Memorandum of Association

The memorandum of association is the formal, legal constitution

governing a company, often simply called the memorandum. It is the
document that governs the relationship between the company and the
outside. It is one of the documents required to incorporate a company in the
United Kingdom, Ireland and India, and is also used in many of the
common law jurisdictions of the Commonwealth.
Typically, the memorandum will state the company's name, the location of
its registered office, its objectives, that the liability of its members is limited
and the amount and type of shares.

Purpose

The memorandum of association records the agreement of the first

subscribers to form a company under the 2006 Act, to become members
and, in the case of a company that is to have a share capital, to take at
least one share each.

What is a Memorandum of Association?

Memorandum of Association is the most important document of a

company. It states the objects for which the company is formed. It contains
the rights, privileges and powers of the company. Hence it is called a
charter of the company. It is treated as the constitution of the company. It
determines the relationship between the company and the outsiders.

The whole business of the company is built up according to Memorandum

of Association. A company cannot undertake any business or activity not
stated in the Memorandum. It can exercise only those powers which are
clearly stated in the Memorandum.

Definition of Memorandum of Association

Lord Cairns:
The memorandum of association of a company is the charter and defines
the limitation of the power of the company established under the Act.

Thus, a Memorandum of Association is a document which sets out the

constitution of the company. It clearly displays the companys relationship
with outside world. It also defines the scope of its activities. MoA enables
the shareholders, creditors and people who has dealing with the company
in one form or another to know the range of activities.

Contents of Memorandum of Association

According to the Companies Act, the Memorandum of Association of a

company must contain the following clauses:

1. Name Clause of Memorandum of Association

The name of the company should be stated in this clause. A company is free
to select any name it likes. But the name should not be identical or similar
to that of a company already registered. It should not also use words like
King, Queen, Emperor, Government Bodies and names of World Bodies
like U.N.O., W.H.O., World Bank etc. If it is a Public Limited Company, the
name of the company should end with the word Limited and if it is a
Private Limited Company, the name should end with the words Private
Limited.

2. Situation Clause of Memorandum of Association

In this clause, the name of the State where the Companys registered office
is located should be mentioned. Registered office means a place where the
common seal, statutory books etc., of the company are kept.The company
should intimate the location of registered office to the registrar within
thirty days from the date of incorporation or commencement of business.

The registered office of a company can be shifted from one place to another
within the town with a simple intimation to the Registrar. But in some
situation, the company may want to shift its registered office to another
town within the state. Under such circumstance, a special resolution should
be passed. Whereas, to shift the registered office to other state,
Memorandum should be altered accordingly.

3. Objects Clause of Memorandum of Association

This clause specifies the objects for which the company is formed. It is
difficult to alter the objects clause later on. Hence, it is necessary that the
promoters should draft this clause carefully. This clause mentions all
possible types of business in which a company may engage in future.

The objects clause must contain the important objectives of the company
and the other objectives not included above.

4. Liability Clause of Memorandum of Association

This clause states the liability of the members of the company. The liability
may be limited by shares or by guarantee. This clause may be omitted in
case of unlimited liability.

5. Capital Clause of Memorandum of Association

This clause mentions the maximum amount of capital that can be raised by
the company. The division of capital into shares is also mentioned in this
clause. The company cannot secure more capital than mentioned in this
clause. If some special rights and privileges are conferred on any type of
shareholders mention may also be made in this clause.

6. Subscription Clause of Memorandum of Association

It contains the names and addresses of the first subscribers. The

subscribers to the Memorandum must take at least one share. The
minimum number of members is two in case of a private company and
seven in case of a public company.

Thus the Memorandum of Association of the company is the most

important document. It is the foundation of the company.
 BASIS FOR
Memorandum of Association a
COMPARISON

Meaning Memorandum of Association is

a document that contains all
fundamental information
which are required for the
incorporation of the company.

Defined in Section 2 (28)

Type of Information Powers and objects of the company.

contained

Status It is subordinate to the Companies Act.

Retrospective Effect The memorandum of association

of the company cannot be
amended retrospectively.

Major contents A memorandum must contain

six clauses.

Obligatory Yes, for all companies.

Compulsory filing at the Required

time of Registration

Alteration Alteration can be done, after

passi Special Resolution (SR)
in Annual Meeting (AGM) and
 BASIS FOR
Memorandum of Association a
COMPARISON

previous Government (CG)

Company Law Board (CLB)
is required.

Relation Defines the relation between

company and outsider.

Acts done beyond the Absolutely void

scope

Definition of Memorandum of Association

Memorandum of Association (MOA) is the supreme public document which
contains all those information that are required for the company at the time
of incorporation. It can also be said that a company cannot be incorporated
without memorandum. At the time of registration of the company, it needs
to be registered with the ROC (Registrar of Companies). It contains the
objects, powers, and scope of the company, beyond which a company is not
allowed to work, i.e. it limits the range of activities of the company.

Any person who deals with the company like shareholders, creditors,
investors, etc. is presumed to have read the company, i.e. they must know
the companys objects and its area of operations. The Memorandum is also
known as the charter of the company. There are six conditions of the
Memorandum:

Name Clause Any company cannot register with a name which

CG may think unfit and also with a name that too nearly resembles with the
name of any other company.

