NAME : TAKURA .T.

MASHATE

SSID : 2022820597

PROGRAM : BALLB ~ SECTION A

COURSE TITLE : CORPORATE LAW

ASGNMT : MoA is a Charter of the Company. Comment

the statement and explain clauses which are
included in the MoA of the Company.
In the realm of corporate governance, the most crucial document for a company is
its Memorandum Of Association (MOA). It outlines the purposes for which the
company is established. The memorandum of association serves as the foundation
upon which the company's entire business is based. A company is not permitted to
engage in any operation or activities not specified in the memorandum. Only those
powers that are expressly indicated in the memorandum may be exercised by
it. Thus, it is popularly known as its “Constitution” or “Charter” as it contains all
its legal and foundational details recorded with the Registrar Of Companies (ROC)
during the company registration process.

Definition of Memorandum of Association:

Section 2(56) of the Companies Act 2013 defines memorandum of association. It

states that a memorandum means 2 things:

 Memorandum of association as originally framed: memorandum as

originally framed refers to the memorandum as it was during the
incorporation of the company.
 Memorandum as altered from time to time: this means that all the
alteration that are made in the memorandum from time to time.

Purpose of Memorandum of Association

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.

Significance of MOA in Company Registration & Governance

 The relevance of the Memorandum of Association (MoA) lies in its

multifaceted utility, serving pivotal roles during company registration and
business operations. This foundational document not only ensures the legal
standing of a company but also acts as the most credible and transparent
source of information about it. The MoA thus becomes a publicly
accessible document that continues to shape and define the company’s
identity and objectives beyond its initial establishment. Let’s delve into the
distinctive purposes that make the MoA an indispensable document for any
incorporated company.
 Company Registration: The registration of a company is not possible
without a valid and accurately drafted Memorandum of Association. The
MOA is one of the documents that is submitted with the application
for company registration. When the application reaches the Registrar of
Companies, he not only registers the name of the company but also its
Memorandum of Association.
 Company Changes: You cannot alter or change any foundational detail of
the company without appropriately altering the MOA. For instance, if you
are looking forward to changing the registered office address of the
company, the application filed for the same to the ROC will be supported
by an altered or modified copy of the MOA consisting of the new
registered address. Upon receiving the application, the ROC will not only
change the address but also update the MOA registered with it.
 Enhances Credibility: The MOA of a company registered with the ROC, is
a document that can be publicly viewed and inspected. This enhances the
credibility of a company, especially for its investors and creditors, as every
 detail with which the company is operating on the ground can be easily and
accurately verified.
 Reliable Source of Information: The MOA, kept at the company’s
registered office, serves as a key reference point for insiders and external
visitors. It ensures easy access to information for executives and
employees, fostering a clear understanding of the company’s mission.
Additionally, external stakeholders, including investors and regulatory
authorities, benefit from transparent insights into the company’s structure
and objectives. By maintaining the MOA at the registered office, the
company upholds regulatory compliance and builds trust through
transparency.
 Supremacy in Compliance: The MOA defines the powers of a company.
Any act done by the company or any of its stakeholders that contradicts the
provisions of the MOA shall be deemed null and void. Even the Articles of
Association of the company, which contains the rules, regulations, and
procedures of its internal management, should be drafted in complete
adherence to the provisions and clauses of the MOA.

Clauses in Memorandum of Association

A Memorandum of Association is a legal document that sets out the fundamental

and essential elements of a company. According to the Companies Act 2013 in
India, a memorandum of association contains six mandatory clauses that must be
included during the incorporation of a company. These clauses are stated
under section 4 of the Companies Act, 2013. It includes all the important
information that the memo must include;

1. Name Clause

The company name is stated in the first clause. The company name can be
anything. However there are several requirements that must be met.
According to section 4(1)(a) states-

A company should include the word ‘limited’ if it is a public company or private

limited should appear in its name if a company is private one. A private
corporation like “JJ Tax” would have “JJ Tax private limited” as its registered
name. Section 8 companies are not subject to this stipulation.

Remember, the name stated in the memorandum shall not be,

1. Identical to the name of another company

2. Too nearly resembling the name of an existing company.

Thus, in accordance with 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.

2. Registered Office Clause

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. The country of origin and judicial jurisdiction of a
company are determined by its registered office. It serves as a dwelling and the
hub for all communication with the business.

The company must provide its correspondence address at the time of

incorporation. However, the company must declare the precise location of the
registered office after incorporation. Within 30 days of establishment the business
must also verify its location. Every company shall paint or affix its name, and the
address of its registered office, and keep the same painted or affixed, on the
outside of every office or place in which its business is carried on.

3. Object Clause

The object clause is described in section 4(c) of the Companies Act, 2013. The
most significant portion of the memorandum of association is the object clause. It
outlines the purpose for which the company was incorporated. The principal object
as well as element required to accomplish the specified object commonly to as
incidental or supplementary object are both included in the object clause.

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 following are protected by the object clause

Shareholder: the object clause makes it clear which operation the firm will
conduct. This makes it easier for the shareholder to understand how their
investment in the business will be put to use.

Creditors: it assures the creditor that their money is safe and that the business is
operating within the restrictions outlined in the clause.

Public interest: this clause restricts the range of objects the company can operate
making it impossible for the company to diversify its business lines.

Doctrine of ultra vires:

The company action will be ultra vires and void if they go beyond the purview of
the authority specified in the object clause.

Impact of ultra vires:

 1. Directors are responsible for making sure that the company capital is
solely used for the intended purposes. The capital is used for a purpose
other than what is specified in the memorandum then the director will
be held responsible.
2. void ab initio: the company ultra vires action are regarded as void
from the beginning.
3. Injunction: any member of the company may use an injunction as a
remedy to stop the company from acting outside of its legal authority.

4. Liability Clause

The liability clause shields the shareholders from personal liability from the
company’s losses so offering them legal protection.

There are 2 categories;

Limited by Shares: In a company limited by shares, the liability of its members is

limited to the amount unpaid on their shares. This means that if the company runs
into financial trouble and cannot pay its debts, the shareholders are only liable to
contribute the remaining unpaid amount on their shares. Once they have paid for
their shares in full, they have no further financial obligations to the company.

Limited by guarantee: A company limited by guarantee does not have

shareholders or share capital in the traditional sense. Instead, it has members who
act as guarantors, agreeing to contribute a predetermined amount (usually
nominal) towards the company's debts in the event of its winding up.

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.

5. Capital Clause

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.

Thus, the Capital Clause in the Memorandum of Association (MOA) defines the
authorized share capital i.e. maximum amount of capital a company can raise by
issuing shares to its shareholders. Amendments to the capital clause require
shareholder approval and compliance with regulatory requirements.

6. Subscription Clause

Who is signing the memorandum is stated in the subscription clause. Each

subscriber must specify how many shares he/she is purchasing. A minimum of one
share must be purchased by each subscriber.

The number of subscriber required for incorporation varies depending on the type
of company. These are:

 Private company: A private company must have a minimum of two

subscribers.
 Public company: A public company must have a minimum of seven
subscribers.
 One Person Company: Only one person is necessary for a one person
company.

The Subscription 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 Subscription 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.

In simple terms, the Memorandum of Association (MOA) is like the constitution

of a company, containing all the essential information that defines its identity and
purpose. By understanding its components and importance, we gained insight into
how companies operate and why they exists.