Know your Memorandum of Association (MOA)

The Memorandum of Association (MOA) is a primary document that plays a crucial role in a company’s internal mechanism. It helps the company to understand its objectives, operations, and internal workings acts as a guiding document for shareholders, directors, and other stakeholders to understand the company’s fundamental principles and operations.

It is mandatory to frame an MOA at the time of incorporation as it defines the business objectives of a company. Any act done outside the scope of the MOA makes such acts legally invalid. Therefore, it is imperative to draft the MOA with the utmost care and foresight.

The MOA contains six mandatory clauses that pertain to the company’s name clause, registered office clause, objects clause, liability clause, capital clause and association clause. All clauses, except for the association clause, can be altered in accordance with the provisions of section 13 of the Companies Act, 2013.

The clauses are briefly mentioned below:

1. Name Clause:

Choosing the right name for the company is essential, and the name should not be identical or similar to any existing registered company or LLP. Name of every Private limited Company shall end with the word ‘Private Limited’.

2. Registered Address Clause: 

This clause contains the name of the state where the company’s registered office is located.

3. Object Clause:

This clause defines the primary and ancillary objects of the Company for which it is formed.Any activity carried out outside the scope of its object shall be invalid.

4. Liability Clause:

This clause states the nature and liability of the members of the company. Liability of the members is limited to the unpaid amount on their subscribed shares.

5. Capital Clause:

The capital clause mentions the authorized capital, which is the maximum amount of capital that can be raised by the company.

6. Association/Subscription Clause:

This clause states the details of the persons who have subscribed as initial subscribers and who are desirous of forming a Company.

In conclusion, drafting a Memorandum of Association is an essential step in company formation that determines a company’s legal parameters and business objectives. By following the legal points mentioned above and seeking expert guidance, companies can protect themselves from legal disputes and ensure a smooth registration process.

FAQs

Q. What is an MOA (Memorandum of Association)? 

A Memorandum of Association (MOA) is a legal document that defines a company’s nature and scope of business operations, and it governs the relationship between the company and its shareholders.

Q. What does an MOA contain? 

An MOA contains details such as the company’s name, registered office address, objectives, capital, liability of the shareholders and association.

Q. Why is an MOA essential in company formation? 

MOA is an important legal document that defines legal parameters for a company, shapes its objectives, and establishes its relationship with its shareholders. Without an MOA, a company cannot be registered with the relevant authority.

Q. Can the clauses of an MOA be altered after company registration? 

Some clauses of an MOA can be altered after company registration; however, the association clause remains unalterable and valid throughout the company’s lifetime.

Q. What is the significance of seeking expert guidance while drafting an MOA? 

Drafting an MOA requires knowledge of legal and regulatory frameworks and company law. Therefore, seeking expert guidance from a legal professional can ensure that the MOA is written efficiently, with appropriate legal language and foresight which covers the primary and ancillary objects of the Company. This will help to avoid legal disputes in the future.

About the Author

Darshana Chauhan

Senior Associate | darshana.c@treelife.in

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