There are two important company documents for the “constitution” of the company. There are Memorandum of Association and Articles of Association.
Memorandum of Association (MOA)
This is a legal document that states the name of the company and the purpose/object for which it was formed. It governs the relationship between the company and the outside world.
Section 2(40) of the Companies Act:
“memorandum” means the memorandum of association of a company as originally framed or as altered from time to time in pursuance of company law or of this Act;
Companies can draft your own MOA but if not then the model MOA in Table B of the Companies Act will apply (or it can be adopted).
Main features of an MOA
Main features of an MOA include name, registered office, objects, limited liability and capital. It shall be deemed to include the power to enter into any arrangement for obtaining loans, advances, finances or credit (Section 30 of the Companies Act)
- Public company – “Limited”
- Private company – “(Private) Limited”
- Single member company – “(SMC-Private) Limited”
The publication of the company name is to be held at a registered office. At this time, the certified copy of certificate of incorporation is to be presented. This name has to be printed along with address, telephone/fax numbers, websites etc. on the letterhead. This name should be on all the cheques and bills that are associated with the company. Exception – Section 42 companies (for promoting commerce, art, science, religion, health, education, research, sports, protection of environment, social welfare, charity or any other useful object)
Company name cannot be:
(a) identical with or resemble or similar to the name of a company
(e) designed to exploit or offend religious susceptibilities of the people
(f) any other ground as may be specified
Caompany name cannot suggest (unless approval from SECP is sought):
(a) the patronage of any past or present Pakistani or foreign head of state
(b) any connection with the Federal/Provincial Govt., any department/authority/statutory body
(c) any connection with any corporation set up by or under any Federal/Provincial law
(d) the patronage of, or any connection with, any foreign Govt. or any international organization
(e) establishing a modaraba management company or to float a modaraba
(f) any other business requiring license from SECP
The address of the registered office is a requirement of an MOA. This is important for all communications and notices and change in address must be notified to the Registrar.
If it is being moved from one city in a Province to another or one city to another in a non-Province, then special resolution is required.
The most important clause of MOA is Objects Clause. It governs relation between company and outside world and defines capacity of the company. Objects clause sets out the purpose and object of the company. If the company acts beyond the object of the company, such act will be ultra vires.
Previously the objects were listed but this lists became very long in order to accommodate any line of business one could imagine. Under Companies Act it is the “principal line of business”:
- The business in which substantial assets are held/likely to be held or substantial revenue is earned/likely to be earned (whichever is higher)
- Must be commensurate with the name of the company
Form of an MOA
An MOA is printed and divided into paragraphs and numbered consecutively. It has to be signed by each subscriber with his full name, occupation, father/husband’s name, nationality, usual residential address, in the presence of a witness who shall attest the signature and add his particulars. It should also be dated.
Alteration of an MOA
- By special resolution to:
(a) change the place of its registered office
(b) change its principal line of business
(c) adopt any business activity or any change therein which is subject to licence, registration, permission or approval under any law
- Alteration must be confirmed by the SECP (apart from change of principal line of business)
Articles of Association (AOA)
Articles of association is an important legal company document that contain “the organizational and governance rules of the company which primarily dealt with the management affairs.” It governs the relationship between the company and the insiders.
Section 2(3) of the Companies Act:
“articles” means the articles of association of a company framed in accordance with the company law or this Act;
Companies can draft your own AOA but if not then the model AOA in Table A of the Companies Act will apply (or it can be adopted).
Main features of AOA include the amount of share capital with which the company proposes to be registered as well as the voting and other rights attached to the different classes of shares and other securities, issued or to be issued.
The articles shall be explicit and without ambiguity and If a company contravenes the AOA, the company and every officer of the company shall be liable to a penalty under the Act.
Like MOA, AOA is printed and divided into paragraphs and numbered consecutively. It has to be signed by each subscriber with his full name, occupation, father/husband’s name, nationality, usual residential address, in the presence of a witness who shall attest the signature and add his particulars. It should also be dated.
Alteration of AOA can only be done through a special resolution.
Also read: Forms of business Organizations