Memorandum of Association and its alteration

What is a Memorandum of Association?

The Memorandum of Association is a legal document that serves as a charter for a company’s
formation. It is a crucial document as it defines the company’s legal identity and purpose.
According to the Companies Act 2013 in India, a memorandum of association is one of the
documents that must be filed with the Registrar of Companies during the incorporation process.
It sets out the fundamental and essential elements of a company, including its name, registered
office address, objectives, authorized share capital, and liability of members. The MOA outlines
the company’s scope of activities and serves as a guide to the company’s internal operations.
The memorandum of association must comply with the requirements of the Companies Act and
include the mandatory clauses specified by the Act. Therefore, it is essential for entrepreneurs and
business owners to understand the significance of MOA and create it with utmost care and
attention to detail.
Purpose of MoA
The main purpose of the Memorandum of Association is to define the legal identity and scope of
activities of a company. It serves as a charter for the company’s formation and sets out the
fundamental and essential elements of the company.
The memorandum of association outlines the company’s name, registered office address,
objectives, authorized share capital, and liability of members. It also specifies the objects for which
the company is formed and operates.
By defining these crucial elements, the MOA provides clarity and transparency to the company’s
stakeholders, such as investors, shareholders, creditors, and regulators. It serves as a guide to
the company’s internal operations and helps in ensuring that the company is managed in
accordance with the legal framework.
Clauses in Memorandum of Association
A Memorandum of Association is a legal document that sets out the fundamental and essential
elements of a company. According to the Companies Act 2013 in India, a memorandum of
association contains six mandatory clauses that must be included during the incorporation of a
company. These clauses are
Name Clause: This clause specifies the name of the company and should end with “Private
Limited” or “Limited” for a company limited by shares, or “Unlimited” for a company not limited by
shares.
Registered Office Clause: This clause sets out the registered office address of the company. It
should be located in the same state where the company is incorporated.
Objective Clause: This clause outlines the company’s main objectives and activities. It specifies
the objects for which the company is formed and operates.
Liability Clause: This clause sets out the liability of the company’s members in case the company
goes into liquidation. The liability can be limited or unlimited, depending on the type of company.
Capital Clause: This clause specifies the authorized share capital of the company. It sets out the
maximum amount of capital that the company can raise through the issue of shares.
Association Clause: This clause is a declaration by the subscribers of the MOA stating that they
wish to form a company and agree to become its members. It must be signed by at least two
persons in the case of a private company, and by at least seven persons in the case of a public
company.
Name Clause in Memorandum of Association
According to the Companies Act 2013 in India, the name clause is a mandatory clause that must
be included in the Memorandum of Association of a company. It specifies the name of the
company and should end with “Private Limited” or “Limited” for a company limited by shares, or
“Unlimited” for a company not limited by shares.
The name of the company should be unique, and the Registrar of Companies must approve it
before the company’s incorporation. The name clause should also comply with the rules and
regulations laid down by the Ministry of Corporate Affairs. The name of the company should not be
identical or similar to any existing company, and it should not be offensive or violate any copyright
or trademark laws.
The name clause is a crucial part of the memorandum of association as it defines the legal identity
of the company and helps in identifying and differentiating it from other companies.
Registered Office Clause in Memorandum of Association
The Registered Office Clause is a mandatory clause that must be included in the Memorandum of
Association of a company. It sets out the registered office address of the company, which is the
official address of the company where all legal notices, communications, and documents will be
sent.
The registered office must be situated in the same state where the company is incorporated. The
Registered Office Clause should include the full address, including the city, district, state, and PIN
code. It is important to note that any change in the registered office address must be
communicated to the Registrar of Companies within 30 days of the change.
The Registered Office Clause is a crucial part of the MOA as it establishes the official address of
the company and helps in determining the jurisdiction of the company for legal purposes.
Objective Clause in Memorandum of Association
The Objective Clause specifies the objects and purposes for which the company is formed and
operated. The Objective Clause should clearly state the main objects, which are the primary
objectives of the company, and other objects, which are incidental or ancillary to the main objects.
The objects should be specific, definite, and not vague or ambiguous.
