Memorandum of Association & Articles of Association| MOA and AOA

Memorandum of Association & Articles of Association - Meaning and Relationship

Have you gone through all the rigorous procedures of getting your company funded and backed? Are you all set to put your dream on paper after all the hard work?

Well, if that is the case and you are at the auspicious step of registering your company officially, here are a couple of very important terms you need to learn about before you sign the dotted line. These are Memorandum and Articles of Association.

In this article we are going to discuss Memorandum of association and article of association. Also the difference and Relationship between MoA and AoA.

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Memorandum of Association (MOA)

Memorandum of Association (MOA) is the main, compulsory document required for the incorporation of the company. It must be registered with the ROC (Registrar of Companies) at the time of incorporation. It lays down the objects, scope, powers and area of operation of the company, all of which the company can’t transgress. Thus, it lays down the limits of the company.

It must be drafted very carefully as the company can’t go against it later. Moreover, it can only be amended by a difficult procedure in the Annual General Meeting with the knowledge of the Central Government. It can’t be amended retrospectively.

It guides all relations within and outside the company by laying guidelines and rules for the same and all the subordinate documents and agreements follow from it. Also known as the ‘charter of the company’, it must lay down the following six conditions:

Name Clause

– It is meant to register the official name of the company with the CG (Central Government) which must be original and must not, in any way, resemble that of a pre-existing one.

Situation Clause

– It deals with highlighting the name of the state in which the company’s registered office is located.

Object Clause

– The main and auxiliary objects of the company are specified here.

Liability Clause

– It specifies the liabilities of each member of the company.

Capital Clause

– It lays down the total capital of the company.

Subscription or Associate Clause

– It lays down in detail all information about subscribers and their shares.

Articles of Association (AOA)

Articles of Association (AOA) is a secondary document that is constituted only after the MOA. It lays down the rules and regulations for the administration and management of the company. The articles lay down the right, responsibilities, powers, duties, etc of the members along with information regarding the accounts and audit of the company.

It is mostly advisable for every company to have its own article but a company limited by shares can adopt Table A for the same purpose. It is made to guide the working and governance inside the company.

It follows the MOA and can’t contradict it. It is easier to amend than MOA which can be done without any restrictions. It can be amended retrospectively in the Annual General Meeting as per the choice of the company.

Since both these documents sound similar, people often get confused between the two. You must not make that mistake. Make sure you get legal help in order to understand the true dynamics of both and to draft a copy for your company. In the meantime, here are some of the key differences between the two you must keep in mind.

Note: Example for Relationship between MOA and AOA - A judge knows his/her scope and power like every level of court’s judges have different powers and scope and they all knew about it. And the verdict they give on a case it’s their method to carry out the final judgement taking help from precedent or other references. Similarly The MOA states the power and scope of the organisation and AOA shows the path for it to carry out the object of the organisation. So, both need to be maintained well in an organisation.

By reading the above explanation for both of them we can somehow get the relationship between MoA and AoA. This relationship between MoA and AoA states clear differences between them but there are also some conflicts. 

In Case Of Conflict between MOA and AOA

If there is any ambiguity, inconsistency, or in case of conflict between MOA and AOA provisions of the Company's Memorandum and Articles of Association (as amended in accordance with the terms hereof through the date when such ambiguity, conflict, or inconsistency arises or is deemed to arise). Such ambiguity, inconsistency, or conflict shall be resolved by giving precedence to the provisions of the Memorandum and Articles of Association over this Agreement, and the Parties shall promptly take all such actions and steps as are necessary to amend the Company's Memorandum and Articles of Association to eliminate such inconsistency or in case of conflict between MOA and AOA of provision or term of them. Meanwhile, neither Party hereto shall seek to enforce the provision of the articles that is being altered in order to avoid contradiction with the provisions hereof while such revisions to the articles are pending. The above mentioned theory is for in case of conflict between MoA and AoA. And in case of conflict between MOA and AOA the conflict needs to be sorted out on time.

Differences & Relationship between MOA and AOA

1. MOA is the supreme document without which the company can’t function. All other documents are subordinate to it and follow from it, including AOA.

2. MOA lays down the conditions for the registration of the company, whereas, AOA is a document that contains the rules and regulations for the administration of the company.

3. MOA lays down the powers, objects and area of operation of the company, while AOA lays down the rules for the management and administration of the same.

4. MOA defines the relationship between the company and the outside world, whereas AOA defines relations within the company.

5. MOA is defined in Section 2 (28) while AOA is found under Section 2 (2) of the Indian Companies Act 1956.

6. In case of conflict between MOA and AOA, MOA takes precedence.

7. Acts ultra vires the MOA are void, whereas acts beyond the AOA are simply irregular but not void.

8. MOA has six compulsory clauses. AOA is framed arbitrarily as per the discretion of the members of the company.

9. MOA is a compulsory document which must be registered with the ROC at the time of incorporation of the company. On the other hand, AOA is not obligatory and in case of limited shares, a company can use its Table A in its place.

10. MOA can only be amended prospectively and not retrospectively, that too in the Annual General Meeting with the knowledge of the CG. Meanwhile, AOA can be amended retrospectively in the Annual General Meeting as per the whims of the members.

Thus, these are the main differences between the two very important documents of a company which every entrepreneur must be familiar with. DO consult an adept corporate lawyer for more details and get legal help in drafting this very important document. 

Therefore,Memorandum and Articles of association  plays an important role in company incorporation

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