The Details of the Critical Document for a Company Incorporation in India
For every entrepreneur wishing to set up a company in India, they should be done with market analysis. This will ensure that the company they want to set up will have a definitive business model and business plan. If you are still dreaming up the business model, the best advice is to get in all on paper. That way, you have a reliable information base before you can even begin applying to incorporate a company in India. Every company incorporation requires the Memorandum of Association. Here is a list of what the Memorandum of Association (MOA) in India company incorporation should have.
A Legal Record
As a legal record, the Memorandum of Association (MOA) is critical to forming a company. Without it, the company cannot be incorporated as it would be non-complying to the Company Acts 2013. In a bid to make company incorporation easier, India’s Ministry of Corporate Affairs (MCA) has an online filing system. It hopes with the online filing system, individual or business owners can incorporate a company in one day. Previously, business owners had to fill up forms manually. It was time-consuming and confusing, as many may need time to obtain the correct information properly. The most time consuming was to fill up the Memorandum of Association.
Types of MOA
An MOA documents the company’s relationship with its shareholders. It contains the objective and powers of the company. The following are types of Memorandum of Association in India company incorporation.
- One for a company limited by shares,
- A company limited by guarantee without share capital,
- A company limited by guarantee with a share capital,
- An unlimited company and
- An unlimited company with a share capital.
Essential Content of MOA
Name of Company
Company incorporation will be invalid if there is no name to it. The MOA must state the name of the company. One must be aware that the company name is applied separately and approved by the Central Registration Centre. However, a business owner can apply for a company name together with the company incorporation. A newly registered company name must not, under any circumstances, be the same in phonetic sound or form as a registered trademark or other companies. The following are examples of how a company name should become as according to its business structure:
- Public limited company – SAMPLE LIMITED
- Private limited company – SAMPLE PRIVATE LIMITED
- Companies formed under Section 8 of the Act – Foundation/Forum/Association/Federation/Chambers/Council/Confederation/Trust and many more.
Company Operations, Activities & Objectives
A Memorandum of Association in India company incorporation consists of the companies operations and its intended activities. It defines the limit of functions that the company will carry out. At an early stage, the business owner could only carry out one or two activities to achieve the objective. Hence, the company needs to state immediate activities upon incorporation and state supplementary activities for future operations.
The MOA also indicates the need to state where the registered office of the company. It should be the place where the business operates and where they keep the Common Seal, Statutory Books of the company. If the location is known, it is included during incorporation. Otherwise, the business owners must revert with the place within 30 days of incorporation.
Liabilities apply when the company winds-up. Each shareholder’s liabilities are limited to any unpaid amount of their shares. The statement applies to companies limited by shares. As for companies limited by guarantee, the information should mention the amount committed by each shareholder that contributes to the assets of the company when winding up.
When a company incorporates, it may have a share capital. Companies with a share capital must state the amount of the capital into fixed shares. Each member’s name and amount of shares is needed in the Capital section of the MOA. Within this section, business owners will need to pay attention to more sub-sections, such as the following:
- Authorised Share Capital – Sum of money stated in the Memorandum of Association as the share capital of the company. It is the maximum capital amount raised by issuing shares.
- Issued Capital – the portion of the authorised capital, which is issued for a subscription. The amount is equal to or less than the official capital.
- Subscribed Capital – Generally, ninety per cent of the issued capital will receive a subscription. Any subscribed capital will be stated in this sub-section.
- Paid-up Capital – It states the amount paid for the shares subscribed.
Declaration of Association
Another essential section in the MOA is the Declaration of Association. It requires details of the shareholder of the company. For a private company, at least two shareholders declare their association with the company. As for a public company, the requirement is seven shareholders. All subscribers of the MOA must sign using their Digital Signature Certificates in the presence of one witness. The witness must also sign the MOA, including his or her details.