Every company once incorporated have to follow certain procedures. It becomes very crucial to know the scope within which a company can carry on its business activities i.e., a list of do’s and don’ts. Memorandum of Association and Articles of Association act as important corporate documents by laying down the same.
MEMORANDUM OF ASSOCIATION (MOA)
Memorandum of association lays down powers of the company beyond which it cannot operate. It acts as an important legal document and needs to be filed under the registrar of companies. A Memorandum of association helps the shareholders to know all the details about the company it also makes them aware of the rights and powers of the company.
There are various clauses included in the memorandum of association:
- Name Clause
As the name states, the name of the company is mentioned under this clause. It should be original and must not match with any existing company. If a company is a private company its name should end with the word ‘private limited’ (PVT. LTD) and in the case of a public company it should end with the word ‘limited’.
- Registered office clause or situation clause
This clause mentions the name of the state in which the company’s office is registered. The location of the registered office needs to be informed to the registrar of companies within thirty days from the incorporation of the company. This can be helpful in determining the jurisdiction of the company.
- Object clause
Every company is started with a goal and an objective for which the company will run its business activities. In this clause, the object of the company is mentioned and the company cannot carry any activity that is not mentioned in this clause hence it must be drafted with utmost care and expertise.
- Liability clause
This clause mentions the liability of the members of the company. The liability can be limited or unlimited. During the winding-up of the company, the members with limited liability will only pay the face value of the shares bought by them in the company. In case of unlimited liability, the members are required to pay unlimited i.e., without any limit the debts of the company that are required to be paid.
- Capital Clause
Capital is the money that is required to carry on the day-to-day functions of the company. The amount of maximum capital a company can raise is mentioned in this clause. As per Company’s act, there is no limit on the authorized capital of the company. This clause also mentions the total number of shares and their value.
- Subscription clause
The names, addresses, and details of the first subscribers of the company are mentioned in this clause. It is mandatory for the subscribers to take a minimum of one share of the company. In the case of a private company, the minimum number of members is 2, and in the case of a public company, the minimum number of members is 7.
ARTICLES OF ASSOCIATION (AOA)
The purpose of the company is defined under articles of association. It also specifies the regulations by which companies should operate such as the appointment of directors and director’s meetings, nature by which the activities are to be carried out, financial records, dividend policy, winding up process, transferability of shares, voting rights, etc.
There are various components of the articles of association:
- Company name
The official name of the company is mentioned in articles of association. An entity is identified as a company by the suffixes “Ltd.” or “Inc.” the name of the company must not be offensive or vulgar.
- Purpose of the company
As stated above, every company has a goal, objective, and purpose for incorporation. Such purpose must be clearly specified in the document of articles of association.
- Share capital
The capital of the company is divided into shares and the number and types of these shares are mentioned in the articles of association.
- Organization of the company
All the legal information about the company such as registration address, the identity of the founder/owners, information about the directors i.e., number of directors, number of employees, details about the shareholders. Details about legal advisors and auditors of the company may also appear here.
- Shareholder meetings
The details and provisions regarding the first general shareholder meeting are listed in articles of association under a specific section. Notices, votes resolutions regarding subsequent annual shareholders meetings are also listed under the same.
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