Law and You > Corporate Laws > Companies Act, 2013 > Memorandum of Association
According to Section 2(56) of the Companies Act 2013, the “Memorandum” refers to the memorandum of the company as drawn up initially during the formation of the company or as changed periodically to carry out any action as per any other law of the Act. The provisions regarding Memorandum of Association are given under Section 4 of the Companies Act, 2013. It is a public document according to Section 399 of the Companies Act, 2013. Hence, any person who enters into a contract with the company is expected to have knowledge of the MOA.
The MOA defines the area beyond which the company cannot go i.e. under no circumstance can the company depart from the provisions specified in the memorandum. If it does so, then it would be ultra vires the company and void.
In the case of one Person Company (OPC), the memorandum must also state the name of the person who, in the event of the death of the subscriber or his incapacity to contract, will become the member of the company.
It is also to be noted that the provisions of the Companies Act, 2013 have the overriding effect over the memorandum and Articles of a company. If there is any provision in the memorandum of articles of a company which is repugnant to anything contained in the Act, such a provision would, to that extent, be void.
Format of Memorandum of Association (MOA)
According to Section 4(6) of the Companies Act, 2013, companies must draw the MOA in the form given in Tables A-E in Schedule I of the Act. Here are the details of the forms:
Table A: Form for the memorandum of association of a company limited by shares.
Table B: Form for the memorandum of association of a company limited by guarantee and not having a share capital.
Table C: Form for the memorandum of association of a company limited by guarantee and having a share capital.
Table D: Form for the memorandum of association of an unlimited company.
Table E: Form for the memorandum of association of an unlimited company and having share capital.
Required Contents of MOA:
The importance of MOA lies in the fact that it contains the following clauses and providing the following information in MOA is mandatory.
Name Clause:
A Company being a legal entity must have a name of its own to establish its separate identity. The name of the company is a symbol of its independent corporate existence. Under Section 4(1)(a) of the Companies Act, 2013 the first clause in the memorandum of association of the company states the name by which a company is known. The company may adopt any suitable name provided it is not undesirable. Following rules must be followed during the finalization of the name of the company.
- For a public limited company, the name of the company must have the word ‘Limited’ as the last word.
- For the private limited company, the name of the company must have the words ‘Private Limited’ as the last words.
- This is not applicable to companies formed under Section 8 of the Act who must include one of the following words, as applicable: Foundation, Forum, Association, Federation, Chambers, Confederation, Council, Electoral Trust, etc.
Registered Office Clause:
Under Section 4(1)(b) of the Companies Act, 2013 the MOA must specify the State in which the registered office of the company will be situated. The name of the state in which the registered office of the company is to be situated must be given in the memorandum within 30 days of incorporation or in the day when it commences a business, whichever is earlier, the company must have a registered office to which all communication and notices may be sent. The company must also give notice of the situation of the registered office to the Registrar.
Object Clause
Under Section 4(1)(c) of the Companies Act, 2013 the third compulsory clause in the memorandum sets out the objects for which the company has been formed. The MOA must specify the objects for which the company is being incorporated. The objects 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 extent of powers of the company and it states regulatively that nothing should be done beyond that ambit and that no attempt shall be made to use the corporate life for any other purpose than that which is so specified. The purpose of the objects clause is to enable the persons dealing with the company to know its permitted range of activities. The acts beyond this ambit are ultra vires and hence void. Further, if a company changes its activities which are not reflected in its name, then it can change its name within six months of changing its activities. The company must comply with all name-change provisions.
Liability Clause
Under Section 4(1)(d) of the Companies Act, 2013 the forth compulsory clause must state that liability of the members is limited if it is so intended that the company be limited by share or by guarantee. It should specify the liability of the members of the company, whether limited or unlimited. The effect of this clause is that, in a company limited by shares, no member can be called upon to pay more than what remains unpaid. If his shares are fully paid, his liability is nil. In a company limited by guarantee, the liability clause will state the amount which each member should undertake to contribute to the assets of the company in the event of liquidation of the company. He cannot be called upon to pay anything before the company goes into liquidation.
Capital Clause
This is the fifth compulsory clause. Under Section 4(1)(e) of the Companies Act, 2013 the MOA must state the amount of the capital with which the company is registered unless the company is an unlimited company. This is valid only for companies having share capital. The shares into which the capital is divided must be of fixed value, which is commonly known as the nominal value of the share. The capital is variously described as ‘nominal’, ‘authorized’ or ‘registered’. Further, it must state the names of each member and the number of shares against their names.
Association or Subscription Clause:
This is the last clause. The memorandum has to be subscribed by at least seven persons in the case of a public company and by at least two in the case of a private company. Each subscriber must sign the document and must write opposite his name the number of shares he takes. But no subscriber shall take less than one share. After incorporation, no subscriber can withdraw his name on any ground whatsoever. The MOA must clearly specify the desire of the subscriber to form a company.
For One-Person-Company (OPC):
Under Section 4(1)(f) of the Companies Act, 2013 The MOA of One Person Company must specify the name of the person who becomes a member of the company in the event of the death of the subscriber.
Other Things Required:
- Ensure that at least seven people sign it (2 in the case of a private limited company and one in case of a One Person Company).
- Check that there is at least one witness who has seen above people signing.
- Give address, description, occupation, etc. of all the signatories and witnesses.
Conclusion
Memorandum of Association is a document of prime importance for a company. The Memorandum of Association or MOA of a company defines the objectives, extent of authority, competency, liabilities and legal rights of the company. Thus, it is a document which actually forms the charter of the company and defines its powers and objects. It is the basic document on which the company is built and it states how the company is to be constituted and what work it will perform at the same time. It contains rules regarding the capital structure, the liability of the members, the objects clause, and other important matters of the company.