The Memorandum and Articles of Association of a company are the most important documents for the formation of a company and for its functioning thereafter.
The MOA contains the name, situation of registered office, objects, capital and liability clauses. The AOA are its bye-laws or rules and regulations that govern (directs) the management and internal affairs and the conduct of its business. Both the documents are required to be registered with the Registrar of Companies during incorporation.
Before dealing with a company, it is advisable to read the memorandum and articles of the company to understand aspects, such as powers of Board, scope of company’s activities etc. and its relationship with the outside world.
The Memorandum of Association is a document which sets out the constitution of a company and is therefore the foundation on which the structure of the company is built. It defines the scope of the company’s activities and its relations with the outside world.
The first step in the formation of a company is to prepare a document called the memorandum of association. In fact memorandum is one of the most essential pre-requisites for incorporating any form of company under the Act. This is evidenced in Section 3 of the Act, which provides the mode of incorporation of a company and states that a company may be formed for any lawful purpose by the minimum number of persons required to form a Public, private or OPC by subscribing* their names or his name to a memorandum and complying with the requirements of this Act in respect of its registration.
*To subscribe means to append one’s signature or mark a document as an approval or attestation of its contents.
DEFINITION of MOA
According to Section 2(56) of the Companies Act, 2013 “memorandum” means the memorandum of association of a company as originally framed and altered from time to time in pursuance of any previous company law (1956 Act) or this Act (2013 Act).
Section 4 of the Act specifies in clear terms the contents of this important document which is the charter of the company. The MOA of a company contains the objects to pursue with which the company is formed. It not only shows the objects of formation but also determines the scope of its operations beyond which its actions cannot go.
PURPOSE OF MEMORANDUM
The purpose of the object clause in the memorandum is two-fold.
First, the intending shareholder before making investment in the company should know the field in, (e.g. steel or property) or the purpose for which it is going to be used and what risk he is taking in making the investment.
The second purpose is that anyone dealing with the company will know without reasonable doubt “what is the permitted range of activities of the company or within its corporate objects.”
EWING V. BUTTERCUP MARGARINE CO. LTD. (1917)
The plaintiff sold margarine (butter) in retail shops, mainly in Scotland and the north of England. It had used the name ‘Buttercup Dairy Company’. The defendants proposed to sell margarine wholesale under the name ‘Buttercup Margarine Company’. The plaintiff, who carried on business under the name of the Buttercup Dairy Co., obtained an injunction against the defendant (Buttercup Margarine Co. Ltd.), on the grounds that the public might think that the two businesses were connected.
HELD: Ewing was successful and the injunction was granted.
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