Memorandum of Association

What is a memorandum of association?

The Memorandum of Association (MoA) is the document that forms the foundation of a company. It outlines its scope, objectives, and structure.

The purpose of this document is to enable members, creditors and anyone who deals with the company to know what the company is allowed to operate in.

What are the different types of companies?

The following are the types of companies in Nigeria:

• Private Company Limited by Shares: This is the most common type of company. The liability of the members is limited by the shareholders' unpaid shares in the company. This means that in the event of winding up, the members are only liable to pay such amount of unpaid shares (if any). Under the law, a private company should have a minimum of one member, and the total number of members must not exceed 50. Also, this type of company does not offer its shares to the members of the public. The name of the company must end with "Limited".
  
  
• Public Company Limited by Shares: This is similar to a private company limited by shares but it can invite the members of the public to subscribe to its shares (that is, it may be listed on the Nigerian Stock Exchange). There is no limit to the membership of the company. The name of the company must end with "PLC".
  
  
• Unlimited Liability Companies: An unlimited liability company is a company that has no restriction on the responsibility of the members of the company. Consequently, members of an unlimited liability company will be held responsible for all the debts of the company until the debts are fully paid and there is no extent of their liability. The name of the company must end with "Unlimited".
  
  
• Company Limited by Guarantee: A company limited by guarantee is a company usually used for non-profit organizations, the members are only responsible for the debts of the company to the extent of the amount they have undertaken to contribute. This company does not offer shares, it does not have share capital. The name of the company must end with "LTD/GTE" or "Limited by Guarantee".

What is the difference between a memorandum of association and an article of association?

The MoA and Articles of Association (AoA) are fundamental documents required for the incorporation and governance of a company.

However, the MoA consists of basic information about the company structure, including the company's objects, the type of company, share capital, etc. The AoA, on the other hand, is a more robust document that governs the internal management and operations of the company.

Is it mandatory to have a memorandum of association?

Yes, this is a required document for company registration.

What must a memorandum of association contain?

The MoA includes the following key components:

• Name Clause: This specifies the registered name of the company.
  
  
• Registered Office Clause: It contains details of the company's registered office address.
  
  
• Object Clause: This clause states the nature of the business of the company. All the businesses the company intends to engage in must be stated in the object clause because a company can not engage in any activity that is completely different from what was stated in the object clause.
  
  
• Liability Clause: States the liability of the members, which can be either limited by shares or by guarantee.
  
  
• Share Capital Clause: This specifies the company's authorized share capital and the division of this capital into shares of a fixed amount.
  
  
• Association Clause: This is a declaration by the initial subscribers (founders) stating their intention to form a company and adhere to its regulations.

What is not allowed in a memorandum of association?

The objectives clause must clearly define the specific activities the company intends to undertake. The objective clause should not be vague or overly broad which implies the company can engage in any activity that is not permitted. An example of an unclear objective is "To engage in any business or trade". On the other hand, a clear objective is "To manufacture and sell electronic devices and related accessories."

Who can use a memorandum of association?

The subscribers of the MoA are the initial shareholders or members of the company. The subscribers sign the MoA, declaring their intention to become part of the company and to adhere to its terms.

Additionally, only companies that are registered in Nigeria can use the MoA.

Who can become a member or shareholder of a company?

A share is a unit of ownership in a company. Hence, shareholders or members are parties who own shares or an ownership stake in a company. The following parties can be shareholders of a company:

• Individuals who are 18 years of age and above;
• Companies: A company can own shares in another company, becoming a corporate shareholder;
• Business names and non-profit organizations: Organizations registered as business names, such as sole proprietorship and partnership businesses or incorporated trustees can hold shares in a company. Charities and other non-profit organizations can own shares in a company.

It is important to note that only companies registered in Nigeria can use the MoA, as the MoA cannot be used by any other type of organization or business structure, such as business names or incorporated trustees.

For more information about business structures in Nigeria, please review our guide on "How to Choose the Best Legal Structure for Your Business".

Who cannot become a member or shareholder of a company?

The law prevents some parties from joining in forming a company as subscribers (or members) of the company. The parties who cannot join in the formation of a company are:

• Minors: Individuals under the age of 18 years of age cannot legally enter into a contract, including subscribing to a MoA.
• Persons of Unsound Mind: Individuals who have been legally declared as mentally incapacitated or of unsound mind are not permitted to sign a MoA as a subscriber.
• Undischarged Bankrupts: Persons who are currently undischarged bankrupts are generally prohibited from forming a company or signing the MoA as initial subscribers.
• Companies under liquidation cannot become members of the company.

What is the minimum share capital of a company?

In Nigeria, the minimum share capital for private companies is ₦100,000, while public companies have a minimum share capital of ₦2,000,000.

A share capital consists of the total amount of money that was raised by a company through the issue of shares.

What has to be done once the memorandum of association is ready?

A MoA can be used at first, during registration of a new company. It can also be used to amend an already-existing MoA.

In any case, the MoA should be printed and signed by all the subscribers of the company.

• If the MoA is submitted during registration, it should be filed at the Corporate Affairs Commission (CAC) along with the Articles of Association.
• If the MoA is used to amend an existing MoA, the newly amended MoA should be filed at the Corporate Affairs Commission (CAC) along with a Special Resolution of the members of the company approving the amendments.

Which documents should be attached to a memorandum of association?

After the MoA has been filed or registered, the MoA may be sent to new members of the company along with the following documents:

• Articles of Association;
• Company Bylaws;
• Shareholders Agreement.

Is it necessary to notarize a memorandum of association for it to be valid?

No, it is not necessary to notarize a MoA.

Is it necessary to register the memorandum of association?

Yes, the MoA should be registered with the Corporate Affairs Commission (CAC).

If the MoA is submitted during registration, it should be filed at the CAC along with the Articles of Association.

If the MoA is used to amend an existing MoA, the newly amended MoA should be filed at the CAC along with a Special Resolution of the members of the company approving the amendments.

Is it necessary to have witnesses for a memorandum of association?

No, it is not necessary to have witnesses in a MoA.

What are the costs involved in the finalization of a memorandum of association?

The cost of registering the MoA ranges from ₦40,000 to ₦150,000, not including attorney fees. The registration fees also depend on the company's share capital and the type of the company.

Which laws are applicable to a memorandum of association?

The Companies and Allied Matters Act, 2020 is the applicable law.

How to modify the template?

You fill out a form. The document is created before your eyes as you respond to the questions.

At the end, you receive it in Word and PDF formats. You can modify it and reuse it.