Memorandum of Association
Created on 20 Aug 2018
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Updated on 12 Sep 2023
Whenever a company is incorporated either Private or Government Undertaking, there are some requirements which must be complied at the time of its incorporation. Without these requirements being complied with no company can be incorporated legally under the Companies Act for the time being in force.
Some of these requirements for incorporating a limited liability company (LLC) are having Articles of Association (AOA) and Memorandum of Association (MOA) which are a must for every such company apart from the documents which are necessary to be filed at the time of incorporation of a company either Limited company or a Private Limited Company.
The Articles of Association is a document which defines the responsibilities of the Directors, the kind of the business to be undertaken and the means by which the Shareholders exercise control over Board of Directors. Whereas on the other hand the Memorandum of Association is a document which contains the fundamental conditions upon which the company is allowed to operate.
Why the Memorandum of Association is a necessary document?
The Memorandum of Association is the most important document even than the Articles of Association. If the AOA is a document which regulates the internal functioning of an enterprise then the MOA is a document which regulates the external affairs of an enterprise. The objects which a company mentions in its Memorandum, such enterprise is bound to act as per that only and if it wants to act beyond that then an amendment has to be made in such Memorandum. The MOA of a company states and defines the powers of a company and also its limitations within which the body incorporated is bound to operate.
Structure of MOA
The Memorandum of Association of an enterprise must contain the following clauses which are mentioned below:
- Name clause- a company is known by its name which is the identity from which people will identify it. Thus, the name of the company must be mentioned in the Memorandum which is duly approved by the Registrar with which the Company is registered.
- Situation clause- this clause provides for all the possible details of the company such as the address of the registered office of the company or the state in which such registered office is situated etc.
- Object clause- object clause is the most important part of the memorandum. It consists of the objects of a company with which it would be dealing. If the company performs any act which is not mentioned in the object clause then it would be termed as ultra vires on the part of such company.
- Liability clause- this clause provides for the liability of each member of the company and it also provides that in adverse times of the company, irrespective of the financial state of the company, no member will be liable to pay more than the amount that remains unpaid on his shares.
- Capital clause- This capital clause provides that memorandum must contain a clause which should provide the capital with which the company is incorporated.
- Association clause- under this clause it is provided that the subscribers of the company are required to hold at least one share in the company. The memorandum of the company is duly signed by the subscribers and the number of shares allotted to them is also mentioned there. For each subscriber there will be a witness at the time of signing of memorandum. But one subscriber can't be witness to the other subscriber.
To know about MOU and its difference with Letter of Intent, Click Here.
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