MEMORANDUM OF ASSOCIATION
A memorandum of association (MOA) is a legal document prepared in the formation and registration process of a limited liability company to define it’s relationship with shareholders. The memorandum of association is accessible to the public and describes the company’s name, physical address of registered office, name of shareholders and the distribution of shares. The memorandum of association and the article of association serve as the constitution of the company. The memorandum of association is not applied in the U.S but is a legal requirement for limited liability companies in European countries including the united kingdom, France and Netherlands, as well as some commonwealth nation.
It is a principle document which mean without this company can’t be incorporated or create. It gives life to a company. It is a charter of a company and it tells about what is the limitations of the company.
The memorandum of association of a company is a fundamental document of the company. It contains “the fundamental conditions upon which alone the company is allowed to be incorporated”.
It is the most important document as it sets out the constitution of the company. It is a charter of the company and defines its reason for existence. It lays down the area of operation of the company. It also regulates the external affairs of the company in relation to outsiders. It is the “Lakshman Rekha” for a company.
It is therefore the foundation on which the structure of the company is built. In fact memorandum is one of the most essential pre-requisites for incorporation any form of company under the act.
Purpose of Memorandum of Association
The prospective shareholders know the field in, or the purpose for, which their money is going to be used by the company and what risk they are undertaking in making investment.
The outsiders dealing with the company know with certainty as to what the objects of the company are and as to whether the contractual relation into which they contemplate to enter with the company is within the objects of the company.
Thus, a memorandum of association is, as it were, the area beyond which the actions of the company cannot go; inside that area the shareholders may make such regulations for their own governance as they think fit.
Section-13 provides that a company shall not alter the conditions mentioned in its memorandum except in the cases and in the manner and the extent provided in the act.
Contents of Memorandum of Association
The “memorandum of association” is defined in section-2(56) as meaning “the memorandum of association of a company as originally framed or as altered from time to time in pursuance of any previous company law or of this act”. Section -4 states the requirement with respect to memorandum. The memorandum of association of every company shall contain the following clauses (described as “conditions of the company’s incorporation”) section-4(1):
- The Name clause: The first clause of the memorandum is required to state the name of the company. The name of the company establishes its identity and is the symbol of its existence.
- The registered office clause: The second clause of the memorandum specify the state in which the registered office of the company is to be situated. A company must have from the date of commencement of business or within 15 days of incorporation whichever is earlier, a registered office to which all communications and notices may be addressed. The company shall furnish to the registrar verification of its registered office within a period of 30 days of its incorporation in such manner as may be prescribed.
- The object clause: In the third clause, the memorandum must state the objects for which the proposed company is to be established. The object clause is of great importance because it determines the purpose and the capacity of the company. It indicates the purpose for which the company has been set up and its actual capability, besides its sphere of activities.
- The liability clause: The fourth clause has to state the nature of liability that the member incur. If the company is to be incorporated with limited liability, the clause must state that “the liability of the members shall be limited by shares/guarantee.”
- The capital clause: It states the amount of the nominal capital of the company and the number and value of the shares into which it is divided. This is so in the case of a company having a share capital unless the company is an unlimited company.
- In the case of one person company, the name of the person who, in the event of death of the subscriber, shall becomes the member of the company.
Section-4(6) provides that the form of memorandum should be in such one of the form in Tables A,B,C,D and E in schedule I, as may be applicable to the company. Section-7 provides that the memorandum shall be printed, be divided into paragraphs numbered consecutively, and be signed by each subscriber who shall add his address, description and occupation in the presence of at least one witness who shall attest the signature.
It is to be noted that the companies Act, 2013 shall override the provisions in the memorandum of a company, if the latter contains anything contrary to the provisions in the Act (Section-6).
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