Memorandum of Association (MOA): A Simple and Complete Guide for Entrepreneurs

Starting a company requires a lot of planning, and one of the most important documents you’ll need is the Memorandum of Association (MOA).

Think of the MOA as your company’s “rulebook” or “constitution”, it defines how your company will operate, its purpose, and the framework within which it will function.

In this guide, we will break down the MOA in a way that’s easy to understand and highlight its key parts for you as an entrepreneur.

What is the Memorandum of Association (MOA)?

The Memorandum of Association is a legal document required when you register your company with the government. 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.

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?

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

Key Clauses in the Memorandum of Association (MOA)

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.

Public companies must have “Limited” in their name, while private companies must include “Private 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.

Registered Office Clause

This clause mentions the location of your company’s registered office. 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).

Object Clause

The Object Clause is one of the most important parts of the MOA because it defines the main business activities your company will pursue. There are two types of objects in this clause:

• 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).

You must draft the Main Object Clause carefully, as after your company is formed, it can only engage in the activities specified here.

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.

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.

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.

Important Note: Ensure that both the authorized and paid-up share capital limits are clearly specified according to your business requirements.

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:

• Name
• Address
• PAN number
• Number of shares subscribed

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.

Why is the MOA Important?

The Memorandum of Association is crucial because it defines the company’s legal structure and its operational framework. Without the MOA, the company cannot be legally registered, and therefore cannot conduct any business.

The MOA ensures that your business stays within the boundaries of the law and operates according to its stated goals.

Some of the reasons why the MOA is important:

• It helps clearly define the company’s objectives and the scope of its operations.
• It establishes the liability of members and protects their personal assets.
• It sets out the capital structure of the company and how it will raise funds.
• It ensures the legal validity of the company and its operations under the Companies Act 2013.

Starting a company involves many legal steps, and the Memorandum of Association is one of the most important. By clearly defining your company’s objectives, structure, and limitations, the MOA helps you ensure that your business operates smoothly and within the law.

Whether you’re forming a private limited company, public company, or a one person company, having a solid MOA in place is crucial for long-term success.

By understanding the key clauses of the MOA, you can make sure your business is set up correctly from the start, avoiding any legal complications later on.