WHAT IS MOA AND AOA?

MEMORANDUM OF ASSOCIATION

The Memorandum of Association or MoA, of a Company represents its charter. Every
company must compulsorily have a Memorandum. It is a legal document that is prepared
when the company is in the stage of formation and registration. It specifies the objectives for
which the company was formed. The Memorandum of Association defines the structure of
the company and thereby lays its foundation.

A company can only undertake those functions and activities that are mentioned in its
Memorandum of Association. If the company performs any act that goes beyond the scope of
the MoA, the action shall be considered void as it is ultra vires.
It is a public document. The Memorandum assists people who deal with the company, such as
creditors and shareholders, understand the powers and rights of the company. 1
In case of a private limited company, the Memorandum of Association must be signed by at
least 2 subscribers, and in case of a public limited company, it must be signed by at least 7
members and it needs to be signed by only one person in case of a one person company. 2
The Memorandum of Association is important because it defines the relationship between the
company and the outside world. It also contains all the details about the company, its
members and its liabilities.

The following clauses are to be added to the MoA: -

1. Name clause
The name clause states the name of the company. In case of a public limited company, the
name should end with ‘limited’, and in case of a private limited company, the name
should end with ‘private limited’.

2. Domicile clause

The domicile clause states the location of the registered office of the company.

3. Objects clause
The objects clause states the objects for which the company was incorporated.

4. Liability clause
The liability clause states the liability of the members, either limed or unlimited. If the
company is limited by shares, the Memorandum must state that the members have limited
liability. If the company is limited by guarantee, the Memorandum must state the amount
that each member will contribute in case the company is wound up.

5. Capital clause
The capital clause discloses the company share capital. It defines the number of shares of
each kind and their face values.

6. Subscription clause
The subscription clause must state the purpose of the subscribers for incorporating the
company and agreeing to take the same number of shares in the company as mentioned in
the Memorandum. 

ARTICLES OF ASSOCIATION

Articles of association or AoA, is a very important document. It lays down the purpose of the
company and the rules and regulations that it must follow. It basically explains how tasks are
meant to be completed in the organization. It acts like the user’s manual for the organization. 
It governs the internal affairs and method of conducting business. The Articles are
subordinate to and are governed by the Memorandum of Association. It is compulsory for
every company to have their Articles of Association.

The House of Lords explained the importance and functions of Articles of Association in the
case, Ashbury Railway Carriage and Iron Co. Ltd. v. Riche. 6 Here, it was laid down that
articles define the mode and form in which the company shall carry out its functions and that
they define the rights, duties and powers of the governing body between themselves and the
company.

Articles of Association must contain the following: -

1. Adoption of preliminary contracts
2. The total number of shares and their value
3. The number of preference shares issued
4. How many shares have been allotted; to whom they have been allotted and the value of
the shares. 
5. How much money is to be called on shares?
6. Who will retain possession of the shares if the member fails to fulfil his debt to the
company?
7. The provisions related to transfer and transmission of shares
8. All nominations
9. The appointment and delegation of power of the Directors
10. The method in which the company can forfeit its shareholders
11. How the company can buy back its shares from shareholders
12. Procedure for conversion of shares into stock
13. The number of dividends that are to be distributed and the reserves that are to be
maintained
14. When the accounts will be audited
15. All the provisions regarding the common seal 8
Further, the Articles of Association may contain an entrenchment provision. This provision
will act in a way to make amendment of the articles difficult. Here, the term ‘enrenchment’
stands for ‘a habit which is difficult to change’. Inclusion of the entrenchment clause is
completely optional and can either be made by the company at the time of incorporation or at
a later time, by making an amendment to the articles.

DIFFERENCE BETWEEN MEMORANDUM OF ASSOCIATION AND ARTICLES OF
ASSOCIATION:

1. Section 2 (28) of the Companies Act defines the memorandum of association and articles
of association is defined under Section 2 (2) of the Act.
2. The memorandum of association of company defines its constitution while the Articles
are rules and regulations that govern its working.
3. The Memorandum of association defines powers, constraints and objectives of the
organization and the Articles encompass the duties, rights, powers and liabilities of
individuals who are associated with the organization.
4. There are six mandatory clauses that are to be included in the memorandum of association
but the articles of association can be drafted according to the requirements of the
organization.
5. The Memorandum of association is compulsorily to be filed at the time of registration of
the company but filing of Articles of association during company registration is optional.
6. The Memorandum of association is generally considered superior to the articles of
association.
7. The memorandum of association cannot be amended with a retrospective effect but the
same can be done with the articles of association. 

BY – SHRUTI NAVAYATH