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Key takeaways

  • The Memorandum of Association is the legal document that outlines the purpose, power, and scope of the company. The document establishes restrictions on how the company may operate.
  • AoA is a required document that outlines a company's rules and policies to enable effective and efficient operation. It is a companion document to the memo.
  • TheMOA and AOA are both essential documents for a company. They support the company's founders in keeping it functioning successfully. One cannot register a company without these supporting documents

The founding documents of a company are the MOA and AOA. The MOA provides all the information needed to incorporate a company. AOA, on the other hand, outlines the guidelines that a business must adhere to. According to the Companies Act of 2013, a corporation may modify, replace, substitute, delete, or change its MOA and AOA in any other way. If the company's name, registered office, object clause, authorised capital, or liability of the members change, the MOA or AOA may also be modified.

MoA (Memorandum of Association)

The Memorandum of Association is the legal document that outlines the purpose, power, and scope of the company. The document establishes restrictions on how the company may operate. A MoA must be submitted as part of the incorporation process. The six provisions must be included in the MoA.

Name clause: This clause is in the starting section of the MoA. It contains the authorized company name and the type of business (public or private). One of the essential aspects of the name clauses is that the business name should not match with any operating or closed business in the country. The business only runs with the name that has been mentioned in the MoA.

Situation clause:It includes the business's registered office address, which is often the primary or corporate office. If the company must change its registration address in the future for whatever reason, the MoA must be updated with the new address. The registered office address must be given at the time of business incorporation.

Object clause:The goals of the company must be specified in detail since once the object clause is established, revisions cannot be made. Additionally, the company won't be able to pursue all the goals that aren't outlined in the MoA's object clause. Because of this, it is essential to create this clause with the utmost correctness and competence.

Liability clause:The liability of each and every company partner is clearly stated in the liability clause. It outlines the degree of the company partners' financial responsibility should they suffer a loss. However, this condition could not be incorporated in the MoA if the liability is limitless.

Capital clause:Only a certain amount of money can be raised by a company by selling its shares, as specified in the capital clause. This provision must include any privileges provided to the company's stakeholders.

Subscription clause:The subscription clause lists the number of shares that the company's subscribers own together with their part of the company's capital investment. A private limited company must have at least two subscribers in order to exist. Public limited companies, on the other hand, demand a minimum of seven subscribers. Additionally, each subscriber must own at least one share of the company.

AoA (Articles of Association)

AoA is a required document that outlines a company's rules and policies to enable effective and efficient operation. It is a companion document to the memo. The AoA does not, however, have to be created at the moment of incorporation. This document is intended only for internal use. In the end, it interprets the duties and rights of the company's shareholders as well as its operational and administrative policies.AoA contains the following:

  • Details about the shares of the company.
  • The division of the shares into categories and their respective values.
  • Information on how business shares are transferred and converted. Additionally, it contains data on liens and share closure.
  • Requirements for capital raising through share distribution.
  • The benefits associated with owning shares.
  • Minimum subscription requirements and stock conversion regulations.
  • The article covers a thorough method for appointing a member of the company and the rights granted to them.
  • The article covers a thorough method for appointing a member of the company and the rights granted to them. Additionally, it describes how a director may be fired from the company.

Company meetings: Describes the appropriate process for holding company meetings and informing the participants of them. It describes the specifics of performing audits and the compensation of auditors.

Company winding: One is always free to modify the AoA in accordance with the company's needs. To obtain a copy of the AoA, one must submit an application to the company registrar.

What is the procedure for making a change in MOA under Companies Act’2013

The Companies Act of 2013's Section 13 method can be used to change the Memorandum of Association. All firms must adhere to this clause. Hold a board meeting to approve a special resolution recommending the plan for consideration by the members. Give notice of the special meeting that will be held to pass the resolution. The notification must include information about the matter that will be discussed at the EGM as well as the meeting's location, date, day, and hour. The notice of the meeting at which the special resolution is to be made must include an explanation pursuant to Section 102 of the Companies Act of 2013, since the amendment of the memorandum constitutes a special business. Special resolution:

The permission of the members must be expressed by a special resolution in order to change any of the memorandum of association's clauses, with the exception of the capital clause. To change the authorised share capital, however, requires the members' assent by an ordinary resolution in accordance with section 61. The firm must submit a special resolution adopted by shareholders to the Registrar of Companies in order to amend the memorandum of association. Within 30 days of the resolution's passage, Form MGT-14 must be filed for registration of the special resolution. A change made in accordance with section 13 is not effective until it has been registered.

