It is crucial to have the necessary preliminary documents prior to the registration of a company. Memorandum of Association, MoA and Articles of Association, AoA are two such documents. They detail the scope of work, objectives, rules and internal management of the company. These documents are important and need to be drafted properly and with great clarity. Both of these documents are filed by the registrar along with the company incorporation form.
MEMORANDUM OF ASSOCIATION
A Memorandum of Association is the foundation of the structure of a company. It is called the charter of the company. The making of the Memorandum of Association is the first step toward registration. The company members need to comply with the Memorandum of Association. The moa covers the following clauses as per the Companies Act 2013:
- Name Clause
The name of the company is stated in the first paragraph. It specifies whether the company is a private or public limited. The name of the company should be unique, not offensive to any religion or culture and non-indication of any connection with the government or any local authority unless specific permission to do the same is given.
- Situation clause
It specifies the location(state) where the company has its registered office. If the location is changed, the same needs to be updated.
- Object Clause
It specifies the objective for the formation of the company. The company cannot do any activity that is not listed under this clause. Such activities are deemed to be ultra vires and cannot be ratified by even the members.
- Liability Clause
It specifies the obligation of the company’s members. It might be restricted by either shares or a guarantee. In the situation of unlimited liability, this provision is eliminated.
- Capital Clause
It elucidates the maximum quantity of capital that a corporation can raise and distribute in the form of shares. Only the specific capital amount provided under this clause can be secured by the corporation. Shareholders are given particular rights and advantages.
- Subscription Clause
It details the names, addresses, and contact information of its initial consumers. A private limited corporation must have at least two shareholders. A minimum of seven members will be required for a public limited company. These subscribers are required to purchase at least one share.
ARTICLES OF ASSOCIATION
This is the secondary document that defines the internal workings of the organization, as well as its rights, obligations, and administration. It contains the company’s by-laws as well as other rules and regulations. The contents of the Articles of Association remain consistent with the provisions of the Memorandum of Association and the Companies Act. It holds the following information:
- Details regarding the share capital of the company.
- Details of director’s qualification, appointment, powers, payments, obligations etc.
- Details regarding company dividends and reserves.
- Details regarding company accounts and audit.
- Provisions relating to the company’s borrowing powers.
- Provisions relating to conducting meetings.
- Process of winding up of the company.
The Memorandum of Association and the Articles of Association are crucial instruments. They make it easier for the proprietors to operate the business and assist to streamline it. Functions and regulations that are clearly delineated improve efficiency and transparency. As a result, they are required for any private or public limited corporation.