According to the Accounting & Tax Club, the MOI and the Companies Act tell you what to do regarding your company and how to do it.
As you know, MOIs are a legal requirement. You can't have a company without one.
That's not all.
There are risks if you don't have a properly drafted MOI.
If you don't have a properly drafted MOI, your business will face the following difficulties:
#1: Board: As the Practical Accountancy Loose Leaf explains, without an MOI directors can issue shares, reclassify shares and issue debt instruments without the consent of shareholders. But if you have a properly drafted MOI, you can protect your shareholders and restrict the power of the board.
#2: Business rescue: If you don't have a properly drafted MOI, directors can pass a resolution on your financially distressed company and hold up shareholder's rights. A properly drafted MOI can help you avoid this.
Well there you have it. The consequences you'll face if you don't have a properly drafted MOI. Is that a risk you're prepared to take?
Make sure you draft your MOI properly and ensure it complies with the requirements by the Companies Act.