An introduction of memorandum of association is an important part of forming a company. In addition to outlining when a company can be incorporated, a memorandum of association also informs shareholders of the company's purpose.

Memorandum of Association

A memorandum of association is one of the many documents needed when you plan to form a company. First and foremost, this document is used to describe the exact conditions under which the company can incorporate. The memorandum of association also details the company's purpose for existing and the areas where the company will operate.

Another important function of a memorandum of association is outlining how the company will interact with other entities. Shareholders, and outside entities that plan to work with a company, can use the memorandum of association to determine the scope of the company's operations.

Purpose of Memorandum of Association

A memorandum of association has two primary purposes. First, this document can be an important part of attracting potential shareholders. When seeking shareholders for a new company, the memorandum of association will be used to inform the shareholders of important facts about the company:

  • The field of the company
  • The company's purpose
  • The risk shareholders will assume by investing in the company

Second, a memorandum of association will define the company's relationship with outsiders. For example, if an outside entity is planning to work with the company, the memorandum of association will tell the entity of the objectives of the company and the benefits of entering into a contractual relationship with the company.

What to Include in a Memorandum of Association

Like any legal document used by a company, a memorandum of association must include a wide range of information. The first piece of information to include in your memorandum of association is the name of your company. Next, you will need to list the state where your company's registered office will be located.

One of the most important sections of the memorandum of association describes the main objects of your company. These are the primary business goals that your company will pursue through its operations. In this section, you will also need to describe secondary objects that would need to be obtained in order to achieve your main object. If the goals of your company are not confined to one state or territory, you would also need to describe the different locations where your company's objects exist.

If you are forming a limited liability company, you would need to state in your memorandum of association that liability of your company's members is limited. For companies with share capital, this document will need to describe the total amount of share capital and will also need to outline the fixed amount into which the shares will be divided.

In a company with share capital, the subscribers of the memorandum of association are required to take at least one share. Each subscriber should write down their name next to the number of shares they plan to take in the company. If a company is limited by guarantee, the memorandum of association must include a statement that every member has promised to contribute a certain amount of money to the company.

Altering a Memorandum of Association

Altering a memorandum of association requires following the correct procedure for the specific alteration that you wish to make. If you want to change the name of your company, for instance, you will need to make a special resolution and obtain written approval from your government.

In some cases, a company may need to change the location of its registered office. If you are moving your office to a new location within the same city, you will need to notify a registrar within 30 days of the move. When moving your registered office to another city in the same state, the shareholders must approve the move, and a copy of this approval should be submitted to the registrar within 30 days. The registrar in the new city must also be notified of the move.

Moving your company's registered office to a different state requires a special resolution. You must have a clearly defined purpose for moving your registered office to a new state. Special resolutions can be passed at a general meeting.

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