Procedure for alteration of AOA

A minimum of seven days before the meeting, a notice must be published for holding a board meeting.

The proposed modifications to the AOA require the passage of a special resolution with the support of the members.

To host the general meeting, the location, date, and time must be determined. The meeting notification must be distributed to all members by a Director.

The proposed modifications to the AOA require approval from the majority of the members.

Within 30 days following the resolution's passage, the special resolution issued for the revision of the MOA must be filed with the Registrar of Companies in Form MGT-14. The form must be submitted with a certified copy of the special resolution, the notification, and a copy of the modified AOA.

The Registrar of Companies will record the modifications made to the AOA and give a certificate for them when the papers have been verified. Only once the ROC issues the certificate will the modified AOA go into effect.

The business must make adjustments to each copy of the AOA after receiving the certificate from ROC.

Doctrine of ultra vires

A fundamental rule of company law is the doctrine of ultra vires. According to this, a company's objectives as outlined in its memorandum of association may only be altered to the degree authorised by the Act. Therefore, if the company does an act or enters into a contract that is outside the scope of the authority of the directors or the company itself, the act or contract is void and the company is not bound by it. ‘Beyond Powers’ is what the phrase Ultra Vires refers to. Legally speaking, it only applies to actions taken outside a person's legal authority. The premise that the powers are finite is what makes this work.

According to the Doctrine of Ultra Vires, the company is only permitted to pursue the items listed in the memorandum.

  • Blocked from utilising its finances for anything other what the Memorandum specifies
  • Prohibited from engaging in business that is not allowed.

On an ultra vires transaction, the company cannot file a lawsuit. Additionally, it cannot be sued. When a business provides products, renders services, or makes a loan under an ultra vires contract, it is unable to collect payment or recoup the debt.

Doctrine of Constructive Notice

The phrase "constructive notice" derives from the word "constructive," which refers to something that may be inferred and must have been known to the party. As a result, a constructive notice refers to information that can reasonably be assumed to be known by someone. Due to a legal need that a person be aware of specific conditions, this inference is made. According to company law, this refers to information that a person engaging in business with a company is presumed to be aware of as it is in the public domain, whether or not the person was aware of it.A legal concept known as the theory of constructive notice holds individuals accountable for having known any information about the company that is in the public domain.

Section 399 of the Act, which permits anybody to see any document of any business that has been registered with the Registrar of Companies and take extracts from it or create recordings of it, contains the law that establishes this assumption. According to the provision, the applicant will receive this right after paying a charge. The ability to see any public document from any company is included on the right.

The MOA and AOA of the firm are open for public view at all times. The idea of constructive notice, which holds that a person is presumed to be aware of the contents of any document that is in the public domain, was established as a result of this rule. A person must review all relevant corporate papers before deciding to transact with a company and make sure that the terms of the transaction comply with the company's policies. This is known as the "Doctrine of Constructive Notice" and is an implicit and supposed notice given to the individual who intends to trade with the company.

Doctrine of Indoor Management

The constructive notice doctrine is extremely practical and beneficial for management. It gives the business a break from having to individually explain its policies to each customer. It is crucial that this rule be enforced within very restricted parameters since there is a significant predisposition in favour of the company and harm to the person who is trading with it. The Doctrine of Indoor Management is a crucial guideline that limits the doctrine of constructive notice. This rule defends the individual entering into a contract with the firm when the doctrine of constructive notice is being disregarded in favour of an innocent contractor by referencing a rule that is only known to the company's management, meaning it is not in the public domain.

Therefore, such a clause cannot be invoked to impose the doctrine of constructive notice on the individual when specific information about the firm is not available for review by the public. In this situation, the business is without protection and is forced to carry out the contract or face the consequences. This rule equalises the preceding rule and guarantees that the innocent are treated justly.

Conclusion

The MOA and AOA are both essential documents for a company. They support the company's founders in keeping it functioning successfully. One cannot register a company without these supporting documents. Consequently, whether it is a large or small organisation, one must register it before establishing any business or company. If the Company has made a significant decision that necessitates amending the Memorandum of Association and Articles of Association, the procedure outlined in the Companies Act of 2013 must be followed.

Learn the practical aspects of CrPC HERE, CPC HERE, IPC HERE, Evidence Act HERE, Family Laws HERE, DV Act HERE


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