The first step in the formation of a company is to prepare a document known as MOA which contains the fundamental conditions upon which alone the company has been incorporated. It is also known as the fundamental document of the company.
Meaning & Scope. S 2(56) Memorandum means MOA of a Co’ originally framed or altered from time to time in pursuance of any provision of any previous company law or of this Act. According to Palmer MOA is a document of great importance in relation to the proposed company. It contains the objects for which the company is formed& therefore identifies the possible scope of its operations beyond which its actions cannot go. It defines as well as confines the powers of the company. If anything is done beyond the powers, that will be Ultra Vires of the company and so void. In Ashbury Railway Carriage & Iron Co. Ltd v. Riche, Lord Carins observed: the MOA of a company defines the limitations on the powers of the company.
It contains both that which is affirmative & that which is negative. It states affirmatively the ambit & extent of vitality & power which by law are given to the corporation & it states if it is necessary to state negatively, that nothing shall be done beyond that ambit. Thus it serves 2 purpose-It enables the shareholders, creditors & all those who deal with the company to know what its powers are & what is the range of its activities. A shareholder can find out the purpose for which his money is going to be used by the company & what risk he is taking in making the investment. It also helps anyone dealing with the company i.e a third party, whether the transaction he intends to make with the company is not Ultra Vires of its objects.
There have been views earlier that the MOA of a company is an unalterable charter of the company. Until the year of 1890, it was regarded as an unalterable charter of the company. This led to a number of difficulties in the working of companies. Consequently, the Acts were amended to provide for the alteration of various clauses of the MOA. S 13 of the Companies Act of 2013 provides that except the capital clause a company (which can be passed by passing an ordinary resolution) company may be a special resolution & after complying with the procedure specified, alter the other provisions/clauses in the MOA. Therefore, though MOA is referred to as the charter of the company it is alterable.
This Article Does Not Intend To Hurt The Sentiments Of Any Individual Community, Sect, Or Religion Etcetera. This Article Is Based Purely On The Authors Personal Views And Opinions In The Exercise Of The Fundamental Right Guaranteed Under Article 19(1)(A) And Other Related Laws Being Force In India, For The Time Being.
