As we all know, the Memorandum of Association is one of the two most important documents which are required at the time of registration of a company, with the Registrar of Companies.
The Memorandum of Association clearly outlines the formation and structure of the company thereby enforcing it as a legal entity outlining the scope of activities to be undertaken by the company.
In this process the Memorandum of Association also establishes the power of directors and how decisions are to be made within the organisation.
This is particularly important in case of business contracts as the parties involved in the contract must be clear about the person’s credibility who is authorised by the organisation to execute the business contract.
Another case that needs to be considered is that of due diligence which is conducted by an organisation before entering into any business contract or partnership or shareholding arrangement. lt is during this stage that Memorandum of Association provides and confirms the registration details of the company, it’s structure and purpose of the company which gives confidence to the other party.
The Memorandum of Association can also include provision about conflict resolution in case of any dispute which may influence the decision making process in terms of contract negotiation so that the parties involved in the contract have a clear understanding of the processes to be followed and there are no ambiguities on a future date. This will help organisations to make an informed decision with regards to their business.
The Memorandum of Association also ensures that the company follows all legal and compliance mechanisms both at the national and international level.
All business contracts entered into by the organisation must necessarily align with the laws for the time being in force to ensure and minimise legal complications for the organisation.
