Overview: Memorandum of Association (MOA)
In the corporate sector, certain kind of documents holds significant importance and are highly relevant. One such document that outlines the company’s charter and authority is the Memorandum of Association. When you are setting up a business, the MOA is essential for laying the foundation for a newly established business.
The Memorandum of Association (MoA) serves as the foundational document of any corporation, outlining its core framework and governing its relationship with shareholders, investors, and external stakeholders. Acting as the company’s legal blueprint, it outlines the goals of the business, the extent of its operations, and the terms under which it interacts with the business ecosystem.
Through this article, we will be discussing the meaning of the Memorandum of Association. Additionally, we will be covering the use, purpose, format and clauses of the Memorandum of Association.
What is a MOA?
MOA stands for Memorandum of Association. It symbolizes the corporation’s foundation. It is a major necessity issued throughout and after the establishment and licensing procedure of an organization that governs the firm’s involvement with its shareholders and specifies the company’s effectiveness. As a consequence, the MOA specifies the maximum bound beyond which industrial operations are forbidden.
The Memorandum of Association makes sure the investors, borrowers, and anybody else dealing with the business on the important areas of jurisdiction of the sector are aware. The contents of the Memorandum of Agreement also help prospective buyers make the best decision when choosing a status in the market. The MOA should be recorded by at least two clients in terms of a personal partnership firm, and it must be confirmed by at least seven partners in the case of a public company.
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.
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 Memorandum of Association(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.
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.
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 was founded. The purposes are even further subdivided into three categories:
- Main Objective: It describes the company’s primary form of work.
- Incidental Objective: These will be the objects that are secondary to the achievement of the firm’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.
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 is more than just a legal requirement—it is the strategic gateway through which a company transitions from conceptualization to market presence. By clearly defining the company’s objectives, governance, and operational boundaries, the MoA serves as a cornerstone for corporate governance, safeguarding both the organization’s integrity and its ability to grow in a dynamic business environment. It is a vital document that balances regulatory compliance with a company’s ambition, ensuring robust legal and operational structures from inception to expansion.
FAQ’s
A memorandum of association is not required for a limited liability partnership.
Yes, even for a new corporation, a Memorandum of Association is needed.
