Importance of Memorandum of Association (MoA) and Article of Association (AoA) in a company registration

Introduction

In India, for every registered company, it is a constitutional mandated to have MoA and AoA. However, the company registration is not mandatory by law but it has some unmatched benefits. MoA and AoA are the legal documents of a company, which contains the information, basic capital structure, and mode of working of a company.

What are MoA and AoA?

Every organization has its own mode of working. In a company, they are jolt down in a form of MoA and AoA. It works as a constitution and provides basic guidelines for the company like what exactly the company does, details of each main authority agent such as directors, promoters, etc. MoA contains the clause that manages external management of a company. The AoA contains the rules and regulations that manage the internal management of the company.

Importance  of MoA and AoA

  1. It is a constitution of the company. As it provides a working blueprint for a company.
  2. Non- compliance with these memoranda, the company may sue a member.
  3. Every act of the company should be under the scope of MoA and AoA.
  4. The AoA defines internal relations between the company and members.
  5.  It also defines the rights and liability of each member of the company.

Both MoA and AoA are the basic fundamental legal documents of a company. They contain the following important clauses which are crucial for the management of a company.

  • Name Clause

It has the name of the company. It should be unique and should not resemble with the name of another company. For a Private Limited Company, it should end with “Private Limited” or for the Public Limited Company it should end with a word “Limited”.

  • Object Clause

It gives the overview of the main functioning and working of the company. It also provides a clear picture to shareholders and promoters, about where their investment is going to be used.

  • Capital Clause

It gives information about total share capital and the maximum share capital a company can raise.

  • Liability Clause

It details about the liabilities of each member of the company.

  • Transfer of Share

This clause regulates the transfer of shares between shareholders of a company so that existing shareholders will get the first preference if any shareholder is willing to sell their shares.

  • Subscription Clause

It has the name and details of each subscriber of the company and the number of shares allocated to them.

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2018-11-05T13:08:45+00:00Company Registration|