The Memorandum of Association (MOA) is the constitution of a company — think of it as the company's birth certificate combined with its rulebook for the outside world. Before Rajesh & Co. Pvt. Ltd. can even register, the MOA must be drafted correctly. Section 4 tells you exactly what must go inside it.
Every MOA must contain these six compulsory clauses: (1) Name Clause — a public company must end with "Limited"; a private company with "Private Limited" (Section 8 companies like NGOs are exempt). (2) Registered Office Clause — only the State needs to be mentioned at incorporation; the exact address can be provided within 30 days. (3) Objects Clause — what the company will do and anything incidental to it. (4) Liability Clause — for a company limited by shares, members' liability is capped at unpaid share amount; for a company limited by guarantee, each member's guarantee amount must be stated explicitly. (5) Capital Clause — applicable only if the company has share capital; must state total authorised capital, its division into fixed-value shares, and each subscriber's intended shareholding (minimum 1 share each). (6) Nominee Clause — exclusive to One Person Companies (OPC); the subscriber must name a person who will become member upon the subscriber's death.
On name reservation, a person can apply to the Registrar to reserve a name. Once approved, the name is held for 20 days for a proposed new company, and 60 days for an existing company changing its name. If the name was obtained using false information, consequences are harsh: if the company hasn't incorporated yet, the name is cancelled and a penalty up to ₹1 lakh applies; if already incorporated, the Registrar can order a name change (via ordinary resolution within 3 months), strike off the company, or even petition for winding up. Also remember: a company cannot use a name identical or deceptively similar to an existing company, or one that suggests government patronage, without Central Government approval.
📊 Worked example
Example 1 — Name Reservation Penalty
Mr. Sharma applies to the Registrar to reserve the name "Sharma Tech Solutions Private Limited" for his proposed company. He submits incorrect documents to get approval. The name is reserved, but the company is NOT yet incorporated when the fraud is discovered.
Working:
- Was the company incorporated? No.
- Action: Reserved name is cancelled.
- Penalty under Section 4(5)(ii)(a): up to ₹1,00,000
Answer: The reserved name stands cancelled, and Mr. Sharma faces a penalty which may extend to ₹1,00,000.
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Example 2 — Liability Clause in a Guarantee Company
Ms. Iyer is a member of a Section 8 company (not-for-profit) limited by guarantee. The MOA states each member guarantees ₹10,000. The company is wound up; total unpaid debts are ₹4,00,000 and there are 50 members.
Working:
- Each member's maximum liability = guarantee amount = ₹10,000
- Total guarantee pool = 50 × ₹10,000 = ₹5,00,000
- Total debt = ₹4,00,000 (within the pool)
- Ms. Iyer's contribution = ₹4,00,000 ÷ 50 = ₹8,000 (proportionate share, capped at ₹10,000)
Answer: Ms. Iyer's maximum liability is ₹10,000, but she may be called upon to contribute ₹8,000 based on proportionate sharing of the actual debt.
⚠️ Common exam mistakes
- Students write "exact address" in the Registered Office clause — Section 4 only requires the State to be mentioned in the MOA. The full address is filed separately within 30 days of incorporation. Don't confuse the MOA requirement with the INC-22 filing.
- Forgetting the Nominee Clause is OPC-exclusive — many students list 5 clauses for all companies. The 6th clause (nominee) applies only to One Person Companies. For all others, it's 5 clauses.
- Mixing up 20 days vs. 60 days name reservation — 20 days is for a new proposed company; 60 days is for an existing company wanting to change its name. This distinction is a favourite MCQ trap.
- Assuming "Section 8 company" must still add "Limited" or "Private Limited" — the proviso to Section 4(1)(a) specifically exempts Section 8 companies from this requirement. They can use names without these suffixes.
- Thinking any guarantee amount equals actual liability — a member's guarantee is the maximum they can be asked to pay. The actual call depends on the company's real shortfall at winding up, which could be less.
📖 Bare Act text — Section 4, Companies Act 2013
(click to expand)
(1) The memorandum of a company shall state—(a) the name of the company with the last word "Limited" in the case of a public limited company, or the last words "Private Limited" in the case of a private limited company:Provided that nothing in this clause shall apply to a company registered under section 8;(b) the State in which the registered office of the company is to be situated;(c) the objects for which the company is proposed to be incorporated and any matter considered necessary in furtherance thereof;(d) the liability of members of the company, whether limited or unlimited, and also state,—(i) in the case of a company limited by shares, that liability of its members is limited to the amount unpaid, if any, on the shares held by them; and(ii) in the case of a company limited by guarantee, the amount up to which each member undertakes to contribute—(A) to the assets of the company in the event of its being wound up while he is a member or within one year after he ceases to be a member, for payment of the debts and liabilities of the company or of such debts and liabilities as may have been contracted before he ceases to be a member, as the case may be; and(B) to the costs, charges and expenses of winding up and for adjustment of the rights of the contributories among themselves;(e) in the case of a company having a share capital,—(i) the amount of share capital with which the company is to be registered and the division thereof into shares of a fixed amount and the number of shares which the subscribers to the memorandum agree to subscribe which shall not be less than one share; and(ii) the number of shares each subscriber to the memorandum intends to take, indicated opposite his name;(f) in the case of One Person Company, the name of the person who, in the event of death of the subscriber, shall become the member of the company.(2) The name stated in the memorandum shall not—(a) be identical with or resemble too nearly to the name of an existing company registered under this Act or any previous company law; or(b) be such that its use by the company—(i) will constitute an offence under any law for the time being in force; or(ii) is undesirable in the opinion of the Central Government.(3) Without prejudice to the provisions of sub-section (2), a company shall not be registered with a name which contains—(a) any word or expression which is likely to give the impression that the company is in any way connected with, or having the patronage of, the Central Government, any State Government, or any local authority, corporation or body constituted by the Central Government or any State Government under any law for the time being in force; or(b) such word or expression, as may be prescribed,unless the previous approval of the Central Government has been obtained for the use of any such word or expression.(4) A person may make an application, in such form and manner and accompanied by such fee, as may be prescribed, to the Registrar for the reservation of a name set out in the application as—(a) the name of the proposed company; or(b) the name to which the company proposes to change its name.(5) (i) Upon receipt of an application under sub-section (4), the Registrar may, on the basis of information and documents furnished along with the application, reserve the name for a period of twenty days from the date of approval or such other period as may be prescribed:Provided that in case of an application for reservation of name or for change of its name by an existing company, the Registrar may reserve the name for a period of sixty days from the date of approval.(ii) Where after reservation of name under clause (i), it is found that name was applied by furnishing wrong or incorrect information, then,—(a) if the company has not been incorporated, the reserved name shall be cancelled and the person making application under sub-section (4) shall be liable to a penalty which may extend to one lakh rupees;(b) if the company has been incorporated, the Registrar may, after giving the company an opportunity of being heard—(i) either direct the company to change its name within a period of three months, after passing an ordinary resolution;(ii) take action for striking off the name of the company from the register of companies; or(iii) make a petition for winding up of the company.(6) The memorandum of a company shall be in respective forms specified in Tables A, B, C, D and E in Schedule I as may be applicable to such company.(7) Any provision in the memorandum or articles, in the case of a company limited by guarantee and not having a share capital, purporting to give any person a right to participate in the divisible profits of the company otherwise than as a member, shall be void.
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