The Constitution of the company is called the memorandum of association. It is a legal document, mostly required in countries for the formation of the company. As in the case of a partnership firm a partnership deed is required by corporate law for knowing the business scope and resolving the disputes (if any). Memorandum of association describes the nature, scope, limitation, and operation of the business. It is a public document.
The company is an advanced type of businesses; it is a separate legal entity and invisible to others. That is why corporate law comes into existence with the revolution in business, for having a check and balance of legal entities affairs and dispute.
Memorandum of Association Contents and Alteration
The difference between the Memorandum of association and Article of association is MOA is for external affairs of the company and AOA for internal affairs and operation.
The purpose of a memorandum of association is to describe what the company is and how its affairs will be are to be conducted. MOA helps not only to the management for operating the business but also for investor, lender and contractor for doing any deal with the company.
Note: If there is an inconsistency of anything between the memorandum of association and the article of association then the Memorandum of the association will be applicable.
Contents of Memorandum of Association
|Registered Office Clause
That clause defines the name of the company. The name of the business should not be the same as any existing registered name. Prior approval is needed from the registrar office. The company cannot adopt the name which is a criminal offence or considered to be criminal as per the registrar’s opinion.
The name should end with what type of company is Like If public limited company than XYZ Public Ltd or XYZ Plc. Ltd. Plc. is the abbreviation for Public Limited Company. If it is Private limited then XYZ Pvt Ltd will be used in books.
A name that relates to the Government, Royal or local regulatory authority cannot be used until the official approval of the Registrar office.
The name should not be opposed to the business nature, for example, if the business is construction nature then the name should not be like XYZ Surgery Limited. As business nature is Construction but name leads to health services nature.
Objects Clause MOA
Every business starts with a goal to earn a profit by doing something as decided and targeted. In this clause, the company shows the field of operation. What kind of business will be and their activities? Company constitution should have clear provisions regarding their range of activities for the achievement of the business goal.
In the past companies wrote a long and detailed object clause for avoiding an ultra vires act. But according to Section 31 of the companies act 2006, there is no need to register the object Clause. Companies act 1989 also helps from avoiding a breach of conduct, a company may use object clause as “carry on business as a general commercial company” instead of writing the long and complex detail of the object clause
Registered Office Clause
This clause state where the head office of the company will be situated. There is two main reasons for that clause, first for communication with the company irrespective of the legal or trade-related and regulatory authority of the government for tax and other matters. Tax may vary from state to state or city to city etc. The registered office can be changed as per SOP but should be within the country as stated in the memorandum.
What are the liabilities of the company, shareholders? Every investor and lender ask before investing or Lending the money. This clause should clearly state that liability is limited or unlimited. In case of liabilities by guarantee, the amount of guarantee. That clause helps in resolving disputes of liability in accidentals cases or at the time of winding up.
What is the authorized share capital of the company is a division of shares and the nominal value of each share? Company raise capital via issuing the shares, in this clause company, declared the maximum amount of share capital that it can issue or allocate.
At the end of the memorandum with the declaration of association, subscriber shows their wish for the formation of the company. Every subscriber must have at least one share and there are at least two members in case of a private limited company and seven in the case of a public limited company.
Declaration of Memorandum of Association
Every Memorandum Ends with the submission and declaration of association, In which subscriber states their wish for the formation of the company.