Compliances

Know the difference between Memorandum of association and articles of association

calendar04 Mar, 2022
timeReading Time: 5 Minutes
articles of association

The Memorandum of association and articles of association serves as charter documentation for establishing the company and its undertaking thereon. Memorandum of association is an abbreviated term for MoA, which is the fundamental document of the company, which entails all the key particulars of the company. Meanwhile, the Articles of Association is an abbreviation for AOA. It refers to a document that encloses all the rules and norms drafted by the company.

While the MoA lays out the constitution of the company and so it is the foundation on which the company is built. Alternatively, AoA encloses by-laws that regulate the company’s internal affairs and its code of conduct.

Both Memorandum of association and articles of association seek registration with the RoC, i.e. Registrar of Companies, when the company undergoes the incorporation process.

To further understand the fundamental difference between the Memorandum of association (MOA) and articles of association (AOA), keep reading this article.

Comparison Chart : MoA Vs AoA

Grounds FOR COMPARISON MEMORANDUM OF ASSOCIATION (Moa) ARTICLES OF ASSOCIATION (Aoa)
Meaning Memorandum of Association refers to a charter document that encloses key detail which is necessary for company’s incorporation. Articles of Association refer to documents that contain all the norms and rules that regulate the company.
Type of Information Objects and Powers of the Company Rules of the company.
Status It is subordinate to the governing Act. It is subordinate to the MoA.
Retrospective Effect The memorandum of association (MoA) cannot be amended retrospectively. The articles of association (AoA) can be amended retrospectively.
Fundamental contents A memorandum has six fundamental clauses. The articles can be prepared as per the company’s requirement
Obligatory Yes, for all companies. Only a private limited company is required to draft its articles while a public limited company limited by shares can opt for Table F in place of articles.
Mandatory filing at the instance of registration Required Not required
Alteration Can be subjected to alteration after passing special resolution in AGM and prior consent of Central Government or Company Law Board is imperative. Alteration is allowed by passing Special resolution in AGM
Relation Specifies the interplay between company and third-party Governs the interplay between company and its members & also among the members.
Acts done outside the scope Absolutely void Can be ratified by shareholders.

Definition of Memorandum of Association

Memorandum of Association refers to a fundamental public charter that encloses particulars needed at the time of incorporation.

Presently, MOA acts as a mandatory requirement for incorporation in India. At the time of the company’s incorporation, it needs to be registered with the Registrar of Companies[1]. It encloses the powers, objects, and scope of the company, beyond which an organization is not permitted to operate, i.e. it imposes a limitation on the range of undertakings of the company.

Any individual who deals with the company is presumed to have read the company. i.e. they must be accustomed to the company’s objects and its area of activities.

The Memorandum is also referred to as the company’s charter. There are six clauses mentioned under the MoA as shown below:

  • Name Clause – As the name suggests, the name clause specifies the company’s name. The company’s name ought not to be similar to any existing organization. Also, if it is a privately-held company, then it should have the term “Private Limited” affixed at the end of its name.
  • Registered Office Clause– This clause states the state’s name in which the entity’s registered office is operational. This helps to pinpoint the jurisdiction of the RoC. The company is required to share the same with the RoC within thirty days from the company registration date.
  • Object Clause- This clause specifies the company’s fundamental objective with which it is founded. The objectives can be divided into given three subcategories:

Main Objective: It specifies the fundamental business of the company.

Incidental Objective: Incidental Objective specifies the ancillary objects that help in accomplishing the company’s main object.

Other objectives: Any other objects which the company is willing to pursue and not encompassed in above (a) and (b)

  • Liability Clause: The liability Clause defines the liability of the company’s members. For a company limited by guarantee, the members’ liability is limited by the amount each company member has agreed to contribute. In the case of an unlimited company, the members’ liability is unlimited, whereas, for a company limited by shares, the members’ liability is limited by the sum unpaid on their share.
  • Capital Clause: This clause pens down the maximum capital that an entity can procure, which is also regarded as the authorized/nominal capital of the company. This also defines the numbers of shares derived from such capital amount.

Definition of Articles of Association

An article of Association is technically a secondary document, which sets out the rules and norms made by the company for its management and daily activities. Additionally, the AOA encloses the rights, obligations, powers, and duties of members of the company. It also covers details relating to the audits and accounts of the company.

Every company is required to draft AOA. But, a public company limited by shares can opt for Table F rather than AOA. It encloses all the key information relating to internal matters and the company’s management. It is drafted for the person serving the company internally, i.e. members, employees, directors, etc. The company’s governance is done as per the rules cited in it.

The companies can draft their article of associations according to their requirement.

Key Difference Between MOA and AOA 

The fundamental difference between MOA and AOA are listed below:

  1. A Memorandum of Association refers to a document that comprises the conditions essential for the company’s incorporation. On the other hand, Articles of Association encloses the rules and norms for the company’s management.
  2. Memorandum of Association (MoA) is a subsidiary of the Companies Act; meanwhile Articles of Association (AoA) is subsidiary to both the Act and MoA.
  3. In any contradiction between the MoA relating to any clause, MoA shall prevail over the Articles of Association.
  4. Memorandum of Association has details relating to the objects and powers of the company. Alternatively, AOA has information about the norms and rules of the company.
  5. Memorandum of Association should have six fundamental clauses. On the contrary, AoA is drafted as per the company’s discretion.
  6. MoA has to be registered with the Registrar of Companies at the time of incorporation. For AoA, the company is not required to fulfil such requirements, though there is a provision for voluntarily registration.
  7. A MoA specifies the interplay between the company and third parties. On the opposite, AoA regulates the interplay between the company and its serving members. It also defines the interplay between the members.
  8. When it comes to scope, the activities carried out beyond the scope of MoA are null and void. On the contrary, activities performed outside the scope of AoA can be ratified by shareholders’ voting.

Conclusion

The Memorandum of association and articles of association are the two imperative documents of an organization. Both these documents guide the company on various subject matters. They also assist in the apt administration and functioning of the company. That is why every company is mandated to draft its Memorandum and articles.

Read our Article:Register of Members under the Companies Act, 2013

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