Memorandum of Association
Memorandum of Association
Memorandum of Association
The Memorandum of Association (MOA) is a vital document that establishes the legal
framework for the operation of a company in India. It lays down the company’s objectives,
powers, and limitations, and serves as a guide for its operations. The memorandum of
association is an essential document that any entrepreneur or business owner must
understand thoroughly to ensure compliance with the law and avoid legal challenges.
This article explores the different clauses of the MOA and their significance, the legal
requirements for its alteration, and landmark cases that have helped to shape its
interpretation in India. Understanding the memorandum of association is crucial for any
company that wants to establish a strong legal foundation and operate successfully in India.
Contents
1. What is a Memorandum of Association?
2. Purpose of MoA
3. Clauses in Memorandum of Association
3.1. Name Clause in Memorandum of Association
3.2. Registered Office Clause in Memorandum of Association
3.3. Objective Clause in Memorandum of Association
3.4. Liability Clause in MOA
3.5. Capital Clause in Memorandum of Association
3.6. Association Clause in Memorandum of Association
4. Form of Memorandum
5. Alteration of Memorandum of Association of a Company
6. What can be altered in an MOA?
7. Memorandum of association of a one-person company
8. Landmark cases related to MOA
8.1. Ashbury Railway Carriage and Iron Co. Ltd. v. Riche (1875)
8.2. Rayala Corporation Pvt. Ltd. v. Director of Income Tax (2016)
8.3. Sterling Computers Ltd. v. M/s. M & N Publications Ltd. (1993)
8.4. Messer Holdings Ltd. v. Shyam Madanmohan Ruia (2019)
9. Conclusion
The memorandum of association must comply with the requirements of the Companies
Act and include the mandatory clauses specified by the Act. Therefore, it is essential for
entrepreneurs and business owners to understand the significance of MOA and create it with
utmost care and attention to detail.
Purpose of MoA
The main purpose of the Memorandum of Association is to define the legal identity and
scope of activities of a company. It serves as a charter for the company’s formation and sets
out the fundamental and essential elements of the company.
The memorandum of association outlines the company’s name, registered office address,
objectives, authorized share capital, and liability of members. It also specifies the objects for
which the company is formed and operates.
By defining these crucial elements, the MOA provides clarity and transparency to the
company’s stakeholders, such as investors, shareholders, creditors, and regulators. It serves
as a guide to the company’s internal operations and helps in ensuring that the company is
managed in accordance with the legal framework.
Name Clause: This clause specifies the name of the company and should end with “Private
Limited” or “Limited” for a company limited by shares, or “Unlimited” for a company not
limited by shares.
Registered Office Clause: This clause sets out the registered office address of the company.
It should be located in the same state where the company is incorporated.
Objective Clause: This clause outlines the company’s main objectives and activities. It
specifies the objects for which the company is formed and operates.
Liability Clause: This clause sets out the liability of the company’s members in case the
company goes into liquidation. The liability can be limited or unlimited, depending on the
type of company.
Capital Clause: This clause specifies the authorized share capital of the company. It sets out
the maximum amount of capital that the company can raise through the issue of shares.
Association Clause: This clause is a declaration by the subscribers of the MOA stating that
they wish to form a company and agree to become its members. It must be signed by at
least two persons in the case of a private company, and by at least seven persons in the case
of a public company.
According to the Companies Act 2013 in India, the name clause is a mandatory clause that
must be included in the Memorandum of Association of a company. It specifies the name of
the company and should end with “Private Limited” or “Limited” for a company limited by
shares, or “Unlimited” for a company not limited by shares.
The name of the company should be unique, and the Registrar of Companies must approve
it before the company’s incorporation. The name clause should also comply with the rules
and regulations laid down by the Ministry of Corporate Affairs. The name of the company
should not be identical or similar to any existing company, and it should not be offensive or
violate any copyright or trademark laws.
The name clause is a crucial part of the memorandum of association as it defines the legal
identity of the company and helps in identifying and differentiating it from other companies.