The memorandum of association should also include the necessary incidental or ancillary objects
that are required for achieving the main objects. Any changes to the objects of the company must
be approved by the shareholders and communicated to the Registrar of Companies. The
Objective Clause is a crucial part of the MOA as it defines the scope of activities of the company
and helps in determining the legality and validity of the company’s operations.
It also helps in protecting the interests of the stakeholders by ensuring that the company operates
within the legal framework and does not engage in any activities that are not specified in the MOA.
Liability Clause in MOA
The Liability Clause is an essential clause that must be included in the Memorandum of
Association of a company according to the Companies Act 2013 in India. It specifies the liability of
the members of the company in case of any debts or losses incurred by the company.
In a company limited by shares, the liability of the members is limited to the unpaid amount of the
shares held by them. On the other hand, in a company limited by guarantee, the liability of the
members is limited to the amount they agree to contribute to the assets of the company in case of
its winding up.
The memorandum of association should clearly state the nature of the company’s liability, whether
it is limited or unlimited. It is important to note that any misrepresentation or false statement
regarding the liability clause can result in severe legal consequences.
The Liability Clause is a crucial part of the MOA as it defines the extent of the liability of the
members and helps in protecting their personal assets in case of any debts or losses incurred by
the company.
Capital Clause in Memorandum of Association
The Capital Clause is an important clause that must be included in the Memorandum of
Association of a company according to the Companies Act 2013 in India. It specifies the
authorized capital of the company, which is the maximum amount of capital that the company can
issue to its shareholders.
The Capital Clause should clearly state the amount of authorized capital, the number of shares,
and the nominal or face value of each share. The memorandum of association should also specify
the types of shares, such as equity shares, preference shares, or debentures, that the company is
authorized to issue.
Any changes to the authorized capital of the company must be approved by the shareholders and
communicated to the Registrar of Companies.
The Capital Clause is a crucial part of the MOA as it defines the maximum amount of capital that
the company can raise and helps in determining the financial capacity of the company. It also
helps in protecting the interests of the shareholders by ensuring that the company does not issue
more shares than the authorized capital.
Association Clause in Memorandum of Association
The Association Clause is a fundamental clause that must be included in the Memorandum of
Association of a company according to the Companies Act 2013 in India. It specifies the name of
the company, the state in which the registered office is situated, and the objects for which the
company is formed.
The Association Clause should also include the names, addresses, occupations, and signatures of
the subscribers, who are the persons who have agreed to form the company and become its
members. The memorandum of association must be signed by at least seven subscribers in the
case of a public company, two subscribers in the case of a private company with a share capital,
and one subscriber in the case of a private company without a share capital.
The Association Clause is a crucial part of the MOA as it establishes the legal existence of the
company and defines its identity. It also helps in identifying the subscribers who have agreed to
form the company and become its members.
Form of Memorandum
The Memorandum of Association of a company should be divided into paragraphs numbered
consecutively and printed. The memorandum of a company should be formulated in accordance
with the respective forms as mentioned in tables A, B, C, D & E under Schedule 1 of the
Companies Act, 2013.
Table A is applicable to companies that are limited by shares.
Table B is applicable to companies that are limited by guarantee and do not have authorised share
capital.
Table C is applicable to companies limited by guarantee and has authorised share capital.
Table D is applicable to unlimited companies that do not have authorised share capital.
Table E is applicable to unlimited companies that have authorised share capital.
At least seven persons in the case of a public company and at least two in the case of a private
company must subscribe to the memorandum.
Alteration of Memorandum of Association of a Company
The Memorandum of Association is a vital document that defines the constitution, the scope of
activities, and the powers of a company. However, the memorandum of association may require
alterations in certain situations, such as changing the name of the company, increasing the
authorized capital, or altering the objects clause to reflect the changing needs of the company.
The Companies Act 2013 in India provides a detailed procedure for the alteration of the MOA,
which involves obtaining the approval of the shareholders and complying with the provisions of the
Act. The procedure for the alteration of the memorandum of association includes the following
steps:
Convening a Board Meeting: A board meeting should be convened to approve the proposed
alterations to the MOA.
