Memorandum Of Association (MOA): A Master Guide

The Memorandum of Association (MOA) serves as the company's constitution. This legal document outlines the fundamental details of the company's formation, incorporation, and structure. As the company's constitution, the Memorandum of Association's purpose is to define the company's relationship with the outside world, the scope of its activities, powers, and specify the goals and objectives for which the company is formed. 

The MOA sets the boundary for the company's action, and the company cannot go beyond it. Meaning the company will undertake only those activities or operations mentioned in their MOA. 

In this blog, we will cover all aspects of a Memorandum of Association (MOA), including its full form, objectives, format, benefits, clauses to include, and more. 

What is a Memorandum of Association (MOA)? 

The full form of "MOA" is "Memorandum of Association". This legal document is drafted during the company's formation and registration process. A company's MOA will state the company's authority, specify the operations and actions the company may undertake, set the backdrop for the company's regulatory framework, and ensure adherence to it.

Now that the Memorandum of Association has been prepared at the initial stage of forming the company, it serves as a foundational document that outlines the company's organizational structure and includes all the regulations and laws that govern the company's interactions with the outside world. 

Format of Memorandum of Association

The format of the MoA is set out in Section 4(6) of the Companies Act 2013. The Act states that the format of a Memorandum of Association will be specified in Tables A to E of Schedule 1 to the Act. Companies are required to use the appropriate format provided in Tables A to E based on their business type. 

The various sections of the Act are as follows. 

• Table A: Applicable for companies with a share capital. 
• Table B: It is relevant to a company limited by guarantee but does not have a share capital.
• Table C: It is appropriate for a company limited by guarantee having a share capital. 
• Table D: It is relevant to an unlimited company but does not have a share capital. 
• Table E: Applicable to an unlimited company with share capital. 

Companies must ensure that the MoA is numbered, printed, and manually divided into paragraphs. The subscribers to the company are required to sign the MOA. 

What Are The Objectives Of Memorandum Of Association?

Since the MOA is an important document for the company, its objectives are multi-dimensional. MOA plays an integral role in the company's operations, legal matters, stakeholder interactions, and more. 

The following are the objectives of an MOA. 

Registration Objectives: Section 3 of the Companies Act states that the company can be formed when the following members of the company subscribe to the memorandum:

• Seven or more members in the case of a public company. 
• Two or more members in the case of a private company. 
• Only one member in the case of a One Person Company (OPC)

Specifies The Scope Of The Company: The MOA defines the range of activities the company may undertake, ensuring its operations remain within the legal framework applicable to it. 

Establishes The Company's Legal Identity: The MOA is prepared at the initial stage of the company's registration process and serves as the foundational document that legally acknowledges the company's existence and operations. 

Highlight Shareholder Rights: The MOA specifies the duties, obligations, and rights of the company's shareholders. 

Company's Boundaries: The documents set out the limits of the company's activities to prevent it from going beyond the powers granted by the Memorandum. 

Name and Registered Address of Company: The Memorandum of Association contains the company's formal name and registered office address. This also established the legal jurisdiction under which the company operates. 

Capital Structure: The MOA outlines the company's authorized share capital, including the types of shares it may issue. This helps to lay the groundwork for future financial operations and decisions. 

Governing Rules & Regulations: The MOA serves as the company's constitution, outlining the guidelines and regulatory framework for its internal operations. 

Main Clauses Of The Memorandum Of Association (MOA)

The following are the main contents of the Memorandum of Association: 

• Name Clause
• Registered Office Clause
• Object Clause
• Liability Clause
• Capital Clause

Name Clauses: How To Name The Company

The name clause of the MOA specifies the rule for setting the company's name. For instance, the Private Limited Company names must end with "Private Limited". Whereas for "Government Companies", the term "Limited" must be used to conclude the company name. 

Companies under Section 8 of the Act have certain different rules for naming the company. These companies are identified by the following terms:

• Association         
• Federation
• Foundation
• Confederation
• Forum
• Chamber
• Council
• Electoral Trust

Registered Office Clause: Defines The Location Of Company

This clause of the MOA specifies the state(s) in which the company's registered office is located. The register office clause is significant; therefore, it should clearly state the company's registered office, where the organization is registered. The clause clarifies the company's official location. 

