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Difference Between Memorandum (MOA) Of Association And Articles Of Association (AOA)
When starting a company in India, two of the most important legal documents you’ll encounter are the Memorandum of Association (MOA) and the Articles of Association (AOA). While both are essential for a company’s formation and governance, they serve distinct purposes. The MOA defines a company’s core objectives, scope of operations, and relationship with the outside world, whereas the AOA lays down the internal rules and regulations for managing the company’s affairs. Understanding the difference between these documents is crucial for entrepreneurs, investors, and anyone involved in corporate compliance. This article breaks down the key distinctions between the MOA and AOA, helping you navigate their roles with clarity and confidence.
What is MOA?
The Memorandum of Association (MOA) is a legal document that serves as the foundation of a company’s existence and defines its relationship with the outside world.
It contains six essential clauses:
- Name Clause – Specifies the legal name of the company.
- Registered Office Clause – States the location of the company’s registered office.
- Object Clause – Defines the purpose and scope of the company’s business activities.
- Liability Clause – Clarifies the liability of the company’s members, whether limited or unlimited.
- Capital Clause – Provides details of the company’s share capital.
- Subscription Clause – Contains the names of the initial subscribers (founding members) and their agreement to take shares in the company.
For a detailed breakdown of the key provisions, see the essential clauses of a Memorandum of Association (MOA).
In simple terms, the MOA sets the limits within which the company must operate. Any activity beyond what is stated in the MOA is considered invalid under the “doctrine of ultra vires”.
What is AOA?
The Articles of Association (AOA) is a legal document that defines the internal rules and regulations for managing a company’s operations. While the Memorandum of Association (MOA) outlines the company’s objectives and external scope, the AOA focuses on how the company will be run on a day-to-day basis.
Key points covered in the AOA include:
- Rights, duties, and powers of directors
- Procedures for conducting board and general meetings
- Rules for issuing and transferring shares
- Dividend distribution policies
- Maintenance of accounts and audits
- Provisions for winding up the company
In simple terms, the AOA acts as the company’s “rulebook,” guiding the conduct of members, directors, and officers. It is a binding document for the company and its members, and any action contrary to the AOA is invalid unless it is formally amended as per the provisions of the Companies Act, 2013.
Difference Between Memorandum of Association (MOA) and Articles of Association (AOA)
| Basis of Comparison | Memorandum of Association (MOA) | Articles of Association (AOA) |
|---|---|---|
Meaning | A legal document that defines the company’s name, objectives, powers, and scope of activities. | A legal document that contains the rules and regulations for managing the internal affairs of the company. |
Purpose | Specifies the fundamental conditions upon which the company is incorporated. | Regulates the day-to-day management and administration of the company. |
Content | Includes Name Clause, Registered Office Clause, Object Clause, Liability Clause, Capital Clause, and Subscription Clause. | Includes rules about share capital, transfer of shares, meetings, voting rights, appointment of directors, and dividend distribution. |
Scope | Determines the company’s relationship with external stakeholders and the limits of its activities. | Deals only with the internal management of the company. |
Position | Supreme document of the company, subordinate only to the Companies Act. | Subordinate to both the MOA and the Companies Act. |
Alteration | Can be altered only in accordance with the strict provisions of the Companies Act, 2013. | Can be altered by passing a special resolution of shareholders. |
Necessity | Mandatory for all companies at the time of incorporation. | Not mandatory for public companies limited by shares (Table F of Schedule I can be adopted). |
Binding Nature | Binds the company to the outside world and its members. | Binds the company and its members in internal matters. |
Retrospective Effect | Changes cannot have retrospective effect. | Alterations can have retrospective effect if agreed by members. |
Ultra Vires Effect | Any act beyond the scope of the MOA is void and cannot be ratified. | Acts beyond the AOA can be ratified by shareholders if within MOA powers. |
If you also want to know the difference between Shareholders’ Agreement and Articles of Association
, we’ve created a detailed comparison.
Frequently Asked Questions
Q1. Are both the MoA and AoA needed to open a company?
Yes, both documents have to be prepared and given to the government when registering a company.
Q2. Can a company do things that are not listed in its MoA?
No, a company can only carry out the activities mentioned in its MoA.
Q3. Is it possible to update the AoA?
Yes, the AoA can be changed if the company’s members agree and follow the right steps.
Q4. Who must follow the rules in the AoA?
The rules apply to everyone inside the company, like directors, staff, and shareholders.
Q5. What if someone in the company ignores the AoA rules?
If someone doesn’t follow the AoA, the company or its members can take proper action to make sure the rules are respected.
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