All the companies have its own Memorandum of Association and Articles of Association; many people got puzzled between these two. ‘Memorandum of Association’ abbreviated as MOA, is the root document of the company, which contains all the basic details about the company. ‘Articles of Association’ shortly known as AOA, is also a major document which contains all the rules and regulations designed by the company. Below you can see the basic differences between the Memorandum of Association and Articles of Association.
Content: Memorandum of Association Vs Articles of Association
|Basis for Comparison||Memorandum of Association||Articles of Association|
|Meaning||Memorandum of Association is a document that contains all the fundamental information which are required for the incorporation of the company.||Articles of Association is a document containing all the rules and regulations that governs the company.|
|Defined in||Section 2 (56)||Section 2 (5)|
|Type of Information contained||Powers and objects of the company.||Rules of the company.|
|Status||It is subordinate to the Companies Act.||It is subordinate to the memorandum.|
|Retrospective Effect||The memorandum of association of the company cannot be amended retrospectively.||The articles of association can be amended retrospectively.|
|Major contents||A memorandum must contain six clauses.||The articles can be drafted as per the choice of the company.|
|Obligatory||Yes, for all companies.||A public company limited by shares can adopt Table A in place of articles.|
|Compulsory filing at the time of Registration||Required||Not required at all.|
|Alteration||Alteration can be done, after passing Special Resolution (SR) in Annual General Meeting (AGM) and previous approval of Central Government (CG) or Company Law Board (CLB) is required.||Alteration can be done in the Articles by passing Special Resolution (SR) at Annual General Meeting (AGM)|
|Relation||Defines the relation between company and outsider.||Regulates the relationship between company and its members and also between the members inter se.|
|Acts done beyond the scope||Absolutely void||Can be ratified by shareholders.|
Definition of Memorandum of Association
Memorandum of Association (MOA) is the supreme public document which contains all those information that are required for the company at the time of incorporation. It can also be said that a company cannot be incorporated without memorandum. At the time of registration of the company, it needs to be registered with the ROC (Registrar of Companies). It contains the objects, powers, and scope of the company, beyond which a company is not allowed to work, i.e. it limits the range of activities of the company.
Any person who deals with the company like shareholders, creditors, investors, etc. is presumed to have read the company, i.e. they must know the company’s objects and its area of operations. The Memorandum is also known as the charter of the company. There are six conditions of the Memorandum:
- Name Clause – Any company cannot register with a name which CG may think unfit and also with a name that too nearly resembles with the name of any other company.
- Situation Clause – Every company must specify the name of the state in which the registered office of the company is located.
- Object Clause – Main objects and auxiliary objects of the company.
- Liability Clause – Details regarding the liabilities of the members of the company.
- Capital Clause – The total capital of the company.
- Subscription Clause – Details of subscribers, shares taken by them, witness, etc.
Definition of Articles of Association
Articles of Association (AOA) is the secondary document, which defines the rules and regulations made by the company for its administration and day to day management. In addition to this, the articles contain the rights, responsibilities, powers and duties of members and directors of the company. It also includes the information about the accounts and audit of the company.
Every company must have its own articles. However, a public company limited by shares can adopt Table A instead of Articles of Association. It comprises of all the necessary details regarding the internal affairs and the management of the company. It is prepared for the persons inside the company, i.e. members, employees, directors, etc. The governance of the company is done according to the rules prescribed in it. The companies can frame its articles of association as per their requirement and choice.
Key Differences Between Memorandum of Association and Articles of Association
The major differences between memorandum of association and articles of association are given as under:
- Memorandum of Association is a document that contains all the condition which are required for the registration of the company. Articles of Association is a document that contains the rules and regulation for the administration of the company.
- Memorandum of Association is defined in section 2 (56) while the Articles of Association is defined in section 2 (5) of the Indian Companies Act 1956.
- Memorandum of Association is subsidiary to the Companies Act, whereas Articles of Association is subsidiary to both Memorandum of Association as well as the Act.
- In any contradiction between the Memorandum and Articles regarding any clause, Memorandum of Association will prevail over the Articles of Association.
- Memorandum of Association contains the information about the powers and objects of the company. Conversely, Articles of Association contain the information about the rules and regulations of the company.
- Memorandum of Association must contain the six clauses. On the other hand, Articles of Association is framed as per the discretion of the company.
- Memorandum of Association is obligatory to be registered with the ROC at the time of registration of Company. As opposed to Articles of Association, is not required to be filed with the registrar, although the company may file it voluntarily.
- Memorandum of association defines the relationship between company and external party. On the contrary, articles of association govern the relationship between the company and its members and also between the members themselves.
- When it comes to scope, the acts performed beyond the scope of memorandum are absolutely null and void. In contrast, the acts done beyond the scope of artciles can be ratified by unanimous voting of all shareholders.
Memorandum and Articles are the two very important documents of the company, which are to be maintained by them as they guide the company on various matters. They also help in the proper management and functioning of the company throughout its life. That is why every company is required to have its own memorandum and articles.