Memorandum of Association: A Guide to Drafting MoA in Nepal

The Memorandum of Association is a legal document that a company needs to create when it registers in Nepal.

In Nepali language Memorandum of Association or MoA is called " प्रबन्धपत्र".

In brief, Memorandum of Association are also referred to as MoA.

In simple terms, the Memorandum of Association is a important document that needs careful drafting when registering a new company.

In this article, we'll cover everything about Memorandum of Association, explaining what it is and how to create it. We'll provide sample templates and point out important elements to keep in mind.

What is the Memorandum of Association?

The Memorandum of Association (MoA) is a legal document that explains the basic principles and goals of a company. It is a important document needed when a company is being set up.

So, in short, the Memorandum of Association is a very important document that's required when registering a new company in Nepal.

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:

1. Unique Name: Pick a unique name that no other company in Nepal is using.
2. Registered Office: Clearly mention the official address of your company in Nepal.
3. Objectives: Clearly list your business goals in detail.
4. Liability: Explain how much responsibility members have: whether it's limited by shares, guarantee, or unlimited.
5. Capital Details: Describe the total and actual money invested in the company, the different kinds of shares, and their categories.
6. Association Clause: Clearly state that people want to create and be part of the company.
7. Subscription: People joining must sign to show they agree and commit to their share.
8. Use of Income: Explain how the money and property will be used for specific goals.
9. Compliance: Make sure everything follows the rules in the Companies Act of Nepal.
10. Signatures: Make sure a few people sign it, have someone witness it, and get it verified.

Sample Templates of Memorandum of Association in Nepali Language

The Company Registrar's office has given sample templates 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 template that matches the type of company you're establishing, whether it's private limited, public limited, or nonprofit.

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.

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:

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: It is recommended to consult with legal experts or a professional company registration agency to ensure that your Memorandum of Association comply with Nepal's Company Act 2063 (2006).

FAQs (Frequently Asked Questions)

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.

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.

Yes, it is necessary to draft the MoA in the Nepali language to register a new company in Nepal.

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.

Every shareholder of the company needs to sign the MoA when the company is being set up.

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.

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.