Corporate documents
There are two documents required for an organization or a company. They are Memorandum of Association and Articles of association. The Memorandum of association and the Articles of Association serve as the constitution of the company. The directors should define these two written documents, accept and sign it. These documents are the primary purpose of their association and the company or organization.
Memorandum Of Association:
A Memorandum of Association (MOA) is a legal document prepared in the formation and registration process of a company. It define its relationship with shareholders, creditors, investors and other members and it is the document that regulates the company’s external affairs.
The memorandum of association is accessible to the public and describes the company’s name, physical address of registered office, names of shareholders and the distribution of shares. The business that a company carries on is made according to the Memorandum of Association of the company. A company can carry on only those activities which are stated in the memorandum of association and to carry on any activity which is not stated in the memorandum of association, it has to alter the Memorandum of Association. Hence the companies use general terms in defining their business in MOA instead of specific definitions.
An MOA contains the following information:
- Name of the company,
- Registered Office location and address,
- objectives of the company
- Liabilities of shareholders
- Autherised share capital of the company
- Association Clause.
Object Clause is the main body of the memorandum. It provides a list of all the operations of the company. Every motive and operation the company indulges in must be mentioned in the object clause. Also, any such operation which is not mentioned in the object clause is considered to be beyond the reach of the company.
Association clause confirms the shareholders are willingly associating and forming a company. It confirms that the subscribers wish to form an organization or a company and agree to become members of it. In the case of have a share capital, they undertake to receive at least one share each by paying the share amount.
The memorandum of association must be in a prescribed form and must be authenticated by each subscriber.
Articles of Association:
It comprised of rules and regulations that govern the company’s internal affairs. The articles of association set out how the organization or a company run, governed and owned. The articles of association will therefore include the responsibilities and powers of the members and the means by which the members exert control over the the board. It describes types of business and transactions that this entity could enter into. The articles of association cover the company’s internal constitution.
Charitable organizations must state the charitable objectives and community interests that the organization is restricted to benefit the community.
Review the articles on a regular basis. As its circumstances change, some existing clauses may no longer be useful or new provisions may be desirable. By reviewing and updating the articles of association the entity can achieve the most appropriate balance between the needs of the members and the other stakeholders, giving the former the right powers to run the entity while protecting the interests of its members. The articles can be amended through an amending resolution in a meeting.
The articles should cover the following:
- Liabilities of members.
- Members powers and responsibilities.
- Members meetings, voting, delegation to others and conflicts of interest.
- Retaining records of members decisions.
- Appointment and removal of members.
- distribution of Shares: issuing shares & share transfers.
- Dividends and other distributions to members.
- Members’ decision making and attendance at general meetings.
- Means of communication.
- Use of the entity seal and signing authority.
- Members insurance.
The members of an entity should have a good working knowledge of its constitutional documents. When managing the business of the entity, they need to be comfortable that they are acting within the powers conferred by the articles and following and processes or other formalities laid down there.
Memorandum and Articles are public documents, but Articles Of Association can have a confidential part that can be kept out of the public domain to keep the confidentiality of the entity.
