Explain the Contents of Memorandum of Association
A memorandum of association contains a name clause, registered office clause, object, objects clause, liability clause, capital clause, and association clause.3 min read
2. Registered Office Clause
3. Objects or Objective Clause
4. Object Clause
5. Liability Clause
6. Capital Clause
7. Association Clause
Updated August 11, 2020:
A memorandum of association contains a name clause, registered office clause, object (or objective clause), objects clause, liability clause, capital clause, and association clause. An MOA is a type of legal paper that is prepared when forming and registering a limited liability company (LLC).
The MOA's purpose is to explain the LLC's relationship with its shareholders. The articles of Association and MOA make up the company's constitution. An MOA isn't required in the United States, but limited liability companies that are based in European countries, which include the U.K., the Netherlands, France, and some Commonwealth Nations do require MOAs.
This clause states the company's proposed name.
- It must end in the word "limited" if it's a public company or "private limited" if it's a private company.
- It can't be identical to any existing company's name.
- It can't allude to the new company doing the business of an existing company.
- It should not be misleading in any way.
Registered Office Clause
The registered office clause lists the name of the state where the company's registered office is physically located.
- The registered office's physical location determines which jurisdiction the Registrar of Companies and which court the company would fall under.
- It also confirms the company's nationality.
- The registered office's full address must be provided to the Registrar of Companies to simplify further communications.
Objects or Objective Clause
The objects clause, also called the objective clause, is considered the most important in the MOA.
- It defines and limits the scope of the company's operations.
- It details the company's scope of activity for the members and explains how the members' capital will be used.
- It protects shareholders funds and ensures the funds will be used for the specific business purposes for which they were raised and that they won't be risked in other endeavors.
The object clause explained why the company is establishing. Companies aren't legally allowed to do any kind of business other than the kind of business that is specifically stated in this clause. An object clause should contain:
- A list of the main objects the company will be pursuing after it's Incorporated
- Incidental objects that are necessary to achieve the main object
- Any other objects that aren't included in the main objects or incidental object
- Nothing illegal
- Nothing that's against the public interest
- Nothing that's against the country's general rule of law
The liability clause explains what liability each of the company's members faces. If the company is limited by shares, the liability that each member faces can be no more than the face value of shares that he or she holds. If it's a company that's limited by guarantee, this clause must define how much liability each individual company member holds. If it's an unlimited company, this particular clause would not be included in the MOA.
The capital clause lists information about the total capital held by the proposed company. This amount is called the company's authorized capital. Companies aren't permitted to collect more money than the amount listed under authorized capital. The way the capital is divided into equity share capital and preference share capital also needs to be listed in the capital clause. The number of shares the company puts in equity share capital and preference share capital, alongside their value, needs to be included in the MOA.
The association clause explains that any individual signing the bottom of the MOA wants to be part of the association that's being formed by the memorandum. The MOA has to be signed by at least seven people or more if it's a public company. It has to be signed by at least two or more people if it's a private company. The signatures also have to be affirmed by witnesses. There can be one witness for all of the signatures, but none of the subscribers can witness the signatures of the others. All subscribers and witnesses must provide their addresses and occupations in writing.
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