Memorandum of Association and Articles of Association

The Memorandum of Association (MoA)

It is the most important document to be prepared when forming a company. It lays down and defines the powers and limitations of the company. It contains the following six clauses:

Name Clause: This states the name of the company ending in “Limited”. The name of the company should not be confused with a name of another existing company. The name should also not give a false idea of the nature of business. Names with political connotations are normally not acceptable.

Situation Clause: The clause states the domicile of the company i. e. where the registered office is situated. It is enough to mention the name of the country only.

Objects Clause: It is the most important clause that sets out specifically all the aims, objectives and purposes of the proposed company. Once incorporated, the company can operate only within the objects stated in the MoA.

Capital Clause: The clause sets out share capital the company wishes to have. The total value of all the shares is called the nominal share capital. After completion of registration, the company can raise this amount by selling shares. The share capital raised from the sale is referred to as authorized or registered share capital.

Liability Clause: The clause states that the liability of the shareholders shall be limited.

Declaration clause: This clause states the willingness of the promoters to form themselves into a limited company. It must be signed by at least seven persons (promoters) in the case of public limited companies and two persons in the case of private limited companies.

Articles of Association

It lays down the rules and regulations for the internal organization of the company as follows:

• The different types of shares and the rights and powers of each separate class or type.
• Transfer of shares procedure
• Classes of loan capital issued and their rights and powers as well as transfer procedures.
• Kinds of meetings and the methods of calling and conducting meetings.
• Details concerning directors as to numbers, election or appointment, qualifications and disqualifications, powers, duties and liabilities in the management of the company
• Appointment of the secretary to the company under the Act, remuneration, powers, duties and responsibilities.
• Details of the procedures for keeping records of share and loan registers, meetings of all types, accounting and audit.
• Arrangements for the declaration and distribution of dividends on share capital and interest on loan capital.
• Rules governing the appointment of auditors.

Articles of Association can be altered by a meeting of shareholders through a majority vote and alterations must be forwarded to the Registrar of Companies.

NOTE: A company can choose not to prepare its own Articles of Association and instead adopt the standard Article of Association in “Table A” of the Companies Act, 1962, Cap. 486.