For getting company incorporated, the promoters/ professionals needs to draft some preliminary documents and Memorandum is one of them crucial document. This document outlines the constitution and objectives of the proposed company.

Memorandum of Association (MOA):

 

  • The MOA is a legal document that contains the fundamental conditions upon which the company is incorporated.
  • It outlines the company's main objectives and powers, defining the scope of its activities.
  • It includes the company's name, registered office address, objects (main and ancillary), and the liability of members (limited or unlimited).

The Memorandum of Association (MOA) serves as the Constitution or Charter for an incorporated company, encompassing fundamental legal details such as the company's name, registered address, business objectives, liability, and subscription terms. This comprehensive document is meticulously drafted in a specific format on a designated stamp paper of appropriate value, subsequently being stamped and notarized by a public notary. Strict adherence to the prescribed MOA format is essential to uphold its legal validity and facilitate a successful registration process with the Registrar of Companies (ROC). Delving into the elemental clauses of the memorandum of association provides insight into the foundational aspects that constitute its core structure.

 

Legal Aspect

The Memorandum of Association (MOA) serves as the foundational document for companies incorporated in India, with its legal framework primarily governed by the Companies Act of 2013. This Act encompasses crucial provisions that regulate a company's establishment and governance through its MOA. Strict adherence to these provisions is essential to operate within the legal boundaries and ensure compliance. Let's delve into some key sections of the Companies Act of 2013 related to the MOA:

Key Sections

Section 3

 A company may be formed for any lawful purpose by the requisite number of shareholders after subscribing their name/s to the Memorandum of Association.

Section 4

The MOA of a company must include essential information such as the company's name, registered office address, objectives, liability clause, and details about its capital structure.

Section 7:

Outlines the process of drafting, submitting, and registering the MOA with the Registrar of Companies (ROC) during the Company Incorporation process.

Section 13:

Section 13 of the Companies Act addresses the process for altering the MOA. Companies may need to amend their MOA due to changes in name, business objectives, alterations in the capital structure, or shifts in the registered office. This section provides a legal framework and processes for such modifications.

Understanding and adhering to these key sections are crucial steps for companies in India during their incorporation process and subsequent operations. Compliance with these provisions ensures that the MOA remains accurate and reflects the current state of the company, facilitating transparency and legal conformity.

 

MOA Clause

Certainly, the Memorandum of Association (MOA) is a vital document for a company, consisting of six crucial clauses, each with a distinct purpose in shaping the legal framework. Here is a breakdown of these clauses and their respective purposes:

The five main clauses of every MOA of any Company are as given below. A format of what an MOA should look like is also given in Schedule 1 of the Act.

  1. Name Clause:
    1. Specifies the name of the company.
    2. Ensures uniqueness and conformity with regulatory requirements.
    3. Defines the identity under which the company operates.
  2. Registered Office Clause:
    1. States the location of the company's registered office.
    2. Indicates the jurisdiction under which the company is registered.
    3. Allows for changes in the registered office within the legal framework
  3. Object Clause:
    1. Defines the main objectives and scope of the company's activities.
    2. Specifies the business activities the company is authorized to undertake.
    3. Limits the company's operations to activities mentioned in this clause.
    4. Provides flexibility for the company to engage in related activities.
  4. Liability Clause:
    1. Determines the extent of liability of the company's members or shareholders.
    2. States whether the liability is limited by shares or by guarantee.
    3. Informs about the liability of members in case of winding up.
  5. Capital Clause (Subscription sheet):
    1. Specifies the authorized capital of the company.
    2. Defines the types of shares the company can issue (e.g., common shares, preference shares).
    3. Outlines the maximum number of shares each member is entitled to.
    4. Provides flexibility for the company to alter its capital structure within legal limits.

 

 

Amendment of Memorandum of Association (MOA):

While the Memorandum of Association (MOA) serves as the foundational framework for a company's incorporation, it is not static and can undergo modifications under specific circumstances. The legal provisions governing alterations in the clauses of the MOA are primarily outlined in the Companies Act, 2013. Below is a detailed explanation of these provisions:

Section 13 of the Companies Act, 2013:

This section delineates the process and conditions for altering the clauses of the Memorandum of Association. Key aspects emphasized include:

1. Adherence to MOA & AOA:

Any alteration in the clauses of the MOA must conform to the provisions outlined in both the Companies Act and the Articles of Association (AOA). The AOA specifies internal rules and regulations governing the company, including procedures for changing MOA clauses.

2. Special Resolution & Shareholder’s Approval:

Changes in the MOA clauses necessitate the passing of a special resolution by shareholders during a general meeting. This resolution, approved by a two-thirds majority, forms the foundation for proposed alterations.

3. Approval by Other Regulatory Authorities:

Certain substantial changes may require additional approval from relevant regulatory authorities such as the NCLT, Regional Directors, State Governments, and Central Governments. The approval process outlined in the AOA must be diligently followed.

4. Notice to Registrar:

Following the approval of alterations in MOA clauses by shareholders and applicable regulatory authorities, the company must promptly file the revised MOA with the Registrar of Companies (ROC) to ensure the updating of public records.

 

What Can Be Altered in an MOA?:

Companies can consider alterations in the following Memorandum of Association Clauses:

1. Change in Name: Subject to regulatory approval and adherence to guidelines in the Companies Act.

2. Change in Registered Office Address: Due to relocation or other operational reasons, with adherence to legal procedures.

3. Change in Business Objectives: Pertinent if there is a shift or diversification in the company’s focus or business activities.

4. Change in Capital Structure: Alterations related to authorized and subscribed capital, share classes, or other capital-related details with due compliance.

5. Change in Liability: Alterations in the liability clause, specifying the nature of owners' liability towards the company, should align with legal provisions and may require shareholder consensus.

 

Process of MOA Clauses Alterations: The alteration process typically involves proposing changes, obtaining shareholder approval through a special resolution or ordinary resolution as per the requirement, and seeking approval from regulatory authorities whenever necessary. The revised MOA, reflecting approved alterations, must be submitted to the Registrar of Companies (ROC) for updating company records through e-form MGT-14. The resolution approving changes by shareholders should also be submitted with the altered MOA.

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Article Written by

Khadija Firdaus an Intern at Corpzo