Object Clause: States The Purpose & Activities Of The Company

The object clause in the company's Memorandum of Association sets out the organization's mission and intended activities. Over time, if there is any change in the company's operations or activities, the organization's leader must implement the changes in the company's name within six months. Ensure it is completed in a timely manner to avoid any penalties for violating regulations.  

This clause ensures that the company's activities align with its stated purpose. 

Capital Clause: Defines The Shareholder Investments

This clause addresses the capital contributed by multiple shareholders. The clause further details the maximum capital the company can raise, including how that amount is divided among the specified number of shares. Lastly, the capital clauses also detail the type of shares the company can issue legitimately, such as preference shares, equity shares, or debentures. 

Liability Clause: Outlines The Responsibilities of the Member

This clause is an essential part of the MOA. It details the extent of liability held by the members of the company within the firm; liability can be either limited or unlimited. For instance, if the company is operating with limited liability by shares, the MOA must state the number of shares held by each shareholder and whether those shares are paid or remain unpaid. 

This clause holds importance when the company is winding up. This is because the clause ensures that both liabilities and assets, including expenses incurred during the firm's dissolution, are distributed equally among the contributors.        

Benefits of Memorandum of Association? 

The following are the benefits of the MOA. 

Legal Status: The MOA serves as the firm's constitution and grants the company a separate legal identity from its owners. Having these issues is important for the company to engage in the legal transaction and the obligations.

Objectives: The MOA outlines the company's objectives and goals, ensuring everything is achieved in accordance with all applicable laws and regulations. When the company rises, it forms the foundation for seamless company operations. 

Protection of Shareholders: The MOA highlights the shareholders' obligations and rights, ensuring their interests are safeguarded. This further ensures transparency and fairness in corporate actions. 

Ensure Regulatory Compliance: The MOA ensures the company complies with legal requirements and established regulatory standards. 

Decision Making: The MOA guides management by defining the company's goals, objectives, powers, and limitations. 

Alterations In Memorandum Of Association (MOA). 

In the event of any changes to the clauses of the Memorandum of Association (MOA), the MOA must be amended to reflect them. The following changes will result in alterations to the Memorandum of Association. 

• Changes in the company name. 
• Changes in the location of the company's registered office. 
• Change in Company objectives. 
• Change in the nature of liability of the company members. 
• Changes in the maximum limit of the authorized capital of the company. 
• Changes in the division of authorized capital. 

The following is the process for making an alteration in the MOA.

• Hold Board Meeting: The company is required to hold a board meeting to approve the alterations to be made to the MOA. 
• Hold a General Meeting: A general meeting must be held to obtain shareholders' approval to make the alteration to the MOA. 
• Filing Of A Special Resolution: A special resolution to alter the MOA must be filed with the ROC within the next few days of passing it. 
• Approval of the ROC: The ROC will then review the special resolution filed and approve the MOA alteration. 

Who Can Subscribe The MOA?

The following individuals and companies can be subject to the Memorandum of Association (MOA). 

• Individual. 
• Foreign Citizens and Non-Resident Indians. 
• Minor (courtesy of a natural guardian)
• Company incorporated under the Companies Act. 
• Company incorporate outside India. 
• Society is registered under the Societies Registration Act, 1860. 
• Limited Liability Partnership. 
• Body corporate incorporated under an Act of Parliament and State Legislation. 

The Bottom Line

The Memorandum of Association (MOA) is more than a legal document for a company. It is the blueprint that outlines a company's operational scope, goals, objectives, identity, and more. As a business owner, understanding the MOA's core functionality, including its format and advantages, in detail, is essential. The entire corporate governance aspect is crucial, but the MOA guides and ensures that a company operates within the legal framework. 

As an NRI, if you are seeking to register a business in India, Savetaxs is the name to trust. Our experts will provide consultation on end-to-end documentation compliance and on the procedural forms for company incorporation. 

Connect with us as we serve our clients 24/7 across all time zones.