Memorandum of Association (MoA) : Meaning, Format, Objectives and Clauses

The provisions of Section 2(20) of the Companies Act, 2013 define a company as a “Company incorporated under this act or any previous company law.” A company is an artificial person that is created by law and has a separate legal entity, perpetual succession, a common seal, and limited liability. As a company is one of the most popular forms of business arrangement among entrepreneurs, it goes through strict and statutory compliance. The compliance of a company is a complex activity that includes many formalities and strict procedures. The formation of a company takes place in stages; every stage involves a set of documents and pre-defined procedures. Among all the other documents, The Memorandum of Association and the Article of Association are the most important documents for an organization.

Geeky Takeaways:

• A company is a separate legal entity that a group of individuals forms to engage in and operate a business organization in a commercial or industrial capacity.
• The Memorandum of Association and the Articles of Association are the most important documents for an organization.
• The Memorandum of Association is also known as the charter of the company. The MoA states all the rights, privileges, and powers of the company.
• The MoA is signed by seven members in the case of a public limited company, whereas in the case of a private limited company, the MoA is signed by at least two subscribers of the company.

What is Memorandum of Association (MoA)?

The Memorandum of Association is said to be the supreme document of the company. In the MoA, the character of the company is mentioned. The MoA sets out the powers of the company, the objectives of the company, and the operations in which the company will be engaged. It is worth noting that the company can only undertake those activities that are listed in the MoA. The MoA describes the boundaries beyond which company action cannot proceed. The MoA is also a vital document for shareholders and creditors to interact with and deal with the company, as most of the time the stakeholder goes through the MoA to understand the exact business of the company and its limits before entering any business transaction with the company. The boundary beyond, as specified under the MoA, gives an overview of the powers and objectives beyond which the company cannot take action. MoA is signed by seven members in the case of a public limited company, whereas in the case of a private limited company, an MoA is signed by at least two subscribers of the company.

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

Format of MoA

Under Section 4(6) of the Companies Act 2013, a Memorandum of Association (MoA) may take any of the forms mentioned under Tables A to E of Schedule 1. As there can be various types of businesses, the tables are of various types:

Table A	Company with a share capital.
Table B	Company limited by guarantee but does not have a share capital.
Table C	Company limited by guarantee having a share capital.
Table D	Unlimited company but does not have a share capital.
Table E	Unlimited company with a share capital.

Objectives for Registering MoA

1. To Provide a Legal Status: The MoA is a legally binding document that establishes the scope of the company’s activities and helps the company provide a legal identity. The MoA also helps establish the company as a separate legal entity distinct from its owners or members.

2. To Define the Company’s Purpose: The MoA of a company sets out the objectives and activities that the company is authorized to undertake. The MoA makes sure that the company operates within the boundary marked by the MoA and complies with the applicable regulatory and statutory framework.

3. To Protect the Interests of Shareholders: The MoA also highlights the rights and obligations of the shareholders and members, which helps to protect their interests. It also helps to avoid and deal with any unauthorized activities or decisions that could jeopardize the company and affect the shareholders.

4. To Facilitate Capital Raising: The MoA states the authorized share capital of the company, which helps investors and other stakeholders understand the potential size of the company and the amount of capital that is required by the company to conduct its operations. This helps the company raise capital through the issuance of shares.

5. To Facilitate Decision-Making: The MoA of the company helps facilitate effective and efficient decision-making by establishing the company’s powers and limitations. It provides suggestions to the management and directors on the activities that the company can undertake by staying within the boundaries marked by the MoA. This helps the management make informed business decisions.

6. Public Document: MoA is a public document as specified under Section 399 of the Companies Act, 2013. The section establishes that every person who is contracting with the company or enters into a contract with the company shall be presumed to have matters, affairs, and conditions contained in the MoA.

What are the Main Clauses of the MoA?

As per the Companies Act of 2013, the following mandatory clauses are to be included in the MoA:

1. Name Clause

2. Registered Office Clause

3. Object Clause

4. Liability Clause

5. Capital Clause

6. Nominee Clause

Contents of Memorandum of Association (MoA)

1. Name Clause: This clause contains the name of the company; a name is the general identity of a company. In the case of a public limited company, the word “limited” should be at the end of the name, whereas in the case of a private limited company, the last words should have “private limited” at the end. It is worth noting that this clause does not apply to the companies that are formed under Section 8 of the Act. Further, the company should not have any identical name as any existing company registered under this law or any other previous company’s act. The name of the company should not be undesirable in the opinion of the central government. Examples of undesirable names include board, commission, authority, republic, etc.

2. Registered Office Clause: This clause contains the name of the state in which the registered office of the company is located. The Registered Office clause helps to determine the correct jurisdiction of the Registrar of Companies. The company is required to provide the registered office location and address to the RoC within 30 days from the date of incorporation of the company. The registered office will be treated as an official office of the company. All business communications, legal notices, and documents will be sent to the registered office of the company. The address of the registered office is to be printed on all the letterheads, all the cards, etc.

