Memorandum of Association and Articles of Association of a Company are one of the most important documents and must be drafted with care. Memorandum of Association and Articles of Association has to be filed with the Registrar of Companies during the process of incorporation of a Company. It contains the fundamental conditions upon which the company is allowed to operate. Memorandum and Articles of Association are important source of information for shareholders and other stakeholders in a company that has been duly incorporated. In this article we will discuss about different clauses of Memorandum and Articles of Association of Company.
Memorandum of Association:
Memorandum of Association (MOA) includes five different clauses as mentioned below:
- Name Clause
- Situation Clause
- Object Clause
- Liability Clause
- Capital Clause
- Subscription Clause
Name of the Company approved by the Registrar of Companies is written in the name clause of the Memorandum of Association. Company’s name is considered as its identity. It is very important to name a Company correctly and as acceptable by the Registrar of Companies. Click here to know more on how to name a Company.
Memorandum of Association must mention name of the State where the Registered Office of the Company will be situated and name of the Registrar of Companies. Address of Registered Office is not required in the Memorandum of Association. Intimation of Registered Office of the Company may be given to the Registrar of Companies at the time of filing of incorporation documents or within 30 days of incorporation of Company. However, Company cannot commence its business before intimating the Registrar of Companies about address of Registered Office of the Company.
Object Clause is considered as the most important clause of all the clauses of Memorandum of Association. Object Clause defines scope of operations of the Company. Any activity outside the defined objects is treated ultra vires, i.e. beyond the powers of Company.
Liability Clause mentions the liability of every member of the Company. Every Company limited by Shares or Guarantee has to mention that the liability of the member is limited to the extent of his share capital or guarantee as the case may be.
Every Company having share capital has to mention the amount of Share Capital with which the Company is registered. Click here to know more about Authorised Capital and Paid up Capital
Association Clause or Subscription Clause provides that each subscriber shall subscribe to minimum one share of the Company. Every subscriber has to fill the subscription clause with his own handwritings and sign the same. The subscription clause is also to be witnessed. There may be one witness for all subscribers or different witnesses for different subscribers.
Articles of Association:-
The Articles of Association of a Company shall contain the regulation for the management of the company. The articles of association set out how the company is run, governed and owned.
Articles of Association, also simply referred to as Articles, are necessary to be submitted during incorporation process of a Company with the registrar of companies. When Articles are taken in conjunction with MOA, they form what is called as the constitution of the company.
Another characteristic of this document is that it spells out the types of power, responsibilities, and authority of the elected directors of the company. This document is also designed for potential investors where it outlines the rules and regulations for and internal management of the company.
The articles can put restrictions on the company’s powers – which may be useful if shareholders want comfort that the directors will not pursue certain courses of action, at least without shareholder approval.
The articles shall address the following:
- Liability of members;
- Directors’ powers and responsibilities;
- Directors’ meetings, voting, delegation to others and conflicts of interest;
- Retaining records of directors’ decisions;
- Appointment and removal of directors; Shares, unless a limited by guarantee company;
o issuing shares;
o different share classes;
o share certificates;
o share transfers;
- Dividends and other distributions to members;
- Members’ decision making and attendance at general meetings;
- Means of communication;
- Use of the seal, if applicable; and
- Directors’ indemnity and insurance.
The Articles of the company shall be in respective forms specified in Table F, G, H, I and J in Schedule I of the Companies Act 2013.
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