Articles of Association V/s Memorandum of Association
The formation of a company is a complex activity including many formalities and procedures. It has different stages: Promotion of a company i.e., conceiving a business idea and taking the initiative to form a company, giving the practical shape to the available business opportunity, Incorporations i.e., promoters make an application to the registrar of companies of the state within which they plan to establish the registered office of the plan, and Capital Subscription i.e., a public company can raise the required funds from the public using an issue of securities.
In every stage of the formation of the company there lies a set of documents and pre-defined procedures, it has to fulfill for starting a business. Article of Association and Memorandum of Association are the two most important documents, an organization has to fill out for the formation of a company.
Memorandum of Association (MoA)
It is said to be the principal document of the company. In this document, the character of the company is mentioned. MoA describes the power, objective, and operations of the company. The company can undertake those activities written under MOA. It describes the boundaries beyond which the actions of the company cannot exceed. MOA helps the shareholders and creditors interact and deal with the company. So, before moving ahead as a private limited company registration it is important to know the exact business of the company and its limits. The boundary beyond which the company cannot take action and give an overview of the company’s powers and objectives. In the case of a private limited company, an MoA is signed by at least two subscribers. However, in the case of a public limited company, an MoA is signed by seven members.
As per Section 2(56) of Companies Act of 2013, Memorandum means an original memorandum of association that a company has registered or it can be an altered one as per the rules laid down under provisions of Companies Act of 2013.
Form of Memorandum of Association (MoA):
As per section 4 of the companies act, 2013 company shall form the MoA as specified in Tables A to E in schedule I of the Act. Here is the list of forms with their details:
- Table A: Form for a company having limited shares.
- Table B: Form for a company limited by guarantee that does not have a share capital.
- Table C: Form for a company limited by guarantee having a share capital.
- Table D: Form for an unlimited company.
- Table E: Form for an unlimited company having a share capital.
Article of Association (AoA)
Article of Association specifies the rules and regulations of a company’s internal affairs dealing with its management. It also defines the purpose of a company and outlines the ways in which the company should accomplish its tasks. The tasks include preparation of financial records, and management of financial records. In simple terms, an AoA is a user’s manual of an organization stating its purpose and strategies for the fulfillment of its long and short-term objectives. The main focus of an AoA is to give its readers, information regarding the methods used by the organization to accomplish its daily, quarterly, monthly, and yearly objectives. The document generally consists of the legal name of the company, address of the company, financial provisions of the company, purpose of the formation of the company, provisions related to the shareholders’ meetings, and equity capital of the company,
As per Section 2(5) of Companies Act of 2013, Articles refer to an original article of association of the company or an altered version that complies with the provision of 2013 Act, r/w Section 5 which defines AoA as any such document that contains rules and regulations for managing the company.
Forms of Articles of Association (AoA):
The forms of AOA in tables F to J have been mentioned under schedule I for companies ACT 2013. Here is the list of forms with their details:
- Table F: Form for a company limited by shares
- Table G: Form for a company limited by guarantee having a share capital
- Table H: Form for a company limited by guarantee that does not have a share capital
- Table I: Form for an unlimited company having a share capital
- Table J: Form for an unlimited company that does not have a share capital
Difference between Memorandum of Association (MoA) and Articles of Association (AoA)
|Basis of Comparison||Memorandum of Association (MoA)||Articles of Association (AoA)|
|Meaning||A document including every fundamental |
information essential for the incorporation
of an organization.
|A document including every|
rules and regulations governing
|Purpose||The purpose of MoA is defining objectives|
and conditions of an organization and its
|The purpose of AoA is defining |
rules and regulations governing
the internal management of the
organization for the accomplishment
of its goals.
|Status||MoA is subordinate to the Companies Act.||AoA is subordinate to MoA.|
|Defines||An MoA defines the objectives, powers, and|
limits of an organization.
|An AoA defines the powers, rights,|
duties, and liabilities that comes
with the members of the company.
|Relationship||An MoA connects the outsiders with the|
|An AoA connects the members of an|
organization with the company itself.
|Retrospective Effect||An organization cannot amend its MoA.||An organization can amend its AoA.|
|Registration||MoA is a document compulsory for every |
organization irrespective of its nature and
|It is mandatory for a private company.|
However, a public company limited by
shares can adopt Table F of the Companies
|Compulsion||It is mandatory to fill MoA.||It is not mandatory to fill AoA.|
|Alteration||An organization can alter MoA after passing |
a SR (Special Resolution) in the Annual General
Meeting. Besides, it also require a previous approval
of Company Law Board and Central Government.
|An organization can alter the Articles after |
passing SR (Special Resolution) at the Annual
General Meeting (AGM) of the company.
|Contents||An MoA consists of six clauses.||An AoA is drafted by an organization as per|