Memorandum of Association
Updated: Nov 12, 2021
Definition of MOA
Memorandum of Association (MOA) is a term used to define the Company's charter by which the Company's structure is constructed. The MOA is a legal document prepared during the formation and registration process of a company. This document defines the relationship of the Company with shareholders. It also specifies the objectives for which the Company has been formed. The Company can undertake only those activities that are mentioned in the Memorandum of Association. As such, the MOA lays down the boundary beyond which the Company's actions cannot go.
Memorandum of Association helps the shareholders, creditors, and any other person dealing with the Company know the Company's fundamental rights and powers. Also, the contents of the MOA help the prospective shareholders make the right decision while thinking of investing in the Company. MOA must be signed by at least two subscribers in case of a private limited company and seven members in a public limited company.
The MOA describes the basic identification details of a Company, such as the name of the Company, location of the Company's registered office, business objects of the Company, nature of business, liability of promoters, and details of directors/board members, its shareholders, etc. For a limited company, the Memorandum of Association is one of the Primary incorporation documents.
MOA – Applicable Table
Before preparing the MOA. Based on the type of company to be incorporated, the appropriate Table as per Schedule I of the Companies Act, 2013 must be selected. The following is the Table as per Schedule I and the relevant Company:
TABLE – A: MEMORANDUM OF ASSOCIATION OF A COMPANY LIMITED BY SHARES
TABLE – B: MEMORANDUM OF ASSOCIATION OF A COMPANY LIMITED BY GUARANTEE AND NOT HAVING A SHARE CAPITAL
TABLE – C: MEMORANDUM OF ASSOCIATION OF A COMPANY LIMITED BY GUARANTEE AND HAVING A SHARE CAPITAL
TABLE – D: MEMORANDUM OF ASSOCIATION OF AN UNLIMITED COMPANY AND NOT HAVING SHARE CAPITAL
TABLE – E: MEMORANDUM OF ASSOCIATION OF AN UNLIMITED COMPANY AND HAVING SHARE CAPITAL
Contents of Memorandum of Association
Memorandum of Association document contains seven clauses, each of which will carry a piece of certain information regarding the Company. The clauses are as follows:
Clause I - Name Clause
The first clause defines the name of the Company. Before registering a company under any name, the name has to be first approved by the registrar of companies.
The name of the Limited Company shall end with the word "Limited." For a public limited company, the name ends with 'limited,' and for a private company, the name ends with a 'Private Limited.' For a One Person Company, the name shall end with the words "(OPC) Private Limited". Non-profit companies need not have their names end with limited.
If a company decides to change its name, then the amendment of the name clause in the Memorandum is a must.
Clause II – Domicile/Situation Clause
The situation clause of the Memorandum of Association gives the information about the location of the Company. The clause contains the State under which the Company's Registered Office is situated and Registrar of Companies under whose jurisdiction the Company's Registered Office is situated. The respective registrar of companies shall have the jurisdictional authority over the regulatory compliances of the Company.
The Office of Registrar of Companies is situated in almost all the States in India. There are few states, such as Maharashtra and Tamilnadu, that have two jurisdictional offices of ROC. The northeastern states include Assam, Meghalaya, Manipura, Tripura, Mizoram, Nagaland, Arunachal Pradesh, Andhra Pradesh, Telangana, and Bihar; Jharkhand has only one office of ROC. An amendment will be required if the Company is shifting the Registered Office outside the jurisdiction of the present Registrar of Companies. The amendment to the clause would need details of the new State / Registrar of Companies to replace the old clause.
Clause III- The Object Clause
Object clause mainly gives information about the Company's business activities. The clause mentions the business objects for which the Company is incorporated and anything ancillary to the main thing.
The main aim here is to confirm that the Company's business activities or objects are according to the name registered in the registrar's office. Giving an example: POQ Consultancy Private Limited is expected to have business activities related to consultancy services. It cannot run an investment scheme, as the name says 'consultancy.' If a company decides to expand in various fields, the title should also be changed to refer to the expanding business.
The objects clause of the MOA is divided into two parts.
A. Main Objects: The Main Objects are the objects a company would be working on since its incorporation.
B. Ancillary Objects: these are the matters necessary for the furtherance of the objects specified in Main Objects. These objects are referred ancillary things of the Company that is to be carried to achieve the main objects.
Companies are free to amend the object clause in an MOA to meet their business activities. To make amendments in objects like finance and insurance, the Company has to obtain prior permission from the respective regulatory authorities.
Clause IV- The Liability Clause
The liability clause states the liability of the members. The liability can either be limited or unlimited.
a. in case of a company limited by shares, the liability is limited to the amount unpaid on the shares held by them; and
b. in case of a company limited by guarantee, the liability is limited to the amount up to which each member undertakes to contribute in the event of winding up.
The liability clause cannot be amended unless the Company gets converted from one category to another category, that is, from limited liability to unlimited or vice versa.
Clause V - The Capital Clause
The capital clause in the MAO states the Authorised Capital of Company. The clause also states the bifurcations in the authorized capital into different categories of shares, their face value, and the number of shares.
Authorized Capital or Registered Capital of a company is the upper limit of capital that a company can raise from the public through the issue of shares.
Amendments to the capital clause will be needed if there is an increase in the Company's authorized capital. Amendments to this clause can also be made to bifurcate existing capital to different categories, add a new class of shares, consolidate, subdividing, convert, and reduce the share capital to any denomination later.
Clause VI – The Nomination Clause
This clause depicts who will become the member of the Company in the event of the death of a person in the case of a one-person company.
Clause VII - The Subscription Clause
The share subscription clause is the last clause of the Memorandum of Association. Under this clause, the name and address/details of first subscribers of MOA and number of shares and amount contribute as initial capital of the Company are stated.
The subscribers to the Memorandum of Association are initial shareholders of the Company. The subscribes bound to contribute the agreed capital to the Company before the commencement of business by the Company.
With their digital signature, subscribers have to sign this clause of Form No.33 – SPICe – MOA. Also, this subscription clause has to be witnessed by a professional with their digital signature.
The subscription clause of the Memorandum cannot be changed/substituted after the incorporation of the Company. First subscribers' names and address/details shall be permanent information on the Memorandum of Association of a company.
Gathering all the above information, we can say that the Memorandum Of Association is an essential document without which the Company cannot be incorporated. It is a charter document of the Company, and MOA and AOA both act as a constitution of the Company.
Preparation of MOA
MOA can be prepared both in a hard copy and e-format.
The new way of preparing an MOA is through an online portal. The e-MOA filling can be tedious, for which the link below will solve the confusion. https://www.mca.gov.in/Ministry/pdf/SPICe+_MoA_help.pdf.
This link has a detailed, step-by-step preparation process of MOA.
Fee structure of MOA.
The fee structure for registering the MOA will be based on the type of the Company. A detailed table showing the fee structure of MOA registration is given in the below link.
Confusion in the process of preparing an MOA and registering a company?
Many first-time entrepreneurs may face confusion regarding the preparation of an MOA, the clauses included contents in the clauses, which information comes under which clauses, registration offices in the localities, etc.
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