The creation of an organization involves individuals coming together to achieve a common objective, often with a commercial purpose in mind. To establish a business entity, an essential step is incorporating the company through a formal application to the Registrar of Companies (ROC). A critical document required during this incorporation process is the Memorandum of Association (MoA).
The Memorandum of Association (MoA) is a pivotal legal document that outlines the purpose and scope of an organization’s activities. It defines the company’s authority and establishes the framework within which the company operates. In essence, the MoA serves as a guiding document that sets the boundaries for the company’s actions, ensuring that the organization functions within the limits defined by its founders.
Any company must operate within the constraints outlined in its MoA. If a company engages in activities beyond those specified in the MoA, such actions are considered “ultra vires” (beyond the powers) and are, therefore, invalid. The MoA forms the foundation upon which the company is built, detailing the entire organizational structure and ensuring transparency in its operations.
The Memorandum of Association is a public document, meaning anyone interested in doing business with the company can access it. By obtaining a copy from the Registrar of Companies, potential partners or stakeholders can gain insights into the company’s objectives and scope of operations.
The format of a Memorandum of Association is dictated by the Companies Act and varies depending on the type of company. The MoA may take one of the forms outlined in Tables A, B, C, D, and E of Schedule 1 under Section 4(5) of the Companies Act. Each table corresponds to different types of companies:
The MoA should be drafted in a precise format, divided into chapters, and signed by the company’s subscribers. Each subscriber must contribute to the initial share capital and agree to the terms set forth in the document.
The Memorandum of Association is not just a formality but a crucial document that encapsulates the essence of the company. It governs the company’s interactions with its stakeholders, ensuring transparency and clarity in its operations. According to Section 3 of the Companies Act of 2013, an MoA is mandatory for the registration of a company. The requirements for registering an MoA are as follows:
The parties involved in the formation of the company must agree to the terms of the MoA before the company can be registered with the Registrar of Companies. As per Section 7(1)(a) of the Companies Act, both the Memorandum of Association and the Articles of Association must be signed and registered with the Registrar to complete the incorporation process.
The MoA contains several essential elements that provide detailed information about the company. These include:
| Name Clause: | This section determines the company’s name. The company’s name should not be the same as that of another business. Even, since it is a private entity, the term “Private Limited” should be included at the top. In the case of a public corporation, the term “Limited” should be added to the end of its name. |
| Registered Office Clause: | The name of the state in which the company’s registered office is located is specified in this clause. This aids in determining the Registrar of Companies’ authority. Within 30 days of the company’s incorporation or commencement, the company must notify the Registrar of Companies of the site of its registered office. |
| Object ClaLiability Clause:use: | This clause specifies the purpose for which the corporation was formed. The following three subcategories can be included under the objectives:Main Objective – States the main business of the company Incidental Objective – These are the objects that aren’t directly related to the company’s core goals. Other objectives – Any other goals that the organization may achieve that aren’t covered in (a) and (b) above (b) |
| Liability Clause: | It specifies the company’s members’ responsibility. In an unrestricted company, the members’ liability is unlimited, while in a company limited by shares, the members’ liability is limited by the balance outstanding on their share. The members’ responsibility in a corporation limited by guarantee is limited by the amount each partner has agreed to pay. |
| Capital Clause: | This provision specifies the overall amount of capital that a corporation can obtain, also known as the authorized/nominal capital. This also illustrates how such a large sum of money is divided into a set number of shares. |
The Memorandum of Association is a foundational document that plays a crucial role in the formation and operation of a company. It provides a clear framework for the company’s activities, ensuring that all operations are conducted within the boundaries set by the founders. By defining the scope of the company’s powers, the MoA helps prevent unauthorized activities and protects the interests of shareholders and other stakeholders.
The purpose of an MoA is to outline the objectives and scope of a company’s activities, ensuring that the organization operates within its defined boundaries.
Yes, according to the Companies Act of 2013, an MoA is a mandatory document required for the registration of a company.
No, any activity beyond the scope defined in the MoA is considered “ultra vires” and is, therefore, invalid.
The main clauses in an MoA include the Name Clause, Registered Office Clause, Object Clause, Liability Clause, and Capital Clause.
The MoA is a public document and can be accessed by paying a fee to the Registrar of Companies.
Get the link to download the App
Download Jainam Mobile App
