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Difference Between Memorandum of Association & Articles of Association

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What is the Difference Between Memorandum of Association & Articles of Association?

Every company irrespective of it being private, public or listed needs to formulate Memorandum of Association (MOA) and Articles of Association (AOA). As per Companies (Incorporation) Rules, 2014 a company cannot get registered in absence of these documents. These documents form an integral part of registration of private limited company. At the time of incorporation MOA and AOA are to be submitted with the Registrar of Companies. In the past we have got many queries where our clients ask us the difference between Memorandum of Association & Articles of Association.

Hence, I thought we should write a short article explaining the difference between MOA & AOA. For easy understanding I am keeping it short and crisp. I will try and take it step by step, first discussing Memorandum of Association and later the Articles of Association. I have given an example at the end to explain the interplay between the two.

Memorandum of Association

MOA is a document open to public. It contains all the important information related to a company's incorporation. It is like a company's brochure that contains information about its activities, objectives, powers etc. An MOA is divided into 6 clauses, viz.

  1. Name Clause: As the heading suggests, this contains the name of a company.
  2. Situation Clause: The clause contains information about the registered office of a company. It will mention the State where the company is active with complete address of office of the company.
  3. Capital Clause: The Capital Clause consists of information related to capital invested and its source. It contains all the information related to a company's financial structure.
  4. Object Clause: Object Clause states the objectives of a company, that is, the business it will run. It is sub-divided into main and auxiliary clauses.
  5. Liability Clause: It states the liability of promoters and members of a company.
  6. Subscription Clause: It contains details regarding share subscription by promoters and other shareholders.

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Articles of Association

AOA, unlike MOA are not public documents. They contain rules and regulations through which the affairs of company are governed.  It is a set of by-laws that regulates the internal working or operations of a company.

The Articles contain the powers, duties, responsibilities and accountability of directors, members and key managerial personnel of a company. Every company has a different set of AOA and there is no specific format for it. The MOA as discussed above will have a specific format with fewer variations.

MOA and AOA are mutually exclusive and equally important. While MOA specifies what business a company is engaged in, AOA tells how to operate that business.

Example:

While MOA states that a company can increase its authorized capital by altering the Capital Clause, it is the AOA that states the procedure to be followed. The authority required for such alteration. Many exhaustive AOA’s will also contain the authority flow in such circumstances.

I hope you have liked this article on 'Difference between Memorandum of Association & Articles of Association', if yes please comment below. For more information you can visit www.registrationsindia.com

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