Memorandum of Association (MOA) and Article of Association (AOA) are one of the two most important documents prepared by the owners of a new new company.
Memorandum of Association (MOA) is a legal document that specifies the scope of business activities of the company and information about the shareholding of the company. The MOA is a document prepared for the Company registration procedure. Sometimes, it is called the “charter” of the company other times, it is just called a memorandum.
When a company is formed, certain rules and regulations are laid down along with the objectives of the company’s operations and its purpose. These laws regulate the internal affairs of a company. This document is supported by Article of Association (AOA).
Contents of memorandum of Association
Memorandum of Association (MOA) includes six different clauses as mentioned below:
- Name Clause
- Domicile Clause
- Objects Clause
- Liability Clause
- Capital Clause
- Subscription Clause
The name of the company is its first unique identity. Thus the name clause of the memorandum consists of the authentic, legal and approved name of the company. Company names should not bear any similarities to a company registered with a similar name because many times these companies protect the name of their companies via a Trademark Registration procedure.
The domicile clause comprises all possible details of the registered office of the company. It has the name of the State or Union Territory of the registered office and may and may not have the exact address of the office. It also has the names of the registrars enrolled.
Objects Clause constitutes the main body of the memorandum. It provides a list of all the operations of the company. Every motive and operation the company indulges in must be mentioned in the object clause. Also, any such operation which is not mentioned in the object clause is considered to be beyond the reach of the company.
The objects of a company fall into two categories as prescribed below:
- The proposed objects of the company for which it is being incorporated
- Matters considered necessary in furtherance thereof
Liability Clause mentions the liability of every member of the Company. It simply states that every member of the company has limited liability. The clause also specifies the amount of contribution of agreed upon for each individual participant in case the company is closing or winding up.
Irrespective of the financial state of the company, no member can be told to pay more than the amount that remains unpaid on his/her shares.
This clause mentions the share capital with which the company is registered. In addition to this, the capital clause should also mention the types of shares, the number of each type of share, and the face value of each share.
Private companies and public companies not intended to be listed in the stock exchange may assume any face value depending on a number of factors however, public companies to be listed will have a prescribed face value of the shares.
The last and final clause of the Memorandum of Association is called the subscription clause. The subscription clause basically lists down the motives of the shareholders behind the incorporation of the company and also states that the subscribers are agreeing to take up shares in the company. It also specifies the number of shares taken up by each subscriber. It is all according to the details specified in the MoA Subscriber Sheet.
Contents of the Articles of Association
The AOA contains the rules and by-laws for the following;
Rights of various shareholders, share certificates, payment of a commission, etc.
Lien of shares
Calls on shares
The process for the transfer of shares
Transmission of shares
Forfeiture of shares
Surrender of shares
Process for conversion of shares to stocks
Alteration of capital: Increase, decrease, or rearrangement of capital
General meetings and proceedings
Voting rights of members
The appointment, remuneration, qualifications, powers of directors, etc.
Proceedings of the boards of directors’ meetings
Dividends and reserves
Accounts and Audits
Borrowing Powers of the company
Provisions relating to the winding up of the company
|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.|
|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.|
|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.||Only a private company is required to frame its articles while a public company limited by shares can adopt Table F in place of articles.|
|Compulsory filing at the time of Registration||Required||Not required at all.|
|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.|
It is known that the Memorandum Of Association is a very important document without which the company cannot be incorporated. It is a charter document of the company and MOA and AOA both act as a constitution of the company.