When people decide to start a company in India, they do not just start doing business immediately. There is a proper legal process to follow. One of the first and most important steps is registering the company with the Registrar of Companies (RoC).
For this registration, a few documents are compulsory. One key document among them is the Memorandum of Association, commonly called MoA.
For beginners, this document may sound technical. But in simple terms, MoA tells the outside world what the company is, why it exists, and what it is allowed to do. Understanding this helps you know how companies are legally structured in India.
Key Takeaways
- Memorandum of Association defines why a company exists and what it can do.
- Every company in India must have a MoA at the time of registration.
- A company cannot legally operate beyond what is written in its MoA.
- The object clause is the most important part of the MoA for daily business activities.
- MoA protects shareholders, investors, and people dealing with the company.
What is a Memorandum of Association (MoA)?
The Memorandum of Association is a legal document that defines the foundation of a company. It explains the purpose for which the company is formed and sets clear limits on its activities.
It serves as the official document that sets up the company and lays down the key details like:
- Company Name
- Business Objectives
- Registered Office Address
- Authorized Share Capital
- Liability of the Members
- Names of Subscribers
The MOA is required by the Companies Act 2013 for all types of companies, whether it’s a private limited company, public company, or one person company (OPC). Without this document, your company cannot legally operate.
In practice, MoA works like a rule-book for the company. The company cannot do anything outside what is written in this document. If it does, such an act is called ultra vires, which simply means beyond its powers, and such actions are not legally valid.
From real-life experience, many beginners assume a company can do any business once registered. This is not true. What the company can and cannot do is largely decided by its MoA.
Why is MoA Important for Indian Companies?
MoA is important because it protects everyone who deals with the company.
- Shareholders can see how their money will be used.
- Creditors and suppliers can check whether the company is allowed to enter into a particular transaction.
- Investors understand the risk before putting money into the business.
In simple words, MoA creates transparency. It clearly states the company’s boundaries so that no one is misled.
Is Memorandum of Association Mandatory?
Yes. Every company in India must have a MoA.
Whether it is a private company, public company, or even a One Person Company, MoA is compulsory at the time of incorporation. It is filed with the Registrar of Companies and becomes a public document.
This means any person can view the MoA of a company through the Ministry of Corporate Affairs (MCA) website by paying a small fee.
Legal Basis of MoA under Companies Act, 2013
Under the Companies Act, 2013:
- A company is formed by subscribing names to the MoA and complying with registration requirements.
- The law clearly defines what a MoA is and what it must contain.
- If there is any conflict between the Companies Act,2013 and the MoA, the Companies Act will always prevail.
This ensures that companies cannot override the law through their internal documents.
Form of Memorandum of Association
The law provides standard formats for MoA based on the type of company. These formats are given in Schedule I of the Companies Act, 2013.
In practice, companies choose the format that matches their structure, such as whether they are limited by shares, guarantee, or unlimited.
The MoA must be:
- Printed
- Properly numbered
- Divided into paragraphs
- Signed by subscribers
These formalities ensure legal clarity and authenticity.
How to Form a Company and the Role of the MOA
Before you start a company, you need to create the Memorandum of Association.
It is a must for company registration under the Companies Act of 2013. The rules for forming a company depend on the type of business you want to establish:
- Private Company: Needs at least two people to start.
- Public Company: Needs at least seven people to begin.
- One Person Company (OPC): Only one person is required to set it up.
Once you have decided on the type of company, you and the other founders must sign the MOA, agreeing to its contents. The MOA must be attached when registering your company.
What’s Inside the MOA? – Main Clauses of Memorandum of Association
The Memorandum of Association has several key parts that define how the company will operate. Section 4 of the Companies Act 2013 specifies what must be included in the MOA.
The common parts of the MOA are:
- Name Clause
- Registered Office Clause
- Object Clause
- Liability Clause
- Capital Clause
- Subscription Clause
1.Name Clause
The first clause of the MOA is the Name Clause, where you mention your company’s name. The name must be legally approved by the Ministry of Corporate Affairs (MCA) before you proceed.
This clause states the official name of the company.
- A private company must end with “Private Limited”
- A public company must end with “Limited”
Here’s how it would look:
- Public Company: ABC Consultancy Services Ltd.
