What is the Memorandum of Association?
In Nepali language Memorandum of Association or MoA is called “प्रबन्धपत्र“.
The Memorandum of Association (MOA) is a legal document created by a company during its registration and formation.
It serves as the foundational charter. It outlining the company’s relationship with shareholders and defining its business objectives. Companies may only conduct the activities specified in this document.
Prospective shareholders check the contents of the memorandum of the association before investing in a company.
In simple terms, Memorandum of Association is a important document that needs careful drafting when registering a company.
Read More: How to Register a Company in Nepal
Sample Format of Memorandum of Association in the Nepali language
The Company Registrar’s office has given sample format of Memorandum of Association for various types of companies. Here are a few:
| Memorandum of Association | Sample Templates |
|---|---|
| Memorandum of Association for Private Company | Download PDF |
| Memorandum of Association for Public Company | Download PDF |
Select and download the Memorandum of Association sample format that matches the type.
Identify the placeholders in the template, which are sections marked for specific details. Replace these with your company’s information, including its name, registered office address, objectives, and any other relevant details.
Why Are Memorandum of Association Important?
Here are some main reasons why MoA is important:
- Defining Purpose: The MoA clearly states the company’s purpose and objectives. It’s like the company’s mission statement, explaining what it aims to achieve.
- Scope of Operations: It outlines the geographical area within which the company can operate. This helps in avoiding confusion about where the company can conduct its business.
- Limits on Powers: The MoA sets limits on the powers of the company. This ensures that the company operates within legal boundaries and doesn’t exceed its authority.
- Investor Confidence: Investors often review the MoA before investing. A well-defined MoA provides transparency about the company’s goals and operations, building investor confidence.
- Legal Compliance: It ensures that the company operates within the legal framework. By clearly stating the company’s objectives, it helps in adhering to legal requirements and regulations.
- Change Control: If the company decides to change its objectives or scope, it typically requires an amendment to the MoA. This process ensures that any changes are documented and legally recognized.
- Contracts and Agreements: When entering into contracts or agreements, parties often refer to the MoA to understand the company’s capabilities and limitations. It serves as a reference point for business dealings.
- Smooth Operations :Having a well-crafted MoA helps in smooth day-to-day operations. It provides clarity to employees, management, and stakeholders about the company’s core activities.
Legal Requirements for Memorandum of Association in Business in Nepal
Here are some key legal requirements for the MoA in Nepal:
- Unique Name: Pick a unique name that no other company in Nepal is using.
- Registered Office: Clearly mention the official address of your company in Nepal.
- Objectives: Clearly list your business goals in detail.
- Liability: Explain how much responsibility members have: whether it’s limited by shares, guarantee, or unlimited.
- Capital Details: Describe the total and actual money invested in the company, the different kinds of shares, and their categories.
- Association Clause: Clearly state that people want to create and be part of the company.
- Subscription: People joining must sign to show they agree and commit to their share.
- Use of Income: Explain how the money and property will be used for specific goals.
- Compliance: Make sure everything follows the rules in the Companies Act of Nepal.
- Signatures: Make sure a few people sign it, have someone witness it, and get it verified.
How to Draft Memorandum of Association in Nepal
Once you have a clear understanding of the legal requirements, you can start drafting the Memorandum of Association in Nepali language.
Here are the 8 key elements to include when drafting a Memorandum of Association in Nepal:
- Company Name and Registered Office
- Objectives of the Company
- Liability of Shareholders
- Share Capital
- Rights of Shareholders
- Board of Directors
- Winding up of the Company
Step 1: Company Name and Registered Office
The MoA must start with the name of the company, followed by the registered office address.
This section should also include the state and district where the company is located.
Step 2: Objectives of the Company
The next section of the MoA should explain what the company wants to achieve. This is called the objectives section.
It should include the main goals of the company, as well as any other smaller goals they may have.
These goals need to be specific, easy to understand, and brief.
Step 3: Liability of Shareholders
The MoA should also explain what happens if something goes wrong with the company. This is called the liability section.
It should say how much each shareholder is responsible for, and if they have any limits on their responsibility.
Step 4: Share Capital
The next part of the MoA talks about the company’s money. It’s called the share capital section.
The statement needs to show how much money the company can get by selling shares. It should also mention the number of shares sold and the money received from their sale.
Step 5: Rights of Shareholders
The MoA should also explain what shareholders can do. This is called the shareholder rights section.
Shareholders should have information about voting, dividends, and other rights they have.
Step 6: Board of Directors
The MoA should also talk about the people in charge of the company. This is called the board of directors section.
It should say how many directors there are, what they can do, and how they were chosen to be directors.
Step 7: Winding up of the Company
The last part of the MoA talks about what happens if the company has to close down. It’s called the winding up section.
It should explain the steps that need to be taken if the company needs to be shut down.
Conclusion
Creating an MoA in the Nepali language is important when starting a new company in Nepal. This document sets out the goals, objectives, and mission of the company, as well as the rights and responsibilities of its shareholders.
Note: MOA is an important legal document and should be drafted with care. It is advisable to seek professional assistance when drafting the MOA.
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FAQs
What is the difference between Articles of Association and Memorandum of Association?
| Aspect | Memorandum of Association | Articles of Association |
|---|---|---|
| Purpose and Scope | It is the root document of the company, containing basic details required for incorporation. | Comprises rules and regulations governing the company’s internal affairs, management, and conduct. |
| Content | Defines the company’s powers and objects. | Specifies the company’s rules for administration. |
| Status | Subordinate to the Companies Act. | Subordinate to the Memorandum. |
| Retrospective Effect | Cannot be amended retrospectively. | Can be amended retrospectively. |
| Major Contents | Must contain six clauses. | Can be customized based on the company’s needs. |
| Obligatory | Required for all companies. | Only private companies need to frame AoA. |
| Alteration | Requires Special Resolution (SR) and approval from Central Government (CG). | Can be altered by passing SR in the Annual General Meeting (AGM). |
| Relation | Defines the relationship between the company and outsiders. | Regulates the relationship between the company and its members. |
How can I draft the MoA for my company in Nepal?
It’s a good idea to get help from a lawyer or a company registration consultant to make sure the MoA follows the legal rules in Nepal.
Is it necessary to write the MoA in Nepali?
Yes, it is necessary to draft the MoA in the Nepali language to register a new company in Nepal.
Can the MoA be amended?
Yes, Changes to the MoA can be made with the agreement of the company’s shareholders and by following the legal steps in the Companies Act of Nepal.
Who needs to sign the MoA?
Every shareholder of the company needs to sign the MoA when the company is being set up.
Can a foreign national be a subscriber to the MoA in Nepal?
Yes, a foreign national can be a subscriber to the MoA. There are rules and limits on foreign investment. It’s important to follow the guidelines in the Foreign Investment and Technology Transfer Act.
What happens if the MoA is not drafted correctly?
If the MoA is not written correctly, it can lead to legal issues and difficulties in registering the company. That’s why it’s crucial to follow the guidelines and rules set by Nepali law when writing the MoA.
