MEMORANDUM OF
ASSOCIATION (MOA)
MOA is a legal document that defines the power and
limitation of company. It is also known as charter document that defines
objects for which company is formed. It is mandatory for every type of
companies to submit MOA to the Registrar of Companies at the time of its
incorporation. Section 4 of Companies Act, 2013 defines it as memorandum of
association of a company as originally framed and altered, from time to time,
in pursuance of any previous company law or this Act. Let’s understand every
clause of MOA in detail:
Name Clause
As company is separate legal entity, it should has its name separate from its
members. Name should not be similar to already registered company or LLP,
registered trademark or against any law for time being in force. Name of private
company should end with Private Limited & word Limited in case of Public
Company. However, Section 8 Company is not required to use word Private Limited
or Limited. Also, name should not be such that it establish some connection
with Government such as using word India, Bharat, Royal, King, Queen etc. Using
translation of, changing order or using word new, modern, om, sai etc with name
of existing company will not make the name different as of existing name.
Situation Clause
In this clause, state where registered office of company is situated &
Registrar of Companies under whom company is registered is mentioned. If
company has registered office at the time of its incorporation, then its
details are submitted in SPICE+ (Simplified Performa for Incorporating
Companies Electronically) else it needs to be filed in Form INC 22A within 30
days of its incorporation. Company should mention its complete name, registered
office address, mobile number, email ID and Corporate Identification Number
(CIN) on every document and at its registered office in legible form.
Object Clause
It is most important clause of memorandum as it defines what company can
do. It defines the objects for which company came into existence. It consists
of two parts: Objects to be pursued by company & Matters which are
necessary for objects specified in first part. If company carries on any
business not stated in Memorandum of Association will be void ab initio i.e.,
void from beginning which means company will not be liable for that act and directors
responsible will be personally liable. It is known as Doctrine of Ultra Vires.
Liability Clause
This clause specifies whether the liability of members is limited or
unlimited. If liability is limited by share capital then member will be liable
up to amount unpaid on shares held by them. If liability is limited by
guarantee then members have to contribute amount in case of shortfall at time
of liquidation upto amount guaranteed by them. In case of unlimited liability,
even personal assets of members can be sold to recover the amount at the time
of windup.
Capital Clause
This clause is applicable only in case of company limited by share capital.
It specifies the authorised share capital i.e., the maximum amount it can raise
as capital. However it can be increased in future if company wants to do so.
Subscription Clause
This clause specifies number of share undertaken by each subscriber to
memorandum of association in case of companies limited by share capital &
amount of guarantee undertaken by each subscriber in case of companies limited
by guarantee.
Succession Clause
It is applicable only in case of One Person Company in which name of the
person is mentioned who in the event of death or disability of sole member will
become the member of company.
ARTICLE OF
ASSOCIATION (AOA)
AOA defines the internal rules of company. It defines the
internal rules and regulations and act as Bye Laws that govern the management
of its internal affairs. It defines rights and liabilities of member and company.
There are not fixed number of clauses, it may vary from company to company. However,
It should be consistent with Memorandum and Companies Act. It can contain
provisions stricter than companies Act but provisions lenient than Companies
Act will be void.
IMPORTANT DOCTRINES
Doctrine of Ultra
Vires: Meaning of ‘ultra vires’ is beyond the powers MOA specifies the
objects which company can do. Anything done beyond those objects will not bind
company and outsider, Directors will be personally liable for that act. It
cannot be ratified (corrected) by shareholders.
Doctrine of
Constructive Notice: MOA and AOA are public document, anyone dealing with
company are deemed to have knowledge of MOA and AOA even if they have no
knowledge about it. It is against the outsider and in the favour of company.
Doctrine of Indoor
Management: According to this doctrine, any outsider is not deemed to have
knowledge about internal irregularities. For example, if article states that to
borrow certain sum of money special resolution of members is required, since resolution
is not a public document the outsider is not deemed to have knowledge that
whether special resolution is actually passed or not. It is in favour of
Outsider and against the company.