The Registered Office Clause is a mandatory clause that must be included in the
Memorandum of Association of a company. It sets out the registered office address of the
company, which is the official address of the company where all legal notices,
communications, and documents will be sent.
The registered office must be situated in the same state where the company is incorporated.
The Registered Office Clause should include the full address, including the city, district, state,
and PIN code. It is important to note that any change in the registered office address must
be communicated to the Registrar of Companies within 30 days of the change.
The Registered Office Clause is a crucial part of the MOA as it establishes the official address
of the company and helps in determining the jurisdiction of the company for legal purposes.
Objective Clause in Memorandum of Association
The Objective Clause specifies the objects and purposes for which the company is formed
and operated. The Objective Clause should clearly state the main objects, which are the
primary objectives of the company, and other objects, which are incidental or ancillary to the
main objects. The objects should be specific, definite, and not vague or ambiguous.
The memorandum of association should also include the necessary incidental or ancillary
objects that are required for achieving the main objects. Any changes to the objects of the
company must be approved by the shareholders and communicated to the Registrar of
Companies. The Objective Clause is a crucial part of the MOA as it defines the scope of
activities of the company and helps in determining the legality and validity of the company’s
operations.
It also helps in protecting the interests of the stakeholders by ensuring that the company
operates within the legal framework and does not engage in any activities that are not
specified in the MOA.
The Liability Clause is an essential clause that must be included in the Memorandum of
Association of a company according to the Companies Act 2013 in India. It specifies the
liability of the members of the company in case of any debts or losses incurred by the
company.
In a company limited by shares, the liability of the members is limited to the unpaid amount
of the shares held by them. On the other hand, in a company limited by guarantee, the
liability of the members is limited to the amount they agree to contribute to the assets of
the company in case of its winding up.
The memorandum of association should clearly state the nature of the company’s liability,
whether it is limited or unlimited. It is important to note that any misrepresentation or false
statement regarding the liability clause can result in severe legal consequences.
The Liability Clause is a crucial part of the MOA as it defines the extent of the liability of the
members and helps in protecting their personal assets in case of any debts or losses
incurred by the company.
The Capital Clause is an important clause that must be included in the Memorandum of
Association of a company according to the Companies Act 2013 in India. It specifies the
authorized capital of the company, which is the maximum amount of capital that the
company can issue to its shareholders.
The Capital Clause should clearly state the amount of authorized capital, the number of
shares, and the nominal or face value of each share. The memorandum of association should
also specify the types of shares, such as equity shares, preference shares, or debentures, that
the company is authorized to issue.
Any changes to the authorized capital of the company must be approved by the
shareholders and communicated to the Registrar of Companies.
The Capital Clause is a crucial part of the MOA as it defines the maximum amount of capital
that the company can raise and helps in determining the financial capacity of the company.
It also helps in protecting the interests of the shareholders by ensuring that the company
does not issue more shares than the authorized capital.
The Association Clause is a fundamental clause that must be included in the Memorandum
of Association of a company according to the Companies Act 2013 in India. It specifies the
name of the company, the state in which the registered office is situated, and the objects for
which the company is formed.
The Association Clause should also include the names, addresses, occupations, and
signatures of the subscribers, who are the persons who have agreed to form the company
and become its members. The memorandum of association must be signed by at least seven
subscribers in the case of a public company, two subscribers in the case of a private
company with a share capital, and one subscriber in the case of a private company without a
share capital.
The Association Clause is a crucial part of the MOA as it establishes the legal existence of the
company and defines its identity. It also helps in identifying the subscribers who have
agreed to form the company and become its members.
Form of Memorandum
The Memorandum of Association of a company should be divided into paragraphs
numbered consecutively and printed. The memorandum of a company should be formulated
in accordance with the respective forms as mentioned in tables A, B, C, D & E
under Schedule 1 of the Companies Act, 2013.
The Companies Act 2013 in India provides a detailed procedure for the alteration of the
MOA, which involves obtaining the approval of the shareholders and complying with the
provisions of the Act. The procedure for the alteration of the memorandum of association
includes the following steps:
Filing of Special Resolution: A special resolution should be filed with the Registrar of
Companies (ROC) within 30 days of the passing of the resolution.