- Private Company: ABC Technologies Private Limited
- Non-Profit Organization: Yellow Foundation (No “Limited” required)
Once your name is approved by the MCA, you can add it to the MOA.
While taking name approval, you must make sure that the name must not be identical or too similar to an existing company. It should also not give a false impression of government connection.
Many beginners get confused here. The main idea is simple: the company name should be unique and not misleading.
2.Situation Clause – Registered Office Clause
This clause mentions the State where the registered office of the company is located. It helps decide which Registrar of Companies has authority over the company.
You don’t need to include the exact address at the time of registration, but you do need to mention the state in which the company is registered. The company must have its registered office within 30 days of its formation and must verify this office with the Registrar of Companies (ROC).
In daily practice, this address is used for receiving official letters, legal notices, and government communication.
3.Object Clause
This is one of the most important clauses of the MoA. Object clause explains why the company is formed and what activities it is allowed to carry out.
- Main Objects: The core activities your company will engage in.
- Further Necessary Matters: Additional activities that are needed to support the main objectives.
The Object Clause sets limits on what the company can legally do. If your company tries to do something outside these specified activities, it will be considered “ultra vires” (beyond its legal power).
For example, if a company is formed to manufacture electrical goods, it cannot start a real estate business unless that activity is covered in its object clause.
You must draft the Main Object Clause carefully, as after your company is formed, it can only engage in the activities specified here.
Acts outside the object clause are ultra vires and cannot be approved even if all shareholders agree. This often surprises beginners, but it shows how powerful this clause is.
Example of Main Object Clause
- To provide IT consultancy services to businesses.
- To develop software and applications for various industries.
We have drafted sample object clauses for different categories of companies; they will help you draft your own.
4.Liability Clause
This clause explains the level of responsibility of the company’s members in case of debts or liabilities:
- Limited by Shares: The liability of the members is limited to the amount they haven’t paid on their shares.
- Limited by Guarantee: Members guarantee a fixed amount they will pay if the company is closed.
- Unlimited Liability: In case of liabilities, members may be personally responsible for the company’s debts, which could affect their personal assets.
This clause must clearly state the type of liability your company’s members will have.
5.Capital Clause
The Capital Clause specifies the company’s authorized share capital, which is the maximum amount of capital the company is authorized to raise from its members. You will also need to mention the total amount of capital in shares and how these shares will be divided among the members.
It is essential to distinguish between:
- Authorized Share Capital: The maximum amount your company can raise through shares (can be increased later).
- Paid-up Share Capital: The amount that has been contributed by the shareholders for the shares issued to them.
For example, if the MoA says the capital is ₹10,00,000 divided into 1,00,000 shares of ₹10 each, the company cannot issue shares beyond this limit without changing the MoA.
Beginners often confuse authorized capital with paid-up capital. In simple terms, authorized capital is the limit, not the actual money collected.
Important Note: Ensure that both the authorized and paid-up share capital limits are clearly specified in MOA according to your business requirements.
6.Subscription Clause
The Subscription Clause lists the names of the first shareholders (also known as subscribers) and the number of shares they agree to take.
This clause also includes the subscribers’ details, including:
- Names and details of subscribers
- Number of shares each subscriber agrees to take
- Signatures of subscribers and witnesses
Each subscriber must take at least one share. This clause confirms the intention of the founders to form the company. The Subscription clause will also include the signatures of the subscribers and a witness, confirming their agreement to take shares in the company.
In the case of One Person Company (OPC), the name of the nominee (the person who will take over in case the subscriber dies) is also mentioned.
Types of MOA Forms
There are different forms of MOA depending on the type of company being registered. The most common forms are:
- Table A: For companies limited by shares (the most common type of company).
- Table B: For companies limited by guarantee and without share capital.
- Table C: For companies limited by guarantee and with share capital.
- Table D: For unlimited companies without share capital.
- Table E: For unlimited companies with share capital.
Each company must use the appropriate form based on its structure.
Conclusion
The Memorandum of Association is not just a legal formality. It is the backbone of a company’s legal identity in India.
For beginners, the most important thing to remember is this:
MoA sets the limits of a company’s powers. Everything the company does must fit within those limits.
We hope this article helped you understand the Memorandum of Association in a clear and practical way. To continue learning, you may also find our guides on Articles of Association and types of companies in India useful.
