What are the six clauses of memorandum of association?

1. Name Clause

It is the first clause of MOA. 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. A company name should end with the word ‘limited’ in case of a public limited enterprise, and ‘private limited’ in the case of a private limited enterprise. Eg. ‘ABC Private Limited’ in case of the private company, and ‘ABC Ltd’ for a public company.

2. Domicile Clause

The memorandum must mention the state in which registered office of the company is situated. The domicile clause will not exactly contain the address of the registered office, but the state or union territory in which the registered office of the company is located. The registered office of a company can be shifted from one place to another within the town with a simple intimation to the Registrar. Whereas, to shift the registered office to other state, Memorandum should be altered accordingly.

3. The Object Clause

This is the most important clause. It states the objects of the company for which the company is proposed to be incorporated. The company is not legally entitled to do any business other than specified in object clause. This clause enables general public to know the purpose for which capital is raised by company. It enables to know the extent of powers of company. The objects are divided into three subcategories:

  • Main Objective: It states the main business of the company.
  • Incidental or Ancillary: These objects are ancillary to the attainment of the main objects of the company.
  • Other objectives: Any other objects which the company may pursue and are not covered in above.

4. Liability Clause

The liability clause declares the liability of members of the company to be either limited or unlimited. The MOA of the company limited by shares must declare that the liability of the members of the company is limited. The MOA of a company limited by guarantee must state the amount of contribution that every member agrees to contribute to the assets of the company in the event of thecompany being wound up. However, in case of a unlimited company, the liability of directors or managers of a company may be unlimited, if specified in the memorandum.

5. Capital Clause

This is valid only for companies having share capital. These companies must specify the amount of Authorized capital divided into shares of fixed amounts. Further, it must state the names of each member and the number of shares against their names. It is usually expressed as “the share capital of company is Rs. 100 crores, divided into 100 lakh equity shares of Rs. 100/- each’. The company should decide its authorized capital after considering its long term financial needs. The company can issue different types of shares to raise the capital from market.

6. Subscription (Association) Clause

This clause contains declaration by the subscribers to the MOA that they are desirous of forming themselves into a company. The subscribers to the Memorandum must take at least one share (qualification shares). The minimum number of members is two in case of a private company and seven in case of a public company. Signatures shall be attested by witnesses. Each subscriber must put his signature along with his name and address.

Leave a Comment

Your email address will not be published. Required fields are marked *