A Memorandum of Association (MOA), also known as a company memorandum, is a legal document which is created during the formation and registration process of a company which is based in Singapore as well as certain other countries. A company uses a MOA to define its relationship with shareholders. A MOA can be accessed by the public and states important details related to the company. Oftentimes, a MOA is prepared by a company secretary.
What’s the difference between MOA, AOA and Constitution?
The company’s MOA and the Articles of Association (AOA) combine to serve as the constitution of the company. A MOA includes information such as the identity of its shareholders, the distribution of the company’s shares, the legal name of the company, the physical address of the company’s registered office, the business objectives of the company, the liability of the company’s shareholders, the company’s authorized share capital, and the method by which the company was formed.
In Singapore, we use the Constitution as the main company document.
In Hong Kong, they use the Articles of Association as the main company document.
Both documents usually include similar information as the MOA.
Why Memorandums of Association Are Necessary
Memorandums of association of Singapore companies form a portion of the constitutions of such companies. Therefore, those who plan on incorporating a Singapore company require one. The constitution of a Singaporean Company can be designed and modified to best suit a company’s operations.
MOAs should be created in such a way as to give the owner of the company greater flexibility and certainty with regard to the running of the company. A well-crafted MOA allows a business owner to have greater control over the company as time passes.
When a company drafts a MOA, there are certain key points which must be taken into account.
One of these relates to the business objectives of the company. These must be explicitly stated at some point in the MOA.
The company’s decision-making structure is also to be mentioned, especially if the owner of the company plans to utilize a specific structure which is not commonly used. Doing so ensures the legal compliance of the company and also prevents any potential conflicts from taking place.
Certain companies might also have unusual or specific rules and regulations which may be unique to them. If such is the case, it ought to be mentioned in the MOA and the constitution of the company. Doing so will bring the company in line with the legal and compliance regulations of Singapore.
Having a well thought-out MOA can ensure that a company will not be set up with any irrelevant rules or incorrectly classed shares. This will in turn save the company from the cost of expensive legal fees in case of any legal conflicts. A MOA and constitution may also bs used to correct the balance of power between owners, shareholders, directors, and management if a power struggle has been taking place within the company. For example, a shareholder may be enabled through a MOA to call for the overturning of decisions made by the directors of the company.
Changing of a Memorandum of Association
If circumstances take place in such a way that a change of the company’s MOA is required, it can be altered but only by way of a special resolution. The alteration will be a part of the original MOA and therefore the company’s constitution from the date of the passing of the special resolution. The company will then be required to submit a notice of the resolution or any court order that has direct relevance to the constitution within a period of 14 days of such resolution of the order to the Accounting and Corporate Regulatory Authority (ACRA). Once this has been done, ACRA will issue a certificate of incorporation which serves as a confirmation of the alteration.
Rules Related to Memorandums of Association
Any business entity which has been established by one or more entrepreneurs must comply with the contents which have been stated in its memorandum of association. A company’s MOA should be able to be accessed on its official website. When the company is being established, the owners must audibly read the MOA at least once. While doing so, they must specify the following information:
The name of the company;
The domicile of the head office of company;
The company’s business activities;
The objectives and purposes of the company;
The details of the shares of the company;
The details of the company’s general meetings of shareholders; and
The details of appointments of members of the board of directors and board of commissioners.
There are also many other rules which must be followed by a Singaporean company. These rules are usually mentioned in the company’s constitution.
How Memorandums of Association Benefit Singaporean Companies
Memorandums of Association provide many different benefits to companies across Singapore.
1. Clarity over identity of company
For example, the MOA will include certain information about how the company name was selected. Therefore, this prevents people from becoming confused by or misled about the purpose of the company through its name.
2. Prevent shareholder dispute over shareholding
The rules regarding shareholders and their shares are also defined in the MOA. Therefore, when there is a problem related to the shareholders, the MOA can be used to solve it. In this way, no issue that occurs in the company which concerns its shares will ever remain unsolved.
3. Details appointment, liabilities and responsibililties of directors
Another benefit relates to the appointment of the directors and commissioners. The MOA defines how many directors and commissioners must be in a company, their minimum age, and their liabilities. Whenever one or more directors show negligence towards their responsibilities, then the director can be dismissed upon the request of the members of the board of directors in accordance with the company’s MOA.
Therefore, many problems can be solved if the company’s MOA is properly followed. This shows just how truly important an MOA is to any company based in Singapore.
As such, it is extremely important for companies to have a local company secretary advising them of proper regulations.