25/10/2025
Q1. Write and explain the three main documents of a company.
A company is a legal entity that comes into existence through registration under the Companies Act. For registration and lawful functioning, certain fundamental documents are required. These documents define the company’s objectives, powers, structure, and management system. The three main documents of a company are:
1. Memorandum of Association (MOA)
The Memorandum of Association is often called the “charter of the company” because it defines the fundamental conditions under which the company operates. It sets the outer limits of the company’s powers and its relationship with the external world.
Main Clauses of the MOA:
Name Clause: Specifies the legal name of the company and ensures it is not identical to any existing company.
Registered Office Clause: Identifies the province or city where the registered office is located.
Object Clause: States the objectives for which the company is formed. Any activity beyond this clause is ultra vires (beyond powers).
Liability Clause: Defines the liability of shareholders, whether limited or unlimited.
Capital Clause: Shows the authorized share capital and its division into shares.
Association Clause: Declares that the subscribers agree to form the company and take up shares.
Importance of MOA:
It defines the scope of activities the company can undertake.
Serves as a public document that investors, creditors, and regulators can inspect.
Helps prevent misuse of corporate powers.
Provides legal protection to outsiders dealing with the company.
2. Articles of Association (AOA)
The Articles of Association contain the rules and regulations for the internal management of the company. While the MOA defines the company’s objectives, the AOA defines how those objectives will be achieved.
Main Contents of the AOA:
Procedure for appointment, powers, and duties of directors.
Rules for conducting meetings (board and general).
Voting rights of members.
Policy regarding dividends and reserve funds.
Transfer and transmission of shares.
Issue of new shares or debentures.
Rules regarding accounts and audits.
Importance of AOA:
It acts as an internal rulebook or constitution for smooth operations.
Prevents conflicts among shareholders and directors by clearly defining roles.
Provides a legal framework for company procedures.
Gives flexibility to modify rules as per business requirements.
3. Prospectus
The Prospectus is a document issued by a public limited company to invite the public to subscribe to its shares or debentures. It provides essential information about the company’s financial position, management, and business prospects.
Contents of a Prospectus:
Purpose and amount of the share issue.
Details of directors, promoters, and auditors.
Financial statements and performance record.
Risk factors and future business plans.
Terms of issue, minimum subscription, and closing date.
Importance of Prospectus:
Ensures transparency and investor protection.
Builds public confidence by disclosing all relevant facts.
Enables the company to raise funds legally from the public.
Misleading statements in the prospectus can lead to legal penalties.
Conclusion:
The Memorandum of Association, Articles of Association, and Prospectus are essential legal documents that form the foundation of a company’s structure and operations. The MOA sets its objectives, the AOA defines internal governance, and the Prospectus invites public participation. Together, these documents ensure that the company functions lawfully, transparently, and efficiently.
