Major clauses of the MOA (Memorandum of Association)

Introduction

Memorandum of Association (MOA) must have the mandatory clauses according to the Companies Act of 2013. It is a legal document created during the foundation and registration procedure of a company. A company is an association of individuals that is formed through a memorandum. In this article we have discussed all about the importance and Clauses of an MOA.

What is MOA (Memorandum of Association)?

The MOA stands for Memorandum of Association which is one of the important documents for company registration. All of the activities in which the company is engaging need to be mentioned under MOA. In simple terms, the Memorandum of Association creates a bridge between the company, its activities, and its relationship with the shareholders. The company is liable to perform only those acts which are mentioned in the MOA.

What is Association Clause?

A company is an association of individuals that is formed through a memorandum. The Memorandum of the company must be signed by the people who desire to be a part of the organization. The section where these signatures are confirmed is known as the association clause.

What is the importance of Memorandum of Association?

• Determines the operational area : There is a list of possible activities that an organization can conduct.
• Determines the company’s relationship with external parties : The main purpose of this document is to provide the owners, creditors, and other stakeholders with the important information.
• Fixed charter of the company : For the company, the memorandum of association serves as a fixed charter (as per section 16 of the Companies Act).
• Founder’s Declaration : The memorandum of association must be submitted to the registrar of corporations to incorporate it. It must be signed by a minimum two signatures for a private firm and 7 signatures for a public corporation.

Major Clauses of the MOA (Memorandum of Association)

The contents of the memorandum are mentioned according to Section 4 of Companies Act 2013. There are 6 major clauses of the Memorandum of Association.

1. Name Clause: This clause outlines the name of the company. The company name shouldn’t be the same as any other existing company and The work of the company’s Clause is to look out whether the name of the company is legally appropriate. For example – if it is a private company so it’s mandatory to suffix the word “Private Limited”.
2. Domicile Clause : The ‘domicile’ clause is the second clause of the MOA which identifies the location of the company’s registered office. The state or union territory where the company’s registered office is located shall be listed in the domicile clause.
3. Object Clause : The object clause is the third clause in a company’s Memorandum of Association. It outlines a goal associated with the commercial reason for which the company was established.
4. Liability Clause : This is the fourth Clause in the company’s memorandum. A limitation of liability provision (also known as a liability clause) which is a section of a contract that outlines the types of damages that each party handles paying to the other according to the terms and circumstances of the contract.
5. Capital Clause : This is the fifth Clause in the company’s memorandum, also known as the authorized/nominal capital of the company. This clause specifies the maximum amount of capital that an organization may raise. Additionally, this explains the division of the capital into a certain number of shares with a fixed amount.
6. Subscription Clause : The sixth and last primary clause of the Memorandum of Association is the subscription clause. The information about the company’s initial subscribers is provided in this clause. Also it includes names, signatures, addresses, and other information.

Conclusion

Every organization must have MOA (Memorandum of Association), which outlines the parameters of its functioning. The MOA specifics on the company’s overall organizational structure. It must be submitted to the Companies Registrar.