Understand the significance of the Memorandum of Association (MOA) for companies, its contents, and drafting considerations. Learn about the different clauses, such as Name, Registered Office, Object, Liability, Capital, and Subscribers, essential for a company’s legal structure. Get insights into the e-governance era and the importance of E-MOA during company registration.
Memorandum of Association of every company is an important and basic document of every company. It is a constitutional document based upon which every company shall carry on its business in a legal manner approved by Government authorities constituted under Ministry of Corporate Affairs. For LLP (Limited Liability Partnerships, LLP agreement is a basic document. Companies are bound by the business activities mentioned in the Main Object of the company and any business activities carried out by company outside business activities shall be considered as ultra vies (not within the meaning of law).Large Investors, banks, financial institutions, Government authorities study the contents of Memorandum of Association to ascertain genuine business activities carried out by the company and thereby interest of all stakeholders is protected. In the era of e-governance and in the wake of MCA V3 version, E-Memorandum of association needs to be uploaded at the time of registration of a company.
Every type of company form of organization shall have different forms and contents of Memorandum of Association. OPC (One Person Company , Section 8 (Non Profit Making Companies), Company Limited by Guarantee, Nidhi Companies, NBFC (Non Banking Finance Companies), Unlimited Companies with or without share capital shall have different contents based upon its nature of business.
Certain Points to be considered while drafting Memorandum of Association of every company:
- In Name Clause, name approved by Registrar as per present name availability guidelines to be inserted
- In Registered Office Clause, The Company will be situated in the State of Maharashtra within the jurisdiction of the Registrar of Companies, Mumbai or Pune as the case may be inserted. Place of Registered Office is important from the jurisdiction point of view in case of approvals from Regional Director/Central Government authorities as far as mergers, amalgamations and takeovers are concerned.
- In Object Clause, (a) Main Object to reflect main business activity in line with name approved should be clearly mentioned. (b) Other Objects should be in consonance with main object of the company. Other Objects may include major activities like opening of bank account, borrowing powers; investment opportunities to companies, takeover/merger with other companies’ clauses should be inserted to avoid future restrictions. Main Object can be altered subject to compliance with applicable rules and regulations and passing of resolutions to give effect to above.
- Liability Clause, should clearly mention whether the liability is limited, unlimited, Limited by Guarantee as the case may depending upon the nature of and type of company to be registered. Liability clause is important in view of protection of stakeholders and form of organization is selected based upon liability clause in Memorandum of Association in the event of winding up/liquidation of company.
- In Capital clause, Amount of Authorized Share Capital to be mentioned. Authorized Share Capital is the maximum amount up to which a company can obtain subscription or share application money towards paid up share capital of the company. The Authorized share capital can be increased from time to time based upon business expansion requirement, legal requirements and requirement from banks as far as borrowings from banks by companies is concerned. Resolutions to be passed and compliance with Provisions of Companies Act, 2013 to be kept in mind in this regard.
- In Subscribers/Subscription Clause, eligible Subscribers to mention their name, address and number of shares subscribed with their digital signature as far as E-MOA is concerned in electronic form for registration of a company. An Individual, a body corporate, LLP can be subscriber to the Memorandum of Association. Partnership Firms cannot be subscribers to the Memorandum of Association of a Company.
- While drafting Memorandum of Association, care should be taken that the draft Memorandum of Association should reflect true and fair aspect of business to be carried out by the company and in line with name of the company. The language in the draft Memorandum of Association should be simple and clear and unambiguous.
Following is a sample main Object of Section 8 company in the field of Health care and education sector for reference only.
Main Object of Section 8 Company in Health care sector is as follows:
To run a Health care centre, to set up a Hospital, to provide medical related consulting to poor and needy people at affordable fees, to provide Outpatient Department (OPD) Services through expert doctor consulting, to provide all kinds of diagnostic related services and render all kinds of medical and health related services to meet social objective with a non profit motive
Main Object of Section 8 company in Education sector is as follows:
To develop, Establish, promote, facilitate, improvement of educational, social, cultural, economical and medical relief and facilities, educational scholarships to economically poor students and downtrodden at affordable rates and advancement of any other charitable and developmental objects of general public utility and community welfare, promote commerce, art, science, sports, education, research, social welfare for the benefit of underprivileged and economically backward sections of the society.
Disclaimer: The Views expressed in this Article are based upon prevailing facts and Law to date and views expressed are purely personal in nature. Readers are advised to seek expert opinion before arriving at a decision. You may reach me at csdeepakamrutkar@gmail.com.
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