Whenever a new company is registered with Ministry of Corporate Affairs (MCA), it has to draft and file its Memorandum of Association (MOA) to Registrar of Companies (RoC). Memorandum of Association also known as MOA is the principal document which outlines the vision, mission and objects of the proposed company in legal terms. MOA sets the foundation on which a private limited company is established. Therefore, utmost attention is necessary while drafting and finalizing the content of the MOA.
If you are also intending to register private limited company in India, this article is meant for you. Let’s discuss the tips for drafting an ideal MOA for your private limited company.
Memorandum of Association (MOA) consists of the following clauses:
It is the first and foremost clause of MOA. It states the name of the company. When you are registering pvt. Ltd. Company, you need to get proposed name approved from the RoC. While approving the name, RoC checks that the proposed name does not resemble to any existing company and some other parameters as prescribed by MCA.
Once approved, you can use that name while registering the company’s MOA. As per Section 4(1)(a) of the Companies Act, 2013, the company’s name should fulfil the following conditions:
Registered Office Clause contains the official address of the company. This clause is very crucial as this clause helps in determining the jurisdiction of the Registrar of Companies. All future communications between RoC & other authorities and the company shall take place at the given address.
During the time of incorporation of company, you need to specify only the state in which the registered office is located. After the incorporation, the company shall provide the details of registered office address to RoC within 30 days of the incorporation.
Object Clause specifies the objects for which the company is incorporated. The company can undertake those activities only which are commensurate and are necessary for achievement of the objects specified in the “Object Clause”. Object clause not only helps company to set its business plans and strategies in accordance of this clause but also ensures that the interest of the stakeholders is protected. Reading the MOA, the shareholders of the company can know about the activities where their capital will be invested. The objects of a company may be classified into 3 parts:
While drafting the object clause, you must be clear about the principal products or services which your company intends to deliver. Whether it is manufacturing or wholesale or retail business should be known. You should also identify the other products or services which you may undertake in the future and those should also be covered in the MOA. The Company Secretaries are the legal experts for doing this task so you can take help of an expert company secretary.
Liability Clause states the extent of liability of members (shareholders) of the company in case the company incurs losses. It is important to note that in the case of a company (public as well as private limited), the liability of the shareholders is limited. However, the liability can be limited in any of these two manners to be specified in the MOA:
This clause specifies the “Authorized Capital” of the company. Authorized capital also known as nominal capital represents the maximum amount of capital which a company can issue to its shareholders. The Capital Clause explains the division of the authorized capital of the company into number of shares at a fixed value (face value). The share capital of the company is further bifurcated into different classes namely equity, preference etc.
Subscription Clause is the sixth and last one of the mandatory and primary clauses of MOA. This clause specifies the details of the first subscriber to the shares of the company. Each subscriber signing this document should provide the number of shares to which he is subscribing. Details which are needed for subscription clause of the MOA are the name, address, age and signature of first subscribers along with their PAN details. These details can be provided through the ‘subscribers sheet’.
Now that you have come across all the clauses of the MOA and contents needed for drafting of MOA, there are few points to make it more effective:
Note the private limited company registration is not a difficult task if done with proper documentation. Your company will be registered in 10-15 days hassle free. We are happy to help you in incorporating private limited company for you. Let our expert professional handle your company incorporation needs.