What is the Memorandum of Association (MoA) of a Company?

What is MoA?

When a company is formed, usually there are multiple processes involved for registration of the company with the Ministry of Corporate Affairs. One of the primary affairs is the formation of the company’s objectives, defining the purpose and relationship with the stakeholders. This is concisely known as the formation of the MoA (MoA full form is Memorandum of Association), a legal instrument that details the main objectives of the company, and its clauses and defines its stakeholder relations. MoA meaning, in simple terms, is the rulebook for a company, and an organisation can act only according to the acts mentioned in the MoA. The legal boundaries and approved actions are all mentioned in the MoA. For a company to act within the legal terms, the MoA is the only tool that will dictate it accordingly. The MoA specifies the company's name, registered office address, objects, members' liability, and authorized share capital. It is a charter that regulates the company's external relations and interaction with the outside world. In this blog, we will understand specifically the clauses mentioned in the MoA, as well as define the major purposes of a MoA.

MoA Format

The Memorandum Of Association of a company is defined according to the Companies Act, 2013. Here is the specified format of the MoA: The MoA is classified into various tables, which are specific sections that describe the clauses of the company according to the structure of the company.

• Table A - This mentions the guidelines for companies that are limited by shares
• Table B - This mentions regulations for those companies that are not limited by shares
• Table C - Shares guidelines for companies that are limited by shares and guarantee
• Table D - Mentions guidelines for companies that are unlimited without any share capital
• Table E - Offers guidelines for those companies that are unlimited with share capital

Clauses of MoA: Key Components Explained

The MoA of a company generally consists of six clauses:

• Name Clause
• Registered Office Clause
• Object Clause
• Liability Clause
• Capital Clause Each clause consists of a specific purpose, and combined, they define the basis of the existence and operational system of a company. A complete breakdown of the clauses is here:

Name Clause

The name of the company is defined in this clause. This name needs to be unique, and cannot resemble or be similar in theme to any names of an existing company. Moreover, the name clause states that the name of a company should not be illegal, or even against any public policy. In case the company is a private limited by shares, the term “Private Limited” should be mentioned in the name. In case the company is a public one, the term “Public Limited” should be included in the name.

Registered Office Clause

The company is required to notify the Registrar of Companies (ROC) regarding any alteration in the registered office address within the specified time limit. This clause indicates the state of the company's registration. Registered Office Clause refers to the registered office address, where all of the communications and notices issued arising out of any statutory provisions can be directly addressed.

Object Clause

One of the significant clauses of MoA is the Object Clause. This clause defines the primary objectives of the company and the major things the company is liable to do. Moreover, this clause defines the main objects, which safeguard stakeholders' interests. The MoA defines mainly three types of objects for which the company is formed, here are:

• Main objective - Defines the actual business of the company
• Incidental objective - Defines certain objectives that are not primary but may be secondary objectives of the company
• Other objective - All the objectives that are not classified in the main and incidental objectives

Liability Clause

The Liability Clause defines the extent of liability of the members. For example, in the case of a company limited by shares, the liability of the members is limited to the amount which is unpaid on their shares. In the case of an unlimited company, the liability of the members is unlimited.

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Capital Clause

The Capital Clause defines the maximum amount of nominal capital that a company is authorized to raise. Capital Clause also states the maximum share capital that can be issued by the company to its shareholders. It also defines the actual subdivision of the share capital into various classes of shares, including equity shares and preference shares, together with their respective nominal values.

Purpose and Significance of a Memorandum of Association

The MoA has several significant purposes to state:

• It defines the identity of the company, main objectives, and the range of activities which create a complete transparency between the stakeholders and the company. The legal identity of a company is duly created by the MoA, which makes it a unique commercial entity separate from its competitors.
• It creates a specific boundary for the company, beyond which it cannot act. This immensely helps the directors and the core management team to define the DOs and DONTs for the company, hence acting together to achieve the organizational goal collectively.
• A MoA also ensures compliance with the governmental regulations set for an organization to function.
• It safeguards the interests of the members of the company, the creditors, and other stakeholders.
• It facilitates the raising of capital as it mandates the authorized capital. This also helps the stakeholders to know the nominal value of the share capital, and accordingly invest.
• It is a public document that can be viewed by any stakeholder who is interested in knowing the affairs of the company, hence helping the stakeholders to take up decisions of investment.

Alteration of MoA

In case the company undergoes several changes in its objectives and structure, it becomes necessary to change the company MoA. There are some specific changes which can cause an alteration in the MoA:

• Change in the name of the company
• Change in company location
• Change in the liability of the company
• Change in company objects
• Change in the limit of authorised capital or any subsidiary division of authorised capital

Difference Between MoA and AOA

Although the Memorandum of Association (MoA) and the Articles of Association (AOA) are both significant legal documents for a company, they still have diversified scopes and purposes. Here is a table to understand the difference between MoA and AoA.

Advantages of MoA in a company

The major advantages that a Memorandum Of Association of a company provides can be listed in a few points:

Defines the main objectives

The MoA strictly defines the functioning objective of the company, which helps it to align with the specified law as well as reach the company goals. Moreover, this protects the company from engaging in any activity that may be harmful to its stakeholders

Offers a legal imposition

There are multiple legal compliances with which a company needs to adhere to. These compliance are clearly stated in the MoA of a company, which helps to create its distinct structure.

Brings clarity to stakeholders

Stakeholders get direct clarity about raising funds and the paid-up share capital by the MoA. This also helps the company to financially grow, and reach out to the interested stakeholders.

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Conclusion

A Memorandum of Association is a critical document which defines the main purpose behind the formation of the company, and defines the company's existence and operations. It acts as a normative guideline that directs the main operations of a company, as a MoA is more than a legal document for a company. This blog clearly defines MoA meaning, the main clauses stated in MoA, and the end tries to classify the major differences between MoA and AoA.

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