MOA- Understanding the importance of MOA
What is an MOA?
The memorandum of association or MOA, commonly referred to as a memorandum, is a charter document of a company. It illustrates the objective, scope and powers of any company. It is the most important document for any company. Every company is bound to carry out activities in pursuance of the objective specified in the MOA. Any action taken by a company that is beyond its MOA is considered void and ultra vires (beyond given powers). Having an MOA is a legal requirement for every company; without it, no company can be incorporated.
Purpose of an MOA
The MOA is a public legal document available for the general population to access; any person that gets into a contract with a company or collaborates with a company is expected to go through and be familiar with the company’s MOA.
There are a few primary purposes of an MOA.
- It lets shareholders and potential investors know about the purpose and operations of a company
- It lets the company’s employees, collaborators, Vendors etc. know the objectives of the company as well as the field of operations of the company.
- It protects the company as it ensures that funds of the company can only be used for specific purposes.
- The charter of a company has the power to govern its scope of functioning. The MOA can hence also limit the activities of a business.
Clauses of an MOA
There are a few mandatory clauses that every Memorandum of Association has to have:
- Name Clause: The name clause states the name of the company. Public companies are required to end their company name with the word ‘limited’, whereas private limited companies are required to end their name with the words Private Limited. (This does not apply to companies formed under section 8 of the Companies Act).
- Registered office/Domicile clause: This clause specifies the location in which the company has been incorporated. Under this clause, one only has to specify the state in which the company has been incorporated, not its full address.
- Object clause: This clause is at the heart of what makes the memorandum of association so relevant. This clause specifies the objectives of the company and the other incidental objectives that the company can indulge in. Activities done beyond the scope of these objectives will be considered void.
- Liability clause: This clause elaborates the liability of the members of the companies. Under this clause, the company has to specify if the liability of the members of this company is limited by shares, by guarantee, or if the liability is unlimited.
- Limited by Shares: In this situation, the liability of the members of the company will be restricted to the number of shares that have been purchased by them.
- Limited by Guarantee: In this case, every person guarantees a certain amount that they will pay in case the company faces any losses and has to wind up.
- Unlimited liability: In case of unlimited liability, in case the company faces any losses, every member of the company is liable unlimitedly; in other words, they can be liable to pay for an amount as large as it may be, and this liability extends to the extent of their personal property.
- Capital Clause: the Capital clause specifies the maximum capital that the company is permitted to raise; it’s also referred to as the authorized/nominal capital of a company. This clause also elaborates on the division of capital into shares of specific amounts.
- Subscription Clause: This clause specifies the details of subscribers and the shares that they’ve subscribed to. In case of a private company there should be the details and the signatures of 2 subscribers whereas in case of a public company there should be the details and signature of 7 members of the company.
Other than this, companies can have additional clauses in their MOA as well. The format of every MOA depends on the type of company it is; the different formats are specified within Schedule I of the Companies Act.
While incorporating any company, an MOA has to be filed with the registrar of companies. In recent times the MCA(Ministry of Corporate Affairs) has introduced SPICe MOA/eMOA. It is an electronic form that lets you file your Memorandum of Association online via the MCA website. It has made the process of creating and filing an MOA a lot easier.
To get help regarding drafting your MOA or any other related questions, hop onto LegalWiz.in Our legal experts will guide you through any and all aspects of business registration, be it a new business or old! Reach out to us to get an answer to all your queries!
- Is the MOA and the AOA of a company the same?
No, the MOA and AOA of a company are two different documents that together form the constitution of a company. The MOA specifies the objectives and details of a company, whereas the AOA specifies the internal rules and regulations of a company. Of the two, the MOA is considered the most important document and is a lot more difficult to alter.
- What is the main purpose of MOA?
The main purpose of an MOA is to illustrate the objectives of a company and the scope of its activities and powers. Any actions taken by a company that is beyond what’s specified in its MOA are void.
- Does an LLP (Limited Liability Partnership) require an MOA?
No, LLPs don’t need an MOA; MOA is only mandatory for companies. However, instead of an MOA, every limited liability partnership requires an LLP deed to be executed that specifies the scope and powers of the partnership.
- Do all companies need an MOA?
An MOA is a public legal document that every company has to mandatorily have. Without it, no company can be incorporated.
Monjima is a lawyer and a professional content writer at LegalWiz.in. She has a keen interest in Legal technology & Legal design, and believes that content makes the world go round.
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