Purpose of Memorandum of Association (MOA) of a Company

The main purpose of the memorandum of association of a company is to make its readers aware of its contents so as to avoid any kind of fraud or misinformation in the future by the company or by its directors or officers or employees or any other officer-who-is-in-default.

Contents of Memorandum

Mainly, the following information is provided in a memorandum of association of a company:

• the legal name of the company;

• the name of the State in which its registered office is situated;

• the objects for which the company is incorporated;

• the liability of members of the company;

• the amount of authorised share capital and nominal value per share.

Ultra vires acts

The memorandum gives specific authority to the company to carry out acts which are within the powers specified in it. Any act committed by the company beyond this authority will be considered as an ultra vires act.

Example

The object clause of the memorandum of ABC2020 Limited specifies that it can carry on the business of information technology services and related fields.

If the company carries on the business of manufacturing medicines, it will be considered as an ultra vires action.

The company and any officer-who-is-in-default will be held responsible for it in a court of law.

Fraud or Misinformation

Investors/ shareholders or any other stakeholders like banks, clients, contractors, etc usually check the contents of the memorandum of the company to know about the permitted activities/ business of that company, before deciding to fund that company or to engage in business with the company.

Sometimes, the directors/ officers/ shareholders may deliberately intend to defraud someone by giving that person or organisation misinformation about the company and lure them into doing something which may put that person or organisation in monetary or legal risk in the future.

These are the ultra vires acts and are punishable under the law.

Class Action

In accordance with section 245 of the Companies Act, 2013, member(s) or depositor(s) can file an application before the Tribunal (NCLT) for seeking an order to restrain the company from committing an act which is ultra vires the articles of association or memorandum of association of the company.