Memorandum of Association & Articles of Association: Difference

Introduction:

The two charter documents for the formation of the company and its operations are the memorandum of association and articles of association. The ‘Memorandum of Association,’ shortened as MOA, is the company’s founding document, which contains all of the company’s essential information. On the other hand, the ‘Articles of Association,’ or AOA, is a document that contains all of the company’s rules and regulations.

MOA:

The Memorandum of Association (MOA) is the most important public document because it contains all of the information essential for the company’s incorporation. A company cannot be incorporated without a memorandum. The firm must be registered with the Registrar of Companies (ROC) at the moment of its formation . It specifies the company’s objectives, powers, and scope, as well as the boundaries to which it is permitted to operate, i.e. it restricts the company’s range of activities. Any activity carried out by the corporation that goes beyond the scope of the MOA will be declared void. The main goal of the MOA is to keep shareholders, creditors, and other interested parties informed about the company’s various spheres. As per the provisions of Companies Act, 2013, the MOA has six clauses:

  1. Name Clause- If the company is a public limited company, the name will conclude with “Limited,” and if it is a private limited company, it will end with “Private Limited.”
  2. Situation Clause- This determines where the company’s registered office and state of incorporation will be located, as well as the company’s geographical limits.
  3. Object Clause- This clause gives an indication of the main and auxiliary objects that the company deals in.
  4. Liability Clause- This clause specifies the liabilities of members of the company.
  5. Capital Clause- It denotes the company’s capital structure, which is divided into a number of shares, each divided into Rs.
  6. Subscription Clause- This clause gives the details of subscribers, shares taken by them, etc.

AOA:

The Articles of Association (AOA) is a supplementary document that lays out the company’s rules and regulations for administration and day-to-day management. In addition, the articles outline the rights, responsibilities, powers, and responsibilities of the company’s members and directors. It also contains information regarding the company’s accounting and audits. Every company must have its own set of articles.

MOA v. AOA:

The following points are most important for determining the distinction between article of association and memorandum of association:

  • The first distinction between MOA and AOA is this: The AOA specifies the company’s rules, while the MOA describes the company’s powers and objectives.
  • It is mandatory to register MOA at the time of registration however, it is not mandatory to register the AOA with the Registrar.
  • Memorandum of Association is subordinate to the Companies Act, whereas Articles of Association is subordinate to both Memorandum of Association as well as the Companies Act.
  • In the event of a conflict between the Memorandum and the Articles of Association regarding any clause, the Memorandum of Association will take precedence.
  • The fundamental difference between a memorandum of association and an article of association is that a memorandum has six clauses, whereas an article can be prepared according to the needs of the company.
  • MOA cannot be altered easily whereby requires prior approval of central government or NCLT AOA can be altered easily simply by passing a special resolution.
  • When it comes to scope, any actions taken outside of the scope of the memorandum are null and invalid. Acts that go outside the scope of the articles, on the other hand, can be ratified by all shareholders voting unanimously.
  • MOA cannot be amended with retrospective effect while AOA can be amended with retrospective effect.

Conclusion:

The company’s Memorandum and Articles are two highly significant documents that must be kept up to date because they govern the company in different problems. They also assist in the efficient management and operation of the business throughout its lifespan. That is why each company  must have its own memorandum and articles of incorporation.

References:

1. https://www.anbca.com/differences-between-moa-and-aoa-of-the-company/

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