What is Memorandum of Association and Article of Association?

The Memorandum of Association and Articles of Association are two essential documents that establish and govern a company. The Memorandum of Association, or simply MoA, is the fundamental foundational document that sets the framework for the company's operations and establishes its legal boundaries. Whereas, the Articles of Association, abbreviated as AOA outlines the company's internal rules and regulations.

Basically, the MoA serves as the constitution of the company by providing the foundation upon which the company is built. It contains key particulars of the company. Meanwhile, the AoA contains the company's by-laws that regulate its internal affairs and code of conduct.

Both the MoA and AoA need to be registered with the Registrar of Companies (RoC) during the incorporation process of the company. To gain a better understanding of the fundamental differences between the Memorandum of Association and the Articles of Association, please continue reading this article.

Memorandum of Association (MoA)

The Memorandum of Association (MoA) is a crucial public document that contains essential details required during the process of company incorporation. In India, the MoA is a mandatory requirement for company incorporation and must be registered with the Registrar of Companies (RoC). It outlines the powers, objects, and scope of the company, beyond which the company is not permitted to operate, thereby imposing limitations on the company's undertakings.

Any individual dealing with the company is presumed to have read the MoA and must be familiar with the company's objects and area of activities.

The MoA is often referred to as the company's charter and consists of several clauses:

Name Clause: This specifies the company's name, which should not be similar to any existing organization. If it is a privately-held company, it must have the term "Private Limited" affixed at the end of its name.

Registered Office Clause: This states the name of the state where the company's registered office is located, helping to determine the jurisdiction of the RoC. The company is required to share this information with the RoC within thirty days from the date of registration.

Object Clause: This specifies the company's main objective for which it is founded, along with incidental objectives that support the main objective, and any other objectives that the company may pursue, not covered in the main and incidental objectives.

Liability Clause: This defines the liability of the company's members. For a company limited by guarantee, the members' liability is limited to the amount each member has agreed to contribute. For an unlimited company, the members' liability is also unlimited. For a company limited by shares, the members' liability is limited to the unpaid amount on their shares.

Capital Clause: This clause outlines the maximum capital that the company can raise, also known as the authorized/nominal capital of the company and the number of shares derived from this capital amount.

Articles of Association (AOA)

The Articles of Association (AOA) of a company serve as a fundamental declaration of its nature, purpose, and objectives. Along with the Memorandum of Association, the AOA forms the constitution of the company and must be submitted during the incorporation process. It provides a clear overview of the responsibilities of directors, the type of business to be conducted, and the mechanisms through which shareholders exercise control over the board of directors.

A comprehensive AOA should include information on the distribution of power among directors, officers, and shareholders, including rights to vote and veto. It should outline the nature and form of the company's primary business activities, establish the structure for internal corporate governance, outline the means of internal review for executive decisions, identify the ultimate authority for decision-making, and specify the procedure and voting requirements for key decisions.

Additionally, the AOA should outline the rights and duties of company members, including their names and numbers, and provide details on the contributed share capital and other relevant information. It is essential for the AOA to be comprehensive and accurate, as it sets the foundation for the company's operations and governance structure.

Forms of Articles of Association (AOA)

The Companies Act of 2013 provides specific forms, listed in Schedule I, for the Articles of Association (AOA) of different types of companies. These forms are categorized as:

Table F: AOA for a company that is limited by shares

Table G: AOA for a company that is limited by guarantee and has a share capital

Table H: AOA for a company that is limited by guarantee and does not have a share capital

Table I: AOA for an unlimited company that has a share capital

Table J: AOA for an unlimited company that does not have a share capital.

Bottomline

It must have been clear by now that the Memorandum of Association (MOA) and Articles of Association (AOA) hold immense significance for any company, serving as the foundation of its operations even before it is officially incorporated. Therefore, it is crucial to exercise utmost caution when preparing these documents. To ensure a smooth and efficient process, entrust the task of drafting your MOA and AOA, as well as facilitating your company's incorporation, to our in-house experts at SuperCA. We always look forward to helping entrepreneurs and small business owners start, manage, and expand their businesses with peace of mind with affordable and reliable services. Our expertise and assistance will assist you to establish your company seamlessly, without any hassle, and in a time-efficient manner.