Importance of Memorandum of Association

Meaning of Memorandum of Association

Memorandum of association is an important document of the company. It contains all information regarding the company & specifies company objectives and powers. This document is prepared at the time of formation & registration of the company. It is termed as the constitution of the company.

Whole company is regulated through the memorandum of association. It clearly defines the activities & functions of the company. Company can’t take any action outsides the boundaries of memorandum of association.

There are different clauses in a memorandum of association like name clause, situation clause, liability clause, capital clause etc. This document states the relationship of the company with its stakeholders. It helps its stakeholders to easily understand & acquire knowledge about the company. Memorandum of association is called the charter of the company.

Need / Importance of Memorandum of Association

  • It is the basic and important document required for the formation of a company. No company can be registered with the memorandum of association.
  • Memorandum of association clearly defines the operations & functions of the company. This document has full control over the functioning of the company. It is termed as the charter of company & no company cab perform outside this document limits.
  • It is the medium through which all the stakeholders get full information regarding the company. It clearly gives an idea of the objectives & mission of the company.
  • It provides full detail regarding the promoters & managers of the company. It contains name, address of all important persons associated with the business. 
  • Memorandum of association helps in attracting more & more investors. Investors get a clear idea regarding the aims & objectives of the company.
  • It clearly defines the liabilities of each shareholder of the company. This helps in understanding the role & responsibilities of each person.

Advantages of Memorandum of Association

  • Memorandum of association has a very important role in arranging sufficient funds for the company. It gives full detail regarding the company aims & objectives to the investors. 
  • It is the mandatory document for the registration of the company. No company can be incorporated without it. It contains all conditions upon which the company is formed.
  • Memorandum of association helps in regulating & controlling the company. It clearly describes the limits of operation of the company. A company can not perform outside the limits of this document.
  • This document helps in maintaining better relations among the stakeholders of the company. Liability of every shareholder is clearly defined. It helps in defining the roles & responsibilities of every member clearly.
  • Memorandum of association is served as the medium of providing the full company details to all its stakeholders. It provides detail regarding company aims & objectives, financial position, future plans etc.

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