For establishing an association as a commercial company, it is essential to apply with the Registrar of Companies (ROC) with all the essential documents, including the Memorandum of Association (MOA). So in this article we are going to discuss about the all main clauses of Memorandum of Association.
A company or an association is formed when a group of people come together with a specific purpose to achieve a common goal. The primary aim of a company is profit accumulation which is purely commercial.
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A Memorandum of Association (MOA) is a legal paper representing the company’s primary charter. This legal document establishes the company’s authority and sets the terms under which the company works.
Simply put, a Memorandum of Association (MOA) is a legal manual that consists of all the laws and regulations of the company. A Memorandum of Association (MOA) specifies the extent of the company’s activities, stating that it cannot work outside the limits mentioned in the document.
Importance of memorandum of association
- Memorandum of Association (MOA) is a vital and fundamental document required during company registration.
- This document describes, in brief, the scope of the activities carried out by the company or the organization
- It offers protection to the company, ensuring that the funds of the company are used for specific purposes only
- Memorandum of Association (MOA) enlightens the employees, vendors, collaborators, stakeholders, etc., about the company’s objectives and field of operation.
- The document contains the name and addresses of all the important persons associated with the company.
- It contains the functions of the company and defines the span of its operations
Major clauses of Memorandum of Association (MOA)
The clauses contained in the Memorandum of Association (MOA) follow Section 4 of the Companies Act 2013. Below are the 6 main clauses in the Memorandum of Association (MOA).
Name Clause- The first Memorandum of Association (MOA) clause is the name clause. This clause consists of the company’s proposed name, establishing a particular enterprise’s identity. The company’s name should not be the same as any existing enterprise’s. The name clause protects the enterprise from future registrations of closely identical names. If the enterprise is a private firm, it must have the suffix ‘limited; in its name.
Registered Office / Domicile Clause- The second clause of the Memorandum of Association (MOA) consists of the name of the state in which the registered company or enterprise is situated. The domicile clause does not contain the exact address of the enterprise but the state or union territory in which the registered company is located.
Object Clause- The third Memorandum of Association (MOA) clause consists of the object clause. This clause is considered one of the most important since it outlines the objects or goals associated with the commercial reason a company is established. It contains a detailed scope of activities of the company and explains how the members’ capital will be used. The statement of the object clause contained in the Memorandum of Association (MOA) consists of the following benefit:
- It restricts the Board of Directors to use the funds only for the activities stated in the object clause of the company
- It offers assurance to the subscribers of the company regarding their invested capital
- It offers protection to all the stakeholders, vendors, etc., who invest in the company
Liability Clause- This clause declares the liability of all the company members to be unlimited or limited. If a company is limited by shares, the MOA must declare that the liability of its members is also limited. While an enterprise limited by guarantee must specify the amount of contribution that each member agrees to make.
Capital Clause- The capital clause states the company’s share capital. It specifies the maximum amount of capital that any enterprise can raise. This clause also explains the split of the capital into a certain number of shares.
Subscription Clause- The sixth and final clause of the Memorandum of Association (MOA) consists of information about the initial subscribers of the company. It includes names, addresses, signatures and other required information about the subscribers.
While establishing any enterprise or company, a Memorandum of Association (MOA) is a vital document required for its registration. This vital document establishes the legal nature of the company. It comprises six vital clauses that briefly outline a company’s functioning and structure.