that it cannot cross.
- An MOA comprises details about the powers and rights of the company. In no circumstances, a company can depart from the provisions stated in the MOA.
- An MOA clearly defines the scope of the company's activities. It also enables the creditors, shareholders, and people dealing with the company to understand its scope and range of activities.
What are the contents of the Memorandum of Association?
As per the Companies Act, it is mandatory to include the following contents in a Memorandum of Association.
The legal name of the company:
You need to list a legal name for your company under the name clause. The name should not be similar to any existing company during the registration process. The word ‘limited’ needs to be suffixed at the end of the company name as preparing an MOA is mandatory for limited liability companies only.
The physical address of the registered office:
You need to indicate the physical address of the registered office of the company as per the registered office clause. All the company registers have to be kept at the office address furnished. It will be used for managing all incoming and outgoing communication. You need to hold a registered office under the company name before commencing any company activities.
Objectives of the company:
Under the objective clause, you need to state the main objectives of constituting the company. Here you need to provide a reference to the use of shareholding activities and also to the financial resources. You also need to clearly specify the objectives required to meet the vision with which the company was constituted.
Liability of shareholders:
This clause needs you to state the extent to which the shareholders are liable to the debt obligations in case the company is dissolving. You have to indicate whether the shareholders are liable only for their shareholding or they need to commit to contributing to the dissolution costs upon company liquidation.
Authorized share capital:
This clause requires you to state the authorized share capital of the company, the nominal value, and the different categories of shares. The company assets also have to be listed under this clause.
Association and formation of a company:
This clause confirms that the shareholders abiding by an MOA are willingly forming and associating with the company. Seven members are required for signing an MOA of a public company and for private the requirement is of two members. The signing of the memorandum takes place in front of the witness who needs to append his/her signature during the process.
Alteration of Memorandum of association:
Alteration of the memorandum of association of a company is allowed under Section 2(3) of the Memorandum of Association Companies Act, 2013. It permits you to make substitutions, omissions, and additions by following certain procedures. You can change the name of the company, make modifications in the authorized capital, specify the shift of registered office, and change in objectives. A company interested in changing its name can do so based on the provisions mentioned in Section 13 by passing Special Resolution.
A company seeking to issue shares by Rights Issue, Private Placement or any other prescribed methods can do by the virtue of Section 13. There is a prescribed process governed by a set of rules. You will have to bear relevant stamp duty charges depending upon the concerned state in which the registered office of the company is located. A company can change its objectives via Special Resolution. However, a suitable justification is required in doing so.
Memorandum of association format:
As per Section 4 of the Companies Act, 2013, the companies need to draw MOA in the form of tables. Here are the specifics of what needs to be furnished in each table.
- Table A: This form is applicable to a company that is limited by shares.
- Table B: This is applicable to a company not having any share capital and is limited by guarantee.
- Table C: This table is applicable to a company that is limited by both share capital and guarantee.
- Table D: It is applicable to a company not having any share capital.
- Table E: This is applicable to a company that has a share capital.
The memorandum has to be printed, numbered, and then divided into a specific set of paragraphs. It also needs to be signed by the scribers of the company.
Memorandum of association sample:
Consider ABC Private Limited, a company with its head office in Bengaluru and is engaged in the business of manufacturing mobile phones. The company needs to first subscribe to the memorandum for registering with the Registrar of Companies.
Here is an example of a memorandum of association. We are considering the example of a company that is limited by shares. Hence, we will have to consider Table A for the purpose as per the applicable law.
|The Companies Act, 2013|
|Company Limited by Shares|
|Memorandum of Association|
|ABC Private Limited|
|The name of the company is ABC Private Limited|
|The registered office of the company will be situated in Bengaluru city in the state of Karnataka.|
|The object for which the company is established are|
|To carry on the business of manufacturing, designing, and producing mobile phones|
|To sell or serve as agents to import or export all associated devices|
|To act as sellers and dealers of the above-mentioned objects|
|The liability of the member(s) is limited and this liability is limited to the unpaid amount if any of the shares held by them.|
|The share capital of the company is 80, 00,000 rupees, divided into 4000 shares of 2,000 rupees each.|
|We, the several persons, whose names and addresses are subscribed, are desirous of being formed into a company in pursuance of this memorandum of association and we respectively agree to take the number of shares in the capital of the company set against our respective names.|
A memorandum of association is a fundamental document required while incorporating a company. It is a charter of the company and forms the constitution along with the Articles of Association form. It clearly defines its objectives, name, address of the registered office, and other crucial information about the shareholder’s authority and a lot more.
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