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7 Important Clauses of Memorandum of Association (MoA)

Online Legal India LogoBy Online Legal India Published On 11 Jul 2022 Updated On 17 Jan 2023 Category Compliance

When a group of people band together to accomplish a common goal, a corporation is created. Typically, this objective has a commercial focus. Companies are often established in order to benefit from their commercial operations. The Registrar of Companies must receive an application before a company may be incorporated (ROC). A number of papers must be presented with this application. The Memorandum of Association is one of the key papers that must be included with the application for incorporation.

What is the Memorandum of Association?

A legal document known as the Memorandum of Association outlines the reason the firm was founded. It outlines the company's authority and the circumstances under which it must function. It is a document that outlines all the guidelines that direct how a business interacts with the outside world.

Every company must have a Memorandum of Association (MoA) that outlines the parameters of its activities. Once created, the document has no other uses for the business. The action will be regarded as ultra vires and so invalid if the firm exceeds the scope.

Reasons for Registering a Memorandum of Association

An important document that provides all of the information about the firm is the Memorandum of Association. It controls how the corporation interacts with its stakeholders. The Companies Act of 2013's Section 3 explains the significance of memoranda by noting that, in order to form a business,

  • A public company must have seven or more employees;
  • Whenever a private company is involved, two or more persons are needed;
  • One person is all that is necessary for a one-person business.

According to Section 7(1)(a) of the Companies Act, the company's Memorandum of Association & Articles of Association must be properly signed by the subscribers and lodged with the Registrar in order to incorporate a company. A memorandum contains other things in addition to these. which are

  • It enables shareholders to learn more about the business before purchasing shares. 
  • This aids the shareholders in deciding how much money they will put into the business.
  • All interested parties that wish to cooperate with the business in any manner are given information.

7 Important Clauses of Memorandum of Association in Company Law

The contents of the memorandum are stated under Section 4 of the Companies Act of 2013. It includes all the valuable information that the memorandum of association must include:

Name Clause

The company name is stated in the first clause of Memorandum of Association. The company name may be anything. However, there are various requirements that need to be fulfilled.

According to Section 4(1)(a):

  • A company's name should include the word "Limited" if it is a public company. For instance, the registered name of the publicly traded corporation "Robotics" is "Robotics Limited."
  • A company's name should include "Private Limited" if it is a private company. Its legal name will be "Secure Private Limited," a private company.
  • Section 8 corporations are not subject to this stipulation.

Registered Office Clause

The country of origin and judicial jurisdiction of a corporation is determined by its registered office. It serves as a dwelling and the centre for all communications with the business.

The Registered Office of the Company is discussed in Section 12 of the Companies Act, 2013.

It is sufficient to identify the state where the firm is located before the company is incorporated. However, the firm must declare the precise location of the registered office after incorporation. Within thirty days of establishment, the business must also verify its location.

Object Clause

The Act's object clause is described in Section 4(c). The most significant portion of the Memorandum of Association is the Object Clause. It outlines the reason the firm was founded. The principal objects as well as elements required to accomplish the specified objects, commonly referred to as incidental or supplementary objects, are both included in the object clause.

By restricting the company's range of authority. The following are protected by the object clause:

  • Shareholders: The object clause makes it clear which operations the firm will do. This makes it easier for the shareholders to understand how their investment in the business will be put to use.
  • Creditors - It assures the creditors that their money is safe and that the business is operating within the restrictions outlined in the clause.
  • Public Interest - The purpose clause restricts the range of issues the corporation may handle, making it impossible for the company to diversify its business lines.

Liability Clause

Limited By Shares - A private corporation is what the Companies Act of 2013 (section 2(22)) defines. The sole cost incurred by shareholders in a corporation limited by shares is the cost of the shares they have subscribed for. Their obligation will only extend to the unpaid amount if, for any reason, they did not pay the full price for the shares and the corporation fails.

Limited by guarantee- Section 2(21) of the 2013 Companies Act defines limited by guarantee. Instead of stockholders, a business limited by guarantee has members. These members agree to contribute to the company's assets upon dissolution. The members promise that they will be responsible for a specific sum.

Capital Clause

It details the company's entire share capital as well as its share structure. how many shares of whichever type are issued from the total amount of capital. The shares may be preference shares or equity shares.

Subscription Clause

Who is signing the memorandum is stated in the Subscription Clause. Each subscriber must specify how many shares he is purchasing. The memorandum must be signed by the subscribers in the presence of two witnesses. A minimum of one share must be purchased by each subscriber.

Association Clause

The memorandum's signatories express their desire to affiliate with the business and create an association in this section.

What is the usage of the Memorandum of Association (MoA)?

  • It establishes a company's boundaries within which it is not permitted to operate.
  • It controls how a corporation interacts with the outside world.
  • Without it, the firm cannot be established because it is required throughout the registration procedure.
  • It aids anybody seeking information about the firm in order to engage in a contractual connection with it.
  • Due to the fact that it contains all of the information about the firm, its members, and their responsibilities, it is also known as the company charter.

Conclusion

An essential document for the creation of a company is the Memorandum of Association. It is stated in the company's charter. A company cannot be registered or incorporated without a memorandum. The Memorandum and Articles of Association combined make up the company's constitution.

Online legal India provides you with the service of MoA drafting for the incorporation of a company under the Company law in India.

 


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