How to validate your Memorandum of Association Document?

Do you believe in perfection, so that you could just avoid rework? That is exactly what you could be achieving if Memorandum of Association (MoA) the document that is considered the charter of the company is drafted with perfection and validated by law. Critics, you might just say, entrepreneurs hardly have the time or expertise to quality check these documents.  Well, imagine when you plan to raise funding, and add directors to the company’s board of directors, the investor would hesitate to associate himself with your firm because the MOA that you long back drafted is hardly a valid one. In this blog we shall look into How to validate your Memorandum of Association Document?

MOA comprises of all the objectives, rights, liabilities, mentioned therein, in relation to constitution of proposed Company and which is recognized by law as valid, acceptable and binding on all those subscribing to such Charter and all those who deal with the Company formed.

For every Company which is required to be registered under the provisions of the Companies Act 956 it is mandatory to draft and submit a copy of Memorandum of Association keeping in mind, the provisions of the Act. It may be noted that in terms of provisions of section 13 read with sec 14 and 15 of the Act

A Memorandum of Association generally has following clauses:

Name Clause: This clause contains full of the Company as incorporated.

  • Complete name of the Company with word Limited in the case of a public limited company or Private Limited in the case of a private limited company;
  • The State in which the registered office of the company is situated

Registered Office Clause: This clause indicates the jurisdiction of Corporate Regulator, under which the Company’s registered office falls.

Objects Clause: This clause indicates the objects for which Company is incorporated. The objects which are part of main business activities which Company wish to attain immediately after it is incorporated. These objects needs to be very clear and should encompass all the activities such as manufacture, sale, trade, import, export, exchange etc.,

Liability Clause: This clause tells about limit on monetary liability of each member towards the Company. Where the proposed Company, is a Company limited by shares, the Memorandum of such Company shall also state that the liability of its members is limited.

In case of Company limited by guarantee, the Liability clause state the amount each member undertakes to contribute to the assets of the company in the event of its being wound up while he is a member or within one year after he ceases to be a member, for payment of the debts and liabilities of the company, or of such debts and liabilities of the company as may have been contracted before he ceases to be a member, as the case may be, and of the costs, charges and expenses of winding up, and for adjustment of the rights of the contributors among themselves, such amount as may be required, not exceeding a specified amount.

Capital Clause: This clause denotes the maximum capital which Company can raise at given point of time. In the case of a company having a share capital, the Memorandum shall also state:

(a) The amount of share capital in form of Authorized Share Capital with which the company is to be registered and the division thereof into shares of a fixed amount.

(b) Minimum paid Capital in the form of Paid up

Subscription OR Association Clause: This clause is in the nature of Declaration and Undertaking given by all the subscribers to Memorandum of Association to the effect they have agreed to form a Company and further undertake that they will pay for the shares agreed to subscribe.

Now that you know the clauses that should be verified as the first level of quality check, let’s look at the next level of quality check.

Things you should not make any mistakes:

  • The name of the Company appearing in the MoA should match EXACTLY with the as approved by the Registrar of Companies (RoC)
  • The jurisdiction of RoC to be mentioned in Registered Office (Domicile Clause) should be based on location district of the state.
  • Shareholder while making the investment in any company must possess the information regarding the business plans of the company, these object clauses serve the purpose of providing the information to the shareholder about the prospects of the company
  • The objects which Company wish to attain immediately after it is incorporated. These objects which are part of main business activities needs to be very clear and should encompass all the activities such as manufacture, sale, trade, import, export, exchange, etc.,
  • Covering maximum possible activities as a part of main object provide the clarity for the Company and outsiders dealing with the Company about its exact nature of business. Activities such as seeking mandatory registrations, enrollments, bank accounts, marketing and business promotion, staff welfare, borrowing powers, power to take-over new business, merger & amalgamation empowerment of the Company, if included would be best to maintain transparency.
  • A proposed Company whose main object comprise of : ‘Insurance’ , ‘Bank’ , ‘Stock Exchange’ , ‘Venture Capital’ , ‘Asset Management’ , ‘Nidhi’ , ‘Mutual fund’ the Company will be allowed to be incorporated only after in-principle approval is obtained from concern Sectorial Regulator such as RBI, IRDA, SEBI etc.
  • Where a Foreign Company proposed to incorporate a Company in India, it is mandatory that Certificate of Incorporation of such Company issued in the country of registration and resolution of its Board of Directors duly Apostle/ certified by Indian Consulate Officer is submitted. Further in case Memorandum of Association is executed outside India then such Memorandum of Association and Articles of Association is required to be Appostile/ certified by Indian Consulate Officer.

For the complete validation process, it should ideally take just a few hours, and in case you cannot provide the time, then get it done by an experienced lawyer or a CA that provides a note of guarantee. Something that we at Wazzeer assure our clients. Guarantee.