What do you mean by Memorandum of Association (MOA)?
MOA stands for Memorandum of Association. MOA is a document that symbolizes the corporation’s foundation. A Memorandum of Association is a formal document that outlines the rationale behind the establishment of the company. The firm’s authorization and the conditions under which it operates are established in the MOA. The firm’s memorandum of association covers every facet of that specific corporation, including activities, allocation of responsibilities, goals, values, etc.
When engaging in an agreement with a business, MOA enables stockholders, creditors, and anyone else associated with the business to understand the fundamental rights and responsibilities of the organization.
In this article, we will be going to discuss more in-brief about the various aspects of Memorandum of Association and the various MoA clauses. So, without any further ado, let’s begin.
Use Of Memorandum of Association (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.
Format Of Memorandum of Association (MOA)
Section 4 of the Companies Act, 2013 states “The MOA must be drawn in the format outlined in Table A to table E of Appendix I of the Law.”
- Table A: Format for a corporation owned by shareholders’ memorandum of association.
- Table B: Memorandum of Association format for a limited partnership without an equity capital.
- Table C: Type for a memorandum of association for a corporate body with a shareholding.
- Table D: Format for an unrestricted corporation’s memorandum of association.
- Table E: Memorandum of Association for a Limited Liability Corporation with Shareholding.
Purpose of MoA Registration
MOA is a significant document that provides all of the specifics regarding the business and also manages the relationship between the business and its stockholders.
According to Section 3 of the Act, the following individuals must adhere to the memorandum so that the corporation can be established:
- In the situation involving a publicly traded corporation, 7 or more individuals are required.
- Whenever a private corporation is involved, 2 or more individuals are needed
- For an OPC business, only a single individual is needed.
Only after the Memorandum of Agreement is written and has the required number of signatures as outlined in the aforementioned situations, can a business be established. Hence, an MOA is needed in order to establish a corporation.
The MOA has various other purposes, such as the following discussed below:
- When acquiring shares, MOA enables stockholders to have more knowledge of the business. This allows the investors to assess the financial capacity of the firm before making any contribution towards the firm.
- 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.
Clauses In The 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 placed at the end. There is the situation of a public corporation, the text “Limited” must be added at the end of its title.
2. 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.
3. Object Clause
This clause says the purpose whereby the corporation being founded.
The purposes are even further subdivided into three categories:
- Main Objective: It describes the company’s primary form of work.
- Incidental Objective: These are supporting goals for achieving the organization’s primary goals.
- Other objectives: Some other goals that the business might very well seek which were not covered through (a) and (b).
4. 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.
5. 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.
What circumstances permit MOA modifications?
The following circumstances permit MOA modifications:
- When there is any change to the company’s name.
- When any change takes place regarding the business office registration.
- If the authorized capital of the firm changes.
- If the object clause of the firm is modified.
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.
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.
Section 31 gives corporations the authority to change or add to their articles of incorporation. These abilities cannot be relinquished by a corporation.
Conclusion
The Memorandum of Association enables shareholders, creditors, and anyone else interacting with the company to understand its fundamental rights and powers. Additionally, the information in the MoA aids potential shareholders in making the best choice when considering an investment in the business.
At the end of this article, you must have understood about memorandum of association but there are some minor facts that you must remember. An MOA can be signed by a firm through its representative only. To know some more facts like this contact OnDemand International. Our experts at Odint can assist you create a MOA and can further help you with any queries regarding the cluases of MOA.
FAQ’s
The following five provisions ought to be included in every company’s MOA: naming a clause, clause of registered office and the object clause.
The purposes for which the company is being incorporated must be specified. Additionally, if a corporation changes its operations in a way that is not represented in its name, it is permitted to alter its name within six months following the change in operations.
A memorandum of association is not required for a limited liability partnership.
Yes, even for a new corporation, a Memorandum of Association is needed.
A special resolution at the shareholders’ meeting can be used to change the memorandum of association.
