Define 'Memorandum of Association' of company. Discuss different clauses (contents) of the Memorandum of Association. Make a distinction between a Memorandum of Association and Article of Association.

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Update: 2023-01-23 08:11 GMT

Question: Define 'Memorandum of Association' of company. Discuss different clauses (contents) of the Memorandum of Association. Make a distinction between a Memorandum of Association and Article of Association. [BJS 2021]

Find the question and answer of Company Law only on Legal Bites. [Define 'Memorandum of Association' of company. Discuss different clauses (contents) of the Memorandum of Association. Make a distinction between a Memorandum of Association and Article of Association.]

Answer

The Memorandum of Association (MOA) is a legal document that sets out the basic constitutional framework of a company. It is one of the main documents required to be filed with the Registrar of Companies when incorporating a company.

A Memorandum of Association helps the shareholders, creditors and any other person dealing with the company to know the basic rights and powers of the company. Also, the contents of the MOA help prospective shareholders in taking the right decision while thinking of investing in the company. MOA must be signed by at least 2 subscribers in the case of a private limited company, and 7 members in the case of a public limited company.

The MOA contains several important clauses that define the company's purpose, operations, and legal status. Some of the key clauses in a Memorandum of Association include:

Name Clause: This clause sets out the name of the company, and also states that the company is incorporated under the laws of the country where it is registered.

Objects Clause: This clause sets out the main purpose or objectives of the company. It specifies the business activities that the company is authorized to carry out.

Liability Clause: This clause sets out the type of liability that the shareholders of the company will have. The company can be either a limited liability company or an unlimited liability company.

Capital Clause: This clause sets out the authorized capital of the company, which is the maximum amount of money that the company can raise by issuing shares.

Registered office Clause: This clause sets out the address of the company's registered office, which is the official address of the company for legal and official purposes.

Association Clause: This clause states that the subscribers of the memorandum (the people who sign it) agree to become members of the company and are willing to take at least one share each.

Alteration Clause: This clause sets out the procedure for altering the memorandum of association, including the percentage of members' votes required to pass a resolution to alter the memorandum.

Dissolution Clause: This clause sets out the circumstances in which the company can be dissolved and the procedures for doing so.

The Memorandum of Association defines the scope and powers of a company beyond which the company cannot operate. It regulates the company’s relationship with the outside world. A company cannot be registered without having an MOA. It helps anyone who wants to enter into a contractual relationship with the company to gain knowledge about the company. It is also called the company’s charter, as it contains all the company’s details, its members and their liabilities.

Distinction between a Memorandum of Association and Article of Association

The Memorandum of Association (MOA) and the Articles of Association (AOA) are both important legal documents that define the constitutional framework of a company. However, they serve distinct purposes and contain different types of information.

The Memorandum of Association is the primary constitutional document of a company that contains fundamental information about the company, such as its name, objects, capital, and liability of members. It defines the scope of the company's powers and the limits of its objects. It is considered as the company's charter.

On the other hand, the Articles of Association (AOA) is a secondary document that contains the rules and regulations that govern the internal management and administration of the company. It lays down the rules and procedures for the conduct of the company's business, such as the appointment of directors, the holding of meetings, and the management of the company's finances. It is considered as the company's bylaws.

In summary, the MOA defines the company's existence and the scope of its activities, while the AOA sets out the internal rules and procedures for the company's governance. The MOA is required to be filed with the Registrar of Companies at the time of incorporation, while the AOA is adopted by the company after its incorporation.

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