Know your Memorandum of Association (MOA)

Memorandum of Association or MOA is an important corporate document in India which governs the relationship of the company and shareholders and sets out the fundamental principles on which a company shall act. MOA not only sets legal parameters or the scope of operation of a company but also regulates external affairs and defines a relationship and nature of contract between a company and the outside world.

As per Section 2(56) of the Companies Act, 2013 Memorandum of Association means: the memorandum of association of a company as originally framed or as altered from time to time in pursuance of any previous company law or of this Act.

MOA is compulsory to frame at the time of incorporation as they define the business objectives of a company. Since MOA formulates the base of the company it becomes important that it is written with highest efficiency and foresight.

As we are aware that any act done outside the constitution of the country is not legally valid. Similarly, any act done outside the scope of the Memorandum of Association makes such acts legally invalid. If any time, the internal management takes a decision which is beyond the scope of the Memorandum of Association and does not fall within its purview , such decisions or the act shall be termed as void as it is ultra vires to the charter of the company. A Start-up lawyer emphasizes not to commit any act beyond the contours of MOA as it can never be ratified by the shareholders or the company and shall always be termed as void.

Important legal points which a Start-up lawyer shall consider while drafting the MOA are as follows:

1. It should be prepared very diligently;
2. It should be printed and clearly divided into different paragraphs stating the different provisions;
3. The paragraphs should be numbered consecutively;
4. Stamped according to the provision of Companies Ordinance;
5. Should be signed by each subscriber in the presence of one witness.

Memorandum of Association contains below mentioned six mandatory clauses pertaining to the Company; such as name, object, situation, capital, association and liability:

Name Clause 

This clause contains the “Name of the Company”. However” with which the company is incorporated. Further, while selecting a name of the Company, some important points to be noted are as follows:

• The name selected by the Company should not be similar or identical to any company or LLP already registered.
• The name of every public limited company shall end with the word “Limited” and the name of private limited company shall end with words “Private Limited”.
• The name of the Company should not contain the words like King, Queen, Emperor, Government Bodies and names of World Bodies like U.N.O., W.H.O., World Bank Signifying other business constitutions like HUF, firm, Inc., PLC, GmbH etc.
• Every public company has to use the word limited or “LTD” after its name and “private limited” as the last word in case of private company

Situation clause

This clause contains the name of the State where the Company’s registered office is located. All the communications are generally addressed to the registered office of the Company. The Registered office means a place where the; statutory books, records, register etc., of the company are kept.

Object clause 

This clause sets out the purpose for which the company is formed. Each and every detail and object for what the company is formed shall be laid down in this clause. Pursuant to introduction of MCA V3, the main objects of the Company can only contain up to 3 NIC codes and shall not contain any other text. The list of codes for same is available at https://www.ncs.gov.in/Documents/NIC_Sector.pdf

Liability clause 

This clause states the nature and the liability of the members of the company. The liability can be either limited by shares or guarantee or be unlimited.

Capital clause 

This clause mentions the authorised capital i.e. maximum amount of capital that can be raised by the company. The division of capital into shares is also mentioned in this clause. This clause states the number and face value of shares into which the capital of the company is divided.

Association clause 

This clause states that the persons who subscribe their signatures at the end of the MOA are desirous of forming themselves into an association in pursuance of the end of the MOA Company and undertake to subscribe the number of shares as mentioned in clause pursuant to incorporation. This is the only clause of Memorandum that can never be altered and shall remain the same during the lifetime of the Company.

The above clauses (other than association clause) forming part of the MOA can be altered in accordance with the provisions of section 13 of  Companies Act, 2013

---

Disclaimer:
The contents of this article are for information purposes only and does not constitute advice or a legal opinion and are personal views of the author. It is based upon relevant law and/or facts available at that point of time and prepared with due accuracy & reliability. Readers are requested to check and refer to relevant provisions of statute, latest judicial pronouncements, circulars, clarifications etc before acting on the basis of the above write up.  The possibility of other views on the subject matter cannot be ruled out. By the use of the said information, you agree that the Author / Treelife is not responsible or liable in any manner for the authenticity, accuracy, completeness, errors or any kind of omissions in this piece of information for any action taken thereof.