Situation Clause Every company must specify the name of the

state in which the registered office of the company is located.
 Object Clause Main objects and auxiliary objects of the company.

Liability Clause Details regarding the liabilities of the members

of the company.

Capital Clause The total capital of the company.

Subscription Clause Details of subs

What is the 'Articles Of Association'

The articles of association is a document that specifies the regulations for a

company's operations, and they define the company's purpose and lay out
how tasks are to be accomplished within the organization, including the
process for appointing directors and how financial records will be handled.

Articles of association often identify the manner in which a company will

issue stock shares, pay dividends and audit financial records and power of
voting rights. This set of rules can be considered a user's manual for the
company because they outline the methodology for accomplishing the day-
to-day tasks that must be completed.

The Articles of Association is a document that contains the purpose of

the company as well as the duties and responsibilities of its members
defined and recorded clearly. It is an important document which needs to
be filed with the Registrar of Companies.
Content

) Company name
The company name of a private limited liability company must include the
words limited liability company or the abbreviation limited / Ltd (in
Finnish osakeyhti / Oy, in Swedish aktiebolag / Ab). If the
company intends to use its company name in two or more languages, the
names in other languages must be stated in the articles of association.

2) A Finnish municipality as the companys place of business

A company may practice its activities in several places and also abroad, but
its registered place of business can only be in one Finnish municipality. The
companys registered place of business is of significance, as the general
meetings of shareholders generally need to be held in the municipality of
the place of business and any legal actions against the company need to be
brought to the court of the municipality in question (forum domicilii).

3) The company's field of activity

The term "field of activity" refers to the fields in which the company carries
on its business activity. Any activity, which may be pursued legally in the
form of a limited liability company, can constitute the companys field of
activity. A company can have several fields of activity, but they must all be
registered. Although legislation is silent about how precise the definition of
the field of activity needs to be, inexact and unnecessarily extensive
definitions should be avoided. The definition of the field of activity has legal
significance when assessing the competence of the companys organs to
take care of company matters. Moreover, the field of activity is of
importance when evaluating the use of company assets. The field of activity
may also consist of a general field of activity.
In addition, the following provisions may be included in the articles of
association:

4) Share capital
The minimum amount of a private limited liability company's share capital
is 2,500 euros. The minimum amount of a public limited liability
companys share capital must be at least 80,000 euros. The share capital
can be stated either as a fixed amount or as minimum and maximum
amounts. In case the share capital has been defined as minimum and
maximum capital, it can be increased and decreased within these limits
without a need to amend the articles of association.

5) Nominal value and number of shares

If the nominal value is defined in the articles of association, all shares must
have the same nominal value.

6) Number of members of the board of directors and auditors as well as

the possible deputy members, or the minimum and maximum number
thereof
The number of the members of the board of directors and auditors, as well
as the possible deputy members and their term of office may be stated in
the articles of association. The number of the members may also be stated
as a minimum or maximum amount. At least one of the members of the
board of directors must have his/her place of residence in the EEA, unless
the National Office of Patents and Registration of Finland grants the
company a permission to deviate from this requirement. Legally
incompetent or bankrupt natural persons or a legal person cannot be
members of the board of directors. In addition, the articles of association
may include special provisions concerning the eligibility of a board member
and a deputy member.

7) Notice of a general meeting of shareholders

The articles of association may stipulate the manner in which and when the
notice to the annual general meeting of shareholders must be given. The
notice may be given e.g. by announcement in a newspaper or by a written
notice delivered to the persons who have been entered in the share and
shareholders registers. If not mentioned in the articles of association,
according to the Limited Liability Companies Act, the notice must be issued
in private limited liability companies no later than one week prior to the
date of the general meeting, or the special date of registration stated in the
articles of association, and no earlier than two months prior to the date of
the general meeting or the registration date.

8) The agenda of the annual general meeting

The articles of association may state the agenda of the annual general
meeting. Matters, which according to mandatory law provisions must be
considered at the annual general meeting, shall also be included on the
agenda.

9) Accounting period of the company

According to the Auditing Act, the accounting period of the company may
be a calendar year or any other period of twelve (12) months. The
accounting period may be shorter or longer than this period when the
company's activity is being set up or closed down or when the time for the
financial statements is being changed. The maximum length of the
accounting period is eighteen (18) months.

10) Supplementary provisions

The Limited Liability Companies Act provides several legal alternatives, the
use of which requires supplementary provisions to be inserted into the
articles of association. Regulating the matter in the articles of association is
usually a prerequisite, if the company wishes to derive a legal benefit from
the alternative. For instance, a redemption right does not relate to a share,
if the matter has not been stated in the articles of association (a so-called
redemption clause). Nevertheless, the inclusion of such regulations in the
articles of association is entirely voluntary. The use thereof depends on
whether the company wants to utilize the alternative provided by
legislation.

11) Other provisions

In addition to mandatory provisions, the shareholders may also quite freely
include other provisions in the articles of association. The other provisions
may not, however, contradict the mandatory principles provided by the
Limited Liability Companies Act, e.g. by limiting the transferability of the
shares in another way than by way of a redemption or consent clause as
provided by law. These voluntary provisions may concern e.g. following
matters:

appointment of a managing director