Difference Between Memorandum of Association vs Article of Association
The Memorandum of Association, as a key company document, outlines the principles necessary to lay the foundation, including the objectives, scope of authority, competencies, liabilities, and legal rights, to define the company’s relationship with its shareholders. The memorandum is a legal code of conduct that binds the company and its shareholders, investors, and beneficiaries, necessitating any sound organization to grow.
Contents of Memorandum of Association
Under Section 4 of the Companies Act of 2013, a Memorandum of Association comprises of following clauses as discussed below:
1. Name Clause
- For a public Limited company, the company’s name should end with the word ‘Limited’ as the last word.
- For the private limited company, the name of the company should end with the words ‘Private Limited’ as the last words.
Moreover, these words are not covered under Section 8 of the Act; they must include one of the following words, as applicable.
- Foundation
- Forum
- Association
- Federation
- Chambers
- Confederation
- Council
- Electoral Trust, etc.
2. Registered Office Clause
It specifies in which state the registered office is situated off the company.
3. Object Clause
It defines the objective of the company for which it has been incorporated. If the company does not serve the purpose, it has a right to change its name within six months from the date of incorporation.
4. Liability Clause
In the memorandum, each organization member must clearly state their liabilities. Shares or guarantees can limit these liabilities. However, if unlimited liability exists, the entire clause will be abolished.
5. Capital Clause
It defines the maximum amount of capital the company’s members generate should be specified inside the Memorandum of Association. However, the company has no legal limit on the maximum amount of capital to be raised.
6. Association or Subscription Clause
The Memorandum of Association should specify the amount of authorized capital and the number of shares each company member owns.
Articles of Association(AOA)
The article of Association is a document that defines the procedures of a company and it’s various other operations for execution and purpose. It includes other systematic procedures through which various other organizational tasks are to be accomplished. The article of association generally contains some of the provisions as discussed below.
- Shares belonging to a specific class should have certain values and rights attached.
- Calls of shares, transfer of shares, forfeiture, conversion of shares, and alteration of capital.
- Directors, their appointment, power, and duties are also included.
- Minute of Meeting circulation and their intimation.
- Accounts and their audit at regular intervals of time.
- Auditor’s appointments and their remuneration.
- Dividends and Reverse.
- Minimum subscription.
- Formulation of rules to utilize and custody of the common seal.
- Rules and regulations need to convert fully paid shares into stocks.
- The proposed alteration increases the liability of existing members.
- The alteration is allowed only to obtain better results.
- The alteration can be done with a retrospective effect.
Head To Head Comparison Between Memorandum of Association vs Article of Association (Infographics)
Below is the top 10 difference between a Memorandum of Association vs Article of Association
Key Differences Between Memorandum of Association vs Article of Association
Both Memorandum of Association vs Article of Association are popular choices in the market; let us discuss some of the major Differences:
- MOA is a document that defines the necessary documents which are required to fulfill the registration of the company. At the same time, the Articles of Association is a document that defines the rules and regulations for the company’s administration.
- The Indian Companies Act 1956; MOA is defined in section 2(56). However, the AOA is elaborated in section(5).
- MOA is a subsidiary of the Companies Act, while AOA is a subsidiary of both MOA and AOA.
- In any of the clauses, a contradiction occurs between the Memorandum and Articles; the Memorandum of an association will prevail over the Article of Association.
- MOA is a supremacy body that contains information about the company’s powers. At the same time, AOA contains information about the rules and regulations which need to implement.
- MOA comprises six clauses, while AOA is designed at the company’s discretion.
- MOA establishes the relationship with external bodies for streamlining the organization’s operations. However, AOA regulates the relationship between the company and its members.
Memorandum of Association vs Article of Association Comparison Table
Below is the 10 topmost comparison between a Memorandum of Association vs Article of Association
| Basis Of Comparison | Memorandum of Association (MOA) | Article of Association (AOA) |
| Definition | MOA specifies all the fundamental data required to incorporate a company. | AOA defines the rules and regulations necessary to govern the company. |
| Registration | MOA is registered during the time of incorporation | Not mandatory to register. |
| Scope | The Memorandum is the charter, which characterizes and limits the powers and constraints of the organization. | The articles define an individual’s obligation, rights, and power, which are necessary to govern the organization. |
| Status | Major document | Subordinate to the memorandum. |
| Power | MOM gives a right to the company to violet company act | The act constrains the articles. |
| Contents | Six clauses are mandatory to write a memorandum. | The company’s decision is sufficient to write the articles. |
| Objectives | The objective and power of the company are specified in the memorandum. | The articles are the means to attain the objectives and power. |
| Validity | MOA is a reserve of all the rights to attain the objective. | AOA follows the defined procedure of MOA. |
| Defined in | Section 2(56) | Section 2(5) |
| Relation | The relationship between the company and the outsider | A relationship between a company and its members |
Conclusion
The Memorandum of Association and the Article of Association are two documentation procedures that adopt different methods to cater to the fundamental data required to incorporate an organization and formulate definite sets of rules and regulations by the MOA. The mutual collaboration of both procedures helps the proper management and functioning of the company throughout its life. Due to this reason, every company requires to have its own memorandum and articles.
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