Once again, thanks for tuning in. What is a memorandum of association? Before we get
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The firm's charter is represented by the memorandum of association (MOA). It's a legal document
written during the registration and formation of a limited liability firm to outline
the corporation's relationship with its shareholders.
Moreover, limited liability is a legal framework for a company where a business loss is limited
to the sum invested in a limited liability company (LLC) or partnership. To put it
another way, if the corporation fails, the owners' and investors' assets are not
at risk.
In addition, the firm's constitution is comprised of the Articles of Association and the memorandum
of association. However, the MoA sets the barrier beyond which the corporation's actions
are not allowed, and the firm is only permitted to engage in those activities stated in the
MoA.
The memorandum of agreement makes it easy for shareholders and anybody else who engages
with the firm to grasp its core rights and authority. In addition, the MoA's content
assists potential shareholders in making the best judgement possible when considering an investment in
the firm.
What role does a memorandum play in a business?
The significance of the memorandum of association is stated below.
• The memorandum serves as the foundation for the firm's whole structure.
• It puts forth a firm's written objectives.
• It explains the firm's constraints.
• It outlines the firm's scope of operations.
What is the memorandum of association's provisions?
First of all, the Name Clause
This clause defines the firm's name, which should not be the same as any other business.
However, in a private firm, the term "Private Limited" must be added to the end of its name,
and if it is a public corporation, the term "Limited" must be added at the end. So, for
instance, if it's a private organisation, it should be called XYZ Private Limited, and
if it's a public corporation, it should be called XYZ Ltd.
Furthermore, a firm has complete control over the name it chooses. It must not include words
such as Emperor, King, Government Bodies, Queen, or names of international organisations
such as the World Bank, World Health Organisation, United Nations Organisation, etc.
Registered Office Clause.
This clause must include the name of the state where the firm's registered office is situated.
This will aid in determining the Registrar of Corporations' jurisdiction. The term "registered
office" refers to the site where the firm's statutory books, common seal, and other documents
are held. Within 30 days of the firm's formation or beginning, the firm must notify the Registrar
of Companies of the location of its registered office.
Object Clause
This clause explains why the firm was founded and included an overview of the firm's operations.
The object clause must specify the firm's purpose and indulgence in operations. Any
such operation that is not specified in the object clause is regarded to be beyond the
firm's grasp. The following three subcategories can be found in the objectives:
Liability Clause
It outlines the firm's members' liability. If the firm is unlimited, the members' liability
is infinite; but, if shares limit the firm, the members' liability is limited to the amount
owed on their share. In the case of a firm limited by guarantee, however, the members'
liability is limited by the amount each member has pledged to give.
Capital Clause
This clause explains the highest sum of money that the firm can raise and the division of
capital into stocks. The company will not guarantee more capital than that specified
in this clause. If certain stockholders are given privileges or rights, they may be mentioned
in this provision.
Subscription Clause
It includes the names and addresses of the initial subscribers. The memorandum's subscribers
should take at minimum one share. In a private firm, the minimum number of members should
be two, whereas, in a public firm, the minimum number should be seven. As a result, the memorandum
of association is the firm's cornerstone and most important paper.
Now that you’re up to speed, check out some of our other videos to boost your financial
IQ. If you like this info, give us a like, comment, and share. For regular updates, head
to our website at kalkinemedia.com. This has been Holly Shields for Kalkine Media.