A Memorandum of Association (MOA) represents the charter of the company. It is a legal document prepared during the formation and registration process of a company to define its relationship with shareholders and it specifies the objectives for which the company has been formed. The company can undertake only those activities that are mentioned in the Memorandum of Association. As such, the MOA lays down the boundary beyond which the actions of the company cannot go.
Format of MOA
The format of a MOA is specified in Table A to Table E depending upon the type of company. A company can adopt the table applicable to it; for instance, Table A is for a company limited by shares, and Table B is for a company limited by guarantee and having share capital etc.
Contents of Memorandum of Association
The Memorandum of Association is a constitutional document of the company that helps to bring change in a business activity. It consists of five clauses as listed below:
- Name clause– It provides the name of the company. From the name of the company, one can come to know whether it is private or public limited company.
- Registered office clause– It shows in which state the company is incorporated.
- Object clause– From the object clause, it shows the purpose of the company.
- Liability clause– It shows the liability of the members of the company. It can be limited by shares or guarantee.
- Capital clause– Companies having share capital will show the total authorized capital which is divided into the number of shares and the amount.
Hence the company has to follow the procedure as specified under law to change the business activity in of a company. For this, the company will require the approval from the shareholders by passing a resolution.
Objectives of MOA
A company can undertake only those activities that are mentioned in the MOA. In other words, the Memorandum of Association lays down the boundary beyond which the actions of the company cannot exceed.
MOA helps the creditors, shareholders and any other person that are interacting and dealing with the company, to know the company’s powers and objectives. In addition to this, MOA contents help the prospective shareholders in taking the right decision while investing in the company.
Importance of MOA
Memorandum is the fundamental document of a company which contains conditions upon which the company is incorporated.
This document is important for following reasons:
- The memorandum defines the limitations on the powers of the company established under the Act.
- The whole structure of the company is built upon memorandum.
- It explains the scope of activities of the company. The investment knows where their money will be spent, and outsiders also know the nature of activities the company is authorized to take up.
- It is a basic document of the company about its constitution.
- It is a charter of the company which sets out its written goals.
Alteration of MOA
The company after receiving approval from the MCA must alter every copy of the Memorandum of Association. The company can start new business activities after receipt of approval from the MCA.
Be compliant with all the rules and regulations to avoid any consequences. The company must update MCA by filing forms from time to time as and when required such as a change in registered office business activity, capital, etc. Otherwise, the company, as well as the officers in default, will be liable for the penalty.
In the end, we’d like to say that the Memorandum Of Association is a very important document without which the company cannot be incorporated. It is a charter document of the company and MOA and AOA both act as a constitution of the company. If you have any doubt, you can contact company suggestion.