Convening a General Meeting: A general meeting should be convened to obtain the approval of
the shareholders for the proposed alterations to the MOA.
Filing of Special Resolution: A special resolution should be filed with the Registrar of
Companies (ROC) within 30 days of the passing of the resolution.
Approval of ROC: The ROC will scrutinize the special resolution and, if satisfied, will approve the
alteration of the memorandum of association.
Issuance of Certificate of Incorporation: The ROC will issue a fresh Certificate of Incorporation
reflecting the alterations made to the MOA.
It is important to note that any alteration to the memorandum of association must be made in
compliance with the provisions of the Companies Act 2013 in India and any other applicable laws.
Also, the alteration should not be inconsistent with the existing provisions of the MOA and should
not adversely affect the rights of the shareholders or the public.
What can be altered in an MOA?
The Memorandum of Association is a fundamental document that sets out the constitution,
objectives, and powers of a company. The memorandum of association may require alterations in
certain situations, such as changing the name of the company, increasing the authorized capital,
or altering the objects clause to reflect the changing needs of the company.
According to the Companies Act 2013 in India, the MOA can be altered by making changes to its
various clauses, such as
Name Clause: The name of the company can be changed by altering the Name Clause of the
MOA.
Object Clause: The Object Clause defines the objectives and powers of the company. It can be
altered to reflect the changing needs of the company or to include new objectives.
Liability Clause: The Liability Clause specifies the liability of the members or shareholders of the
company. It can be altered to change the liability of the members from limited to unlimited or vice
versa.
Capital Clause: The Capital Clause defines the authorized share capital of the company. It can be
altered to increase or decrease the authorized share capital.
Registered Office Clause: The Registered Office Clause specifies the registered office address
of the company. It can be altered to change the registered office from one location to another.
Memorandum of association of a one-person company
The Memorandum of Association is a critical document for a One-Person Company (OPC) in
India. An OPC is a type of business entity that is owned and managed by a single person, and the
memorandum of association serves as a guide for its operations. The MOA of a one-person
company must comply with the provisions of the Companies Act 2013 and must contain clauses
that outline the company’s objectives, powers, and limitations.
The name clause is one of the essential clauses in the MOA of a one-person company, which
specifies the name of the company. The registered office clause specifies the location of the
registered office of the company. The objective clause outlines the activities that the company can
undertake, and the liability clause determines the extent of the liability of the owner in case of
debts and losses. The capital clause specifies the amount of authorized capital of the company.
An OPC is required to have a nominee who will take over the management of the company in
case the owner becomes incapacitated or dies. The memorandum of association must contain a
clause that specifies the name of the nominee and their consent to act as the nominee. The MOA
of an OPC must also contain a clause that specifies that the company is an OPC.
Landmark cases related to MOA
Here are some landmark cases related to MOA in India:
Ashbury Railway Carriage and Iron Co. Ltd. v. Riche (1875)
This case established the principle that the objects clause of the memorandum of association is a
fundamental document that determines the capacity and powers of a company. The objects of the
company must be clearly stated in the MOA, and any activity that falls outside the scope of the
objects clause is considered ultra vires (beyond the legal power) of the company.
Rayala Corporation Pvt. Ltd. v. Director of Income Tax (2016)
In this case, the Supreme Court of India held that the MOA must be interpreted in a manner that is
consistent with the provisions of the Companies Act 2013. The memorandum of association
cannot be used to circumvent the statutory requirements or to engage in activities that are
prohibited by law.
Sterling Computers Ltd. v. M/s. M & N Publications Ltd. (1993)
This case established that the MOA of a company is a public document that can be inspected by
any person upon payment of the prescribed fee. Any alteration or amendment to the memorandum
of association must be filed with the Registrar of Companies (ROC) and must comply with the
provisions of the Companies Act 2013.
Messer Holdings Ltd. v. Shyam Madanmohan Ruia (2019)
In this case, the Supreme Court of India held that the MOA of a company cannot be used to evade
statutory obligations. The company cannot cite the memorandum of association to avoid
compliance with statutory requirements or to engage in activities that are prohibited by law.
These landmark cases have played an important role in shaping the interpretation and
understanding of the provisions related to MOA in India.