The Name clause is one of the mandatory clauses in any Memorandum of Association. It is the first clause of any MOA; it creates the unique identity of a company.
Importance of the MOA
The MOA or Memorandum of Association is a public legal document that specifies the objectives of a company. It specifies some important details such as it name, purpose, domicile etc. The general public has access to the MOA; it is generally lodged at a public office. The MOA also states if there are any exemptions for that company, such as exemptions for private limited companies. All companies require an MOA. The MOA is an extremely important legal document. You cannot incorporate a company without it. To illustrate how important the MOA is, the MOA & AOA together form the Constitution of any company.
Purpose of the MOA
There are many important things that the MOA elaborates on, such as the activities that a company can undertake, the structure of its stock, et cetera. The contents of the MOA are also helpful for prospective shareholders. It helps them understand the company when they are making a decision regarding investing in it. Hence what you state in your MOA impacts the investments the company will receive in the future.
- It determines the area within which the company shall operate, i.e., the kind of activities it can undertake. Anything outside of that is void. For example, lets stay the MOA of a that they are in the business of providing telecommunication services. That company can’t start selling pharmaceutical products without first modifying the MOA.
- It specifies the relationship the company has/will have with the general public. It intends to disclose all the required information about the company to the shareholders, other stakeholders, creditors, et cetera.
- As per section 16 of the Companies Act 2013, the MOA of a company is considered a ‘charter’ of the company. That is because it specifies all aspects of the company, such as who founded it, where it is based, the reason for it’s creation, etc.
- And lastly, the MOA forms the basis of incorporation for any limited company. An MOA has to be filed to register a company with the Registrar of Companies. Private companies require the signature of two subscribers for file an MOA. On the other hand, Public companies require the signature of seven members.
The Name Clause in MOA
As the name suggests, the name clause states the legal name of a company; It states the name by which the company will be recognized. The name clause of every private company needs to end with the words’ Private Limited’, whereas names of all public companies need to end with the word ‘Limited.’ (Companies formed under section 8 of the Companies Act 2013 enjoy certain exceptions.)
Importance of the Clause
As obvious as it seems, its importance comes from every legal entity needing a name. The name of a company not only shapes the image of the company, but it is also in the name that shall be specified on all its documents and will protect the company from any other new company in the future intending to register with the same name. It secures a company’s de facto monopoly of corporate trading under a particular name.
Pursuant to certain caveats, a company can choose any name for it’s MOA’s name clause. The caveats are:
- A company cannot adopt a name identical or similar to any pre-existing registered company. In other words, you cannot pick a name that might violate the registered and/or trademark rights of any other existing company.
- Companies cannot take names that include words prohibited by the Government of India (notified in the Gazette of the Government).
- A company can only use certain special words such as Royal, Empire, Estate, Imperial, et cetera, in their name after taking the special permission of the government of India.
- Companies cannot take the Names or Logos of world bodies such as the World Bank, WHO, the UN, any supplementary organization of the UN, the secretary general of the UN, or any helping organization or agencies of it, or the secretary general of the WHO, etc. without their written permission.
While choosing a name for your company, be cognizant of the fact that this name is not only the name by which your company will be referred to but also the name that many different rights of your company will attach to. It’s also pertinent to keep in mind that the name of your company is how consumers will initially interact with your company; it creates an image in the mind of the consumers. An attractive and interesting name is likely to bring in more consumers; the name ‘all out’ for a mosquito repellant is a wonderful example of this. Hence, while drafting the Name Clause of Memorandum of Association, we suggest keeping in mind the objectives of your organization and naming it accordingly.
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