Companies are governed by legal documents that spell out the dos and don’ts. All companies require a certain set of rules and regulations to govern their relationship with external parties of the company. The Memorandum of Association (MOA) is one of the charter documents that define the scope of operations of the company.
Any company’s MOA can be downloaded from the online government portal called MCA by payment of requisite fees. Thus MOA is considered as one of the public documents which can be viewed online by any third party in order to understand the objects and shareholding pattern of the promoters of the company on the date of incorporation before entering any transactions or contract with the company. MOA is considered an important document for the company, as a company cannot act beyond its scope of it and if the company wants to carry out any activity other than that mentioned in MOA then it is required to alter the MOA before carrying out new activities.
Types of MOA as per companies act 2013
As notified under Schedule I of the companies act 2013 following are the types of MOA that different types of companies can adopt:
Table A: Company limited by shares
Table B: Company limited by guarantee and having a share capital
Table C: Company limited by guarantee and not having a share capital
Table D: Unlimited company having a share capital
Table E: Unlimited company not having a share capital
The MOA mainly consists of the following clauses:
Name clause– The name clause generally consists of the legal name of the company which is unique in nature as approved by the government. There may arise a situation where an existing company may require to change in its name such as converting one type of company into any other type, change in nature of business, in cases of merger/amalgamations, on the order of a tribunal or any other authority directing to do so, or voluntarily. To change the name of the company, an alteration in MOA is required.
Registered office clause – This clause contains the details regarding the situation of the company’s registered office. This includes the details of the state or union territory in which the registered office of the company is located.
Object clause – Every company is formed with a specific object. This clause defines the company’s main business objects and other ancillary objects which are necessary to fulfill the company’s main objectives. It specifies the scope of the business activities. The company cannot carry out business activities other than one mentioned in the object clause of the MOA. If the company wishes to carry out any other objects due to expansion or change in business activities, then alteration in MOA is required.
Share capital clause – This clause contains the details of the maximum capital that a company can raise, in other terms it is also known as authorized capital. This contains complete details such as the number of shares, types of shares, the face value of each share etc. The company cannot issue more shares than its authorized capital. Thus, in order to raise funds or be in need of higher capital, a company may need to increase its authorized capital as well as make changes to its Memorandum of Association (MOA).
Liability clause – The liability clause defines the extent of the member’s liability towards any debt and other obligations on behalf of the company. The liability can either be limited or unlimited. Limited liability shall mean the liability of the members is limited to the extent of the amount subscribed in respect of the shares issued by a company, or by way of providing a guarantee to the company. The liability can also be unlimited, in which the owners of a company are fully liable for the debts and obligations of the company.
Subscription clause – The last clause of MOA is the subscription clause which contains the details of the shareholders who have subscribed to the share capital of the company. Complete details of shareholders such as Name, address, Description, occupation, PAN number and number of shares subscribed are required to be mentioned. In case the company is limited by a guarantee, the clause simply specifies the name of the person, address and occupation. The subscribers can also jointly subscribe to the share capital of the company.
Situations under which alteration of MOA is required
Change in name of the company- The name clause of MOA will require to be altered in case of a change of name of the company. The company can change its name by passing a special resolution subject to the approval of the central government. However, the approval of the central government shall not be required in cases when the change results in the addition or deletion of the word “private” i.e., conversion of one class of company into any other class.
The change of name shall be considered complete and effective only when the Registrar issues the fresh certificate of incorporation with the new name.
However, change of name is not allowed to such class of companies that have defaulted in filing their annual returns, financial statements, repayment of matured deposits/debentures/interest on deposits or debentures, and any other document which is required to be filed to Registrar.
Change in Company’s registered office – The Company may want to change its registered office address from one place to another for the following reasons:
- For more professional and cost-effective business operations
- To expand operations at the current location
- To merge the company with another company.
The alteration of MOA will be required in case of a change in registered office address from one state to another and it is subject to the approval of the central government. The central government before approval takes into account certain matters such as:
- Approval of all shareholders in the general meeting.
- Approval of creditors
- Approval of debenture-holders and any other person concerned with the company.
The order of the central government approving the same is required to be filed to the respective registrar who shall then issue a fresh certificate of incorporation with the new address.
Changes in the company’s Object Clause – The Company due to expansion of business activities, may want to carry out such business objects which are not mentioned in the MOA, and it can do so only after the addition or alteration of the object clause in the MOA. The change in objects of a company requires a special resolution to be passed in order to take the approval of a majority of shareholders of a company.
Change in the capital clause – The Company limited by shares can alter its capital clause only if the articles of association of the company allow the company to do so. Further, the alteration of MOA will require in case of the following:
- Increase the authorized capital.
- Consolidation of shares.
- Conversion of shares.
- Cancellation of unissued shares.
Change in liability clause – The liability clause will be required to be altered in order to restrict the liability of the shareholders of the company. The liability clause can be made unlimited by passing a special resolution for approval of shareholders of the company and the same is required to be submitted to the registrar within 30 days of passing the special resolution.
Conclusion
The amended Memorandum of Association should be in accordance with the most recent Companies Act, 2013. Furthermore, after making changes to the company’s MoA in accordance with Sections 13 and other applicable provisions of the Companies Act, 2013 (including any amendment or re-enactment thereof), the existing rules and regulations stated in the MoA should be replaced with new ones immediately in all copies that have already been printed and in new copies that will be printed.
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