How to draft MOA for your Private Limited Company- Objectives, Contents & Clauses

Whenever a new company is registered with Ministry of Corporate Affairs (MCA), it has to draft and file its Memorandum of Association (MOA) to Registrar of Companies (RoC). Memorandum of Association also known as MOA is the principal document which outlines the vision, mission and objects of the proposed company in legal terms. MOA sets the foundation on which a private limited company is established. Therefore, utmost attention is necessary while drafting and finalizing the content of the MOA.

If you are also intending to register private limited company in India, this article is meant for you. Let’s discuss the tips for drafting an ideal MOA for your private limited company.

Contents of Memorandum of Association

Memorandum of Association (MOA) consists of the following clauses:

Name Clause

It is the first and foremost clause of MOA. It states the name of the company. When you are registering pvt. Ltd. Company, you need to get proposed name approved from the RoC. While approving the name, RoC checks that the proposed name does not resemble to any existing company and some other parameters as prescribed by MCA.

Once approved, you can use that name while registering the company’s MOA. As per Section 4(1)(a) of the Companies Act, 2013, the company’s name should fulfil the following conditions:

• In case of a Public Limited Company, the name should contain “Limited” at the end.
• If you register a private limited company, the name should contain the words “private limited” at the end of the company’s name.
• For Section 8 Company Registration, the name of the company should contain the words like “Foundation”, “Federation”, “Council”, “Chamber”, “Forum” etc.

Registered Office Clause

Registered Office Clause contains the official address of the company. This clause is very crucial as this clause helps in determining the jurisdiction of the Registrar of Companies. All future communications between RoC & other authorities and the company shall take place at the given address.

During the time of incorporation of company, you need to specify only the state in which the registered office is located. After the incorporation, the company shall provide the details of registered office address to RoC within 30 days of the incorporation.

Object Clause

Object Clause specifies the objects for which the company is incorporated. The company can undertake those activities only which are commensurate and are necessary for achievement of the objects specified in the “Object Clause”. Object clause not only helps company to set its business plans and strategies in accordance of this clause but also ensures that the interest of the stakeholders is protected. Reading the MOA, the shareholders of the company can know about the activities where their capital will be invested. The objects of a company may be classified into 3 parts:

• Main Objects: It mentions the main business activities of the company.
• Incidental Objects: These are the objects which are incidental or ancillary to the attainment of the main objects.
• Other Objects: Any other objects which a company may pursue other than above.

While drafting the object clause, you must be clear about the principal products or services which your company intends to deliver. Whether it is manufacturing or wholesale or retail business should be known. You should also identify the other products or services which you may undertake in the future and those should also be covered in the MOA. The Company Secretaries are the legal experts for doing this task so you can take help of an expert company secretary.

Liability Clause

Liability Clause states the extent of liability of members (shareholders) of the company in case the company incurs losses. It is important to note that in the case of a company (public as well as private limited), the liability of the shareholders is limited. However, the liability can be limited in any of these two manners to be specified in the MOA:

• Limited by Shares: In this case, the shareholders of the company can be called upon to pay only up to the amount unpaid on shares subscribed by them.
• Limited by Guarantee: In this case, in the event of losses the members of the company can be asked to contribute to the extent of amount guaranteed by them in MOA.

Capital Clause

This clause specifies the “Authorized Capital” of the company. Authorized capital also known as nominal capital represents the maximum amount of capital which a company can issue to its shareholders. The Capital Clause explains the division of the authorized capital of the company into number of shares at a fixed value (face value). The share capital of the company is further bifurcated into different classes namely equity, preference etc.

Subscription Clause

Subscription Clause is the sixth and last one of the mandatory and primary clauses of MOA. This clause specifies the details of the first subscriber to the shares of the company. Each subscriber signing this document should provide the number of shares to which he is subscribing. Details which are needed for subscription clause of the MOA are the name, address, age and signature of first subscribers along with their PAN details. These details can be provided through the ‘subscribers sheet’.

Tips for drafting MOA

Now that you have come across all the clauses of the MOA and contents needed for drafting of MOA, there are few points to make it more effective:

• Choosing a unique name for the company is very crucial and cumbersome task. Therefore, try to identify 4-5 alternative name options which are unique and are commensurate with the proposed business activities.
• Write down the vision and objects of the company on paper which will help your company secretary in drafting object clause of the company.
• Get kyc of all the subscribers to MOA and a consent from the first directors of the company.

Note the private limited company registration is not a difficult task if done with proper documentation. Your company will be registered in 10-15 days hassle free. We are happy to help you in incorporating private limited company for you. Let our expert professional handle your company incorporation needs.