3. Object Clause: This clause contains all the objectives with which the company is formed. The company must compulsorily carry out its business activities to fulfill the objectives mentioned in the object clause. This clause helps to protect the interests of the shareholders and members since the company is required to operate within the limits of the scope of its object clause, and the company cannot engage in any activities that are not specified in this clause. There are three subcategories under the object clause:

• Main Objective: It mentions the main business of the company.
• Incidental Objective: It mentions the objects ancillary to the achievement of the main objects of the company.
• Other objectives: it mentions any other objects which the company may pursue and are not covered in (a) and (b).

4. Liability Clause: This clause mentions the liability of the members, whether it is limited or unlimited. In the case of a company limited by shares, the liability of the members of the company is limited up to the amount unpaid, if any, on the shares held. In the case of a company limited by guarantee, the amount up to which the members have undertaken to contribute. In the case of an unlimited-liability company, the members’ liability is unlimited.

5. Capital Clause: This clause mentions the details of the maximum capital a company can raise, this is also called the authorized or nominal capital of the company. It provides details of the maximum amount of capital that can be issued to the company’s shareholders. This clause also explains the division of such an aggregated capital amount into the number of shares of a fixed amount each. The capital clause also specifies the type of shares the company is authorized to issue; i.e., equity shares, preference shares, or debentures.

6. Nominee Clause: This clause is applicable only in the case of a one-person company. This clause mentions the name of the individual who will become a member of the company in the event of the subscriber’s death. Subscribers and nominees must be Indian citizens and residents of India.

Alteration of Memorandum of Association

The MoA must be altered or amended from time to time to include the changes in clauses, if any. The following changes will be considered an alteration of the MoA:

• When there is a change in the company name.
• When there is a change in the location of the registered office.
• When there is a change in company objectives.
• When there is a change like the liability of company members.
• When there is a change in the maximum limit of authorized capital of the company or division of authorized capital.

The process of altering the MoA will be as follows:

1. Hold a Board Meeting: The company is required to hold a board meeting to approve the alterations to the MOA.

2. Hold a General Meeting. A general meeting should be conducted by giving a 21-day notice to members and the agenda to shareholders to obtain approval for the alterations to the MOA.

3. Filing of a special resolution: All details of the special resolution filed to alter the MoA should be filed with the RoC within 30 days of the passing of such resolution.

4. Approval of ROC: The ROC will examine the special resolution and approve the MoA alteration, and this MoA will be considered altered.

Also, refer to Difference between Articles of Association (AOA) and Memorandum of Association (MOA)

Conclusion

The Memorandum of Association is also known as the charter of the company. The MoA states all the rights, privileges, and powers of the company. The MoA sets out the powers of the company, the objectives of the company, and the operations in which the company will be engaged. The MoA is a legally binding document that establishes the scope of the company’s activities and helps the company provide a legal identity. The MoA is also a vital document for shareholders and creditors to interact with and deal with the company, as most of the time the stakeholder goes through the MoA to understand the exact business of the company and its limits before entering any business transaction with the company. The boundary beyond, as specified under the MoA, gives an overview of the powers and objectives beyond which the company cannot take action. The MoA contains six major clauses, namely the name clause, registered office clause, object clause, liability clause, capital clause, and nominee clause. The MoA will be altered once the RoC approves the special resolution filed to amend the MoA.

Frequently Asked Questions (FAQs)

1. What is a Memorandum of Association?

Answer:

As per Section 2(56) of Companies Act 2013, “Memorandum means the Memorandum of Association (MOA) of a company as originally framed or as altered from time to time in pursuance of any previous company law or of this act.” The MoA sets out the powers of the company, objectives of the company, and operations in which the company will be engaged.

2. What are the clauses in the MoA?

Answer:

The followings are the clauses in an MoA:

• Name Clause
• Registered Office Clause
• Object Clause
• Liability Clause
• Capital Clause
• Nominee Clause

3. What is a Name Clause?

Answer:

This clause contains the name of the company; a name is the general identity of a company. In the case of a public limited company, the word “limited” should be at the end of the name, whereas in the case of a private limited company, the last words should have “private limited” at the end. The company should not have any identical name as any existing company registered under this law or any other previous companies act. The name of the company should not be undesirable in the opinion of the central government.

4. What are the forms in MoA?

Answer:

Under Section 4(6) of the Companies Act 2013, a Memorandum of Association (MoA) may take any of the forms mentioned under Tables A to E of Schedule 1.

5. Which changes amount to an alteration in the MoA?

Answer:

• When there is a change in the company name.
• When there is a change in the location of the registered office.
• When there is a change in company objects.
• When there is a change in the nature of the liability of company members.
• When there is a change in the maximum limit of authorised capital of the company or division of authorised capital.