Overview of Memorandum of Association
The memorandum of association acts as the foundation of every company. It explains all the rules and bubbles powers of the owner in your systematic formal representation. It has a broad scope. As it is very important for every organisation, we will try to understand more about moa. Let us discuss the meaning of the memorandum of association and its aims, features, and many more.
Memorandum of Association of a Company
Memorandum of association of the company deals with all aspects of that particular organisation such as the operations delegation of duties and policies, principles, etc. The memorandum of association of any company is formed or designed by considering the objective of a particular firm. In the year 2013, section 399 of the companies act, designed to form an MOA, which is the public document and needs to get aware of this moa to all employees of an organisation.
What is Meant by MOA?
The memorandum of association definition explains that all the powers and the rights should be mentioned in this public document and no one should depart from the contract as well as not to Violet the rules and regulations specified in the moa. If anyone violates, they can be termed as ultra vires of the company and immediately can void them. This is the simple and straight away definition of the memorandum of association of any company. It is completely under legal survival. All the papers are strictly verified and are tested by the moa in company law.
Types of MOA
Based on their form, there are five main types of memorandum of association and they are as follows:
Table A - if shares end up limiting a company.
Table B - if a guarantee limits a company.
Table C - if a guarantee along with share capital limits a company.
Table D - if it is an unlimited company.
Table E - if it is an unlimited company and has a share capital.
Contents of MOA
The contents of the memorandum of the association consist of different clauses. Each clause plays a vital role in the organisation. Let's see all the classes in a detailed manner as given below,
Name Clause:- the name clause of moa specifies that the titles of all the private limited companies should end with 'private limited'. On the other hand, the titles of all the government companies should end with 'limited'.
The companies under section 8 of the act, may need not to follow these rules. These companies can be identified by certain words like-
Association
Federation
Foundation
Confederation
Forum
Chamber
Council
Electoral trust.
Registered Office Clause- indicates the state of the registered office where the organisation is located exactly. It is very important to specify the branch of the registered office where the organisation got registered.
Object Clause: this segment of the memorandum of association explains the motto of the organisation and its activities. After a few months if there is a change in activities and operations, then the head of the institution needs to change the name of that organisation within 6 months. Otherwise, it will become an offence.
Capital Clause: it concentrates on the capital invested by two or more shareholders of one company. We need to furnish the information regarding the amounts of share between the shareholders and how they formulated their rules etc. in the memorandum of association.
Liability Clause: it is another important class of memorandum of association. Here we need to explain the liability of the members either limited or unlimited in the firm.
If the company is limited by shares, it needs to specify the amounts held by the shareholders and whether they are paid or unpaid. All these aspects need to be mentioned clearly in the MOA.
If the company is restricted by guarantees, the Moa specifies that all contributors with a bonus have equal rights. Even during the winding up of a company, both assets and liabilities which include all the expenses while demolishing the firm need to be distributed equally.
Association Clause: It is the last but not least, class of the memorandum of association. Here one should mention the exact idea and goal of the owner of the company.
Amendment of MOA
If any of the following changes take place, then it means that the memorandum of association needs to be amended:
If an alteration takes place in the name of business.
If any changes happen in the office of registration.
If an alteration takes place in the object clause of the business.
If an alteration takes place in the authorised capital of the business.
If any kind of adjustments are made in the legal liabilities of the business members.
The procedures to be followed for making any types of amendments in the memorandum of association have been mentioned in the 13th clause of The Companies Act, 2013.
Conclusion
Hence it is clear that the memorandum of association is the fundamental public agreement of all kinds of organisations that involves the operational activities, rights, powers, etc. From the definition of a memorandum of association, we can understand that it is important to check the format and all clauses without any fail. And the memorandum of association of your company should be verified and attested by the moa of company law.
FAQs on Memorandum of Association: Definition and Importance
1. What is a Memorandum of Association (MoA) and why is it considered the foundational charter of a company?
A Memorandum of Association (MoA) is the primary legal document that establishes a company's existence and purpose. It is considered the foundational charter because it defines the company's constitution, its scope of operations, and its relationship with the outside world. Any action taken by the company beyond the powers stated in the MoA is considered void. It essentially sets the boundaries within which the company can operate.
2. What is the primary importance of the Memorandum of Association for a company's stakeholders?
The primary importance of the MoA for stakeholders like shareholders, creditors, and investors is that it provides complete transparency about the company's objectives and operational limits. It informs them where their capital will be invested and the extent of their liability. This document helps them make informed decisions by clearly stating the purpose for which the company was formed, ensuring their investments are not used for activities outside this defined scope.
3. What are the six mandatory clauses of a Memorandum of Association as per the Companies Act, 2013?
As per the Companies Act, 2013, every MoA must contain six mandatory clauses:
Name Clause: States the legal name of the company, ending with 'Limited' for a public company and 'Private Limited' for a private company.
Registered Office Clause: Specifies the State in which the company's registered office is located.
Object Clause: Details the main objectives and other activities the company is authorised to undertake.
Liability Clause: Defines the liability of the members, which can be limited by shares, limited by guarantee, or unlimited.
Capital Clause: Mentions the authorised share capital of the company and its division into shares of a fixed amount.
Association Clause: A declaration by the subscribers stating their intention to form a company and their agreement to take shares.
4. How does the Memorandum of Association (MoA) fundamentally differ from the Articles of Association (AoA)?
The MoA and AoA differ in their scope, purpose, and legal standing. The MoA defines the company's external relationship with the outside world and sets its objectives and powers. In contrast, the AoA contains the internal rules and regulations for managing the company's day-to-day affairs. The MoA is the supreme document and is subordinate only to the Companies Act, whereas the AoA is subordinate to both the MoA and the Companies Act. Altering the MoA is a complex process, while the AoA can be altered more easily by passing a special resolution.
5. What does the doctrine of 'ultra vires' mean in relation to the MoA, and what are its consequences?
'Ultra vires' is a Latin term meaning 'beyond the powers'. In the context of company law, an act is considered ultra vires if it is beyond the scope of activities defined in the Object Clause of the MoA. The key consequence is that such an act is null and void from the very beginning. It cannot be legally enforced against the company and cannot be ratified or made valid even if all the shareholders consent to it.
6. Why is the Object Clause of the MoA considered the most critical clause for investors and creditors?
The Object Clause is most critical for investors and creditors because it explicitly states the business activities the company will pursue. This clause provides a guarantee that their funds will be used only for the purposes specified in the memorandum. It prevents the company's management from diverting capital into unrelated or unauthorised ventures, thereby protecting the financial interests and providing a sense of security to those who have invested money in the company.
7. What is the process for altering the clauses in a Memorandum of Association?
Altering the clauses of an MoA is a regulated and complex process to protect stakeholder interests. The general procedure involves passing a special resolution by the shareholders in a general meeting. However, for specific changes, such as altering the Name Clause or Object Clause, or shifting the Registered Office from one state to another, the company must also obtain approval from the Central Government or the Registrar of Companies (RoC) after passing the resolution.
8. Can a company operate without a Memorandum of Association?
No, a company cannot be legally incorporated or operate without a Memorandum of Association. The MoA is a mandatory, fundamental document required for the registration of any company under the Companies Act, 2013. It must be drafted and filed with the Registrar of Companies (RoC) at the time of incorporation. Without it, the company has no legal identity, no defined purpose, and cannot be registered.
