What is Memorandum of Association (MOA)​- Meaning, Overview, and Requirements

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    Table of Contents

    Its Memorandum of Association defines a company’s structure and spectrum of functions. The Memorandum of Association represents the company’s structure.

    A company’s structure and spectrum of functions are defined by its Memorandum of Association. The company’s structure is represented by the Memorandum of Association.

    It is a formal requirement written during a firm’s creation and licensing system that defines the firm’s connection with all of its investors and states the strategic mission.

    Only the operations listed in the Memorandum of Association are permissible for the business. As a result, the MoA establishes the limit above which the firm’s activities are prohibited.In simple terms, the foundation of a corporation is based on MOA.

    The Memorandum of Association informs stockholders, creditors, and anyone else dealing with your company about the company’s current rights and protections.

    Furthermore, the components of the MoA assist investors in making the correct choice when considering new investments in the firm. A Memorandum of Association must be agreed to sign through at least two subscribers in the case of a private limited firm.

    There need to be seven participants in the case of a public limited corporation.

    As per Section 399 of the Companies Act of 2013, any individual may thoroughly check any document submitted well with the Registrar following the Act’s regulations. As a result, anyone interested in doing business with the organization can learn more about that by reading the Memorandum of Association.

    Clauses in Memorandum of Association

    Clauses-in-Memorandum-of-Association

    The components of a memorandum are specified in Section 4 of the Companies Act of 2013. It specifies all of the critical data that must be included in the memorandum.

    1. Name Clause

    This clause clarifies the organization’s name. The company’s name must not be the same as that of any other corporation. Furthermore, if that is a privately owned company, the term ‘Private Limited’ should take place at the end. There in the situation of a public corporation, the text “Limited” must be added at the end of its title.

    1. Registered Office Clause:

    The above clause clarifies the name of the state wherein the firm’s authorized headquarters is based. This helps in examining the Registrar of Organizations’ territory. Within 30 days of the firm’s inclusion or initiation, the company must notify the Registrar of Companies of the place of its business address.

    1. Object Clause:

    This clause says the purpose whereby the corporation was founded. The purposes are even further subdivided into three categories:

      1. Main Objective: It describes the company’s primary form of work.
      2. Incidental Objective: These will be the objects that are secondary to the achievement of the firm’s primary goals.
      3. Other objectives: Some other goals that the business might very well seek which were not covered through (a) and (b)
    1. Liability Clause:

    It specifies the responsibility of the company’s directors. In the situation of an unlimited company, the members’ responsibility is infinite. However, in the case of companies sharing capital, the members’ liability is constrained by the sum unpaid on their equity.

    The liability of members in a limited company is determined by the sum each representative agreed to contribute.

    1. Capital Clause:

    This clause specifies the highest amount of funds that a business can bring up, also known as the approved capital of the corporation. This also describes how this capital sum is divided into the number of shareholdings of a fixed amount each.

    Use of an MOA

    The Memorandum of Agreement (MoA) describes a company’s context as well as authority, beyond something that the corporation can perform. It governs the firm’s interactions with the outside world.

    A corporation cannot indeed be enlisted unless it has an MoA. It assists anybody interested in entering into agreements and connections with the corporation in learning much more about the firm.

    It also is known as the firm’s constitution because it includes all of the firm’s financial position, including its representatives and their obligations.

    Purpose of an MOA

    The primary function of the MOA is to narrow the extent of the operational business and powers. A business is only allowed to perform acts that occur in the course of the MoA’s power and influence.

    Any action done by the business that goes beyond the reach of the MoA is a hyper virus. The firm’s ultra-virus behave denotes an act done by the organization that is beyond its capabilities. A company’s representatives and depositors can petition the corporation appeal process.

    This is to enjoin the firm from acting in a way that violates the regulations of the company’s Memorandum of Association.

    Articles of Association

    Because the documentation holding a company’s Articles of Association (AOA) is a commercial document, it must be understood carefully. It governs a business’s domestic administration and establishes specific rights and obligations between its shareholders and the business.

    The Articles of Association are the firm’s by-laws, which specify how members and other officials are to carry out their duties in regards to the company’s business, accounting, and auditing. Every corporation limited by shares, unlimited, or private company must have its articles or memorandum of an organization registered.

    Section 31 gives corporations the authority to change or add to their articles of incorporation. These abilities cannot be relinquished by a corporation.

    Is MOA Necessary for the Startup?

    An MoA is required for any firm, whether that is a private organization, a publicly listed company, or perhaps a one-person organization. Thereby, if the startup intends to register as a limited company under The Companies of 2013, it must prepare a Memorandum of Association before implementing for registration.

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