Approval of ROC: The ROC will scrutinize the special resolution and, if satisfied, will approve
the alteration of the memorandum of association.
It is important to note that any alteration to the memorandum of association must be made
in compliance with the provisions of the Companies Act 2013 in India and any other
applicable laws. Also, the alteration should not be inconsistent with the existing provisions of
the MOA and should not adversely affect the rights of the shareholders or the public.
What can be altered in an MOA?
The Memorandum of Association is a fundamental document that sets out the constitution,
objectives, and powers of a company. The memorandum of association may require
alterations in certain situations, such as changing the name of the company, increasing the
authorized capital, or altering the objects clause to reflect the changing needs of the
company.
According to the Companies Act 2013 in India, the MOA can be altered by making changes
to its various clauses, such as
Name Clause: The name of the company can be changed by altering the Name Clause of
the MOA.
Object Clause: The Object Clause defines the objectives and powers of the company. It can
be altered to reflect the changing needs of the company or to include new objectives.
Liability Clause: The Liability Clause specifies the liability of the members or shareholders of
the company. It can be altered to change the liability of the members from limited to
unlimited or vice versa.
Capital Clause: The Capital Clause defines the authorized share capital of the company. It
can be altered to increase or decrease the authorized share capital.
Registered Office Clause: The Registered Office Clause specifies the registered office
address of the company. It can be altered to change the registered office from one location
to another.
The name clause is one of the essential clauses in the MOA of a one-person company, which
specifies the name of the company. The registered office clause specifies the location of the
registered office of the company. The objective clause outlines the activities that the
company can undertake, and the liability clause determines the extent of the liability of the
owner in case of debts and losses. The capital clause specifies the amount of authorized
capital of the company.
An OPC is required to have a nominee who will take over the management of the company
in case the owner becomes incapacitated or dies. The memorandum of association must
contain a clause that specifies the name of the nominee and their consent to act as the
nominee. The MOA of an OPC must also contain a clause that specifies that the company is
an OPC.
This case established the principle that the objects clause of the memorandum of association
is a fundamental document that determines the capacity and powers of a company. The
objects of the company must be clearly stated in the MOA, and any activity that falls outside
the scope of the objects clause is considered ultra vires (beyond the legal power) of the
company.
In this case, the Supreme Court of India held that the MOA must be interpreted in a manner
that is consistent with the provisions of the Companies Act 2013. The memorandum of
association cannot be used to circumvent the statutory requirements or to engage in
activities that are prohibited by law.
This case established that the MOA of a company is a public document that can be
inspected by any person upon payment of the prescribed fee. Any alteration or amendment
to the memorandum of association must be filed with the Registrar of Companies (ROC) and
must comply with the provisions of the Companies Act 2013.
In this case, the Supreme Court of India held that the MOA of a company cannot be used to
evade statutory obligations. The company cannot cite the memorandum of association to
avoid compliance with statutory requirements or to engage in activities that are prohibited
by law.
These landmark cases have played an important role in shaping the interpretation and
understanding of the provisions related to MOA in India.
Conclusion
The Memorandum of Association is an essential document for any company in India. It
outlines the company’s objectives, powers, and limitations, and serves as a guide for its
operations.
The MOA is a public document that can be inspected by any person, and any alteration or
amendment to the memorandum of association must comply with the provisions of the
Companies Act 2013. The MOA cannot be used to circumvent statutory requirements or to
engage in activities that are prohibited by law.
Landmark cases such as Ashbury Railway Carriage and Iron Co. Ltd. v. Riche and Rayala
Corporation Pvt. Ltd. v. Director of Income Tax have helped to clarify the legal
interpretation of the memorandum of association in India. It is crucial for companies to
understand the clauses of the MOA and their significance in order to avoid any legal
disputes or challenges.
By adhering to the regulations and guidelines outlined in the MOA, companies can establish
a strong foundation for their business and ensure compliance with the law.