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Key Differences Between Memorandum of Association (MoA) and Articles of Association (AoA)

Understanding the difference between the Memorandum of Association (MoA) and the Articles of Association (AoA) is crucial for effective corporate governance and compliance under the Companies Act, 2013. These foundational documents delineate the legal framework and operational guidelines that govern a company’s establishment and internal management.

The Memorandum of Association serves as the constitution of a company, defining its fundamental objectives, authorized share capital, and the scope within which it can operate. It establishes the company’s identity and purpose for external stakeholders, including investors, creditors, and regulatory bodies. Conversely, the Articles of Association focus on the internal governance structure and management practices of the company. They outline rules and procedures for conducting board meetings, appointing directors, distributing dividends, and managing day-to-day operations. Unlike the MoA, which primarily addresses the company’s external relationships and legal boundaries, the AoA sets forth guidelines for internal operations, ensuring consistency and compliance with legal requirements.

Together, these documents provide a comprehensive framework that guides the company’s activities, promotes transparency, and facilitates effective corporate governance. However, major difference between MoA and AoA are discussed here.

1. Purpose and Scope

  • Memorandum of Association: The MoA defines the fundamental conditions essential for company incorporation. It outlines the company’s objectives, authorized share capital, and the scope of its operations. Essentially, it sets the boundaries within which the company must function, focusing on its external relations and fundamental objectives.
  • Articles of Association:  AoA contains bye-laws governing internal management and conduct within the company. It details rules for meetings, director appointments, dividend distribution, and other internal administrative matters. Unlike MoA, AoA deals primarily with the internal affairs and management structure of the company.
  • Difference between MoA and AoA: MoA sets boundaries for external operations; AoA regulates internal governance.

2. Legal Hierarchy

  • MoA: Holds a superior position in the hierarchy of company documents. It takes precedence over AoA, and any conflicting provisions within AoA are rendered void to the extent of inconsistency. Both MoA and AoA are subject to the provisions of the Companies Act, 2013.
  • AoA: Subordinate to MoA and the Companies Act. While it governs internal management and operational procedures, AoA cannot override or contravene provisions laid down in MoA.
  • Difference between MoA and AoA: MoA takes precedence in conflicts; AoA governs internal affairs.

3. Drafting Requirements

  • MoA: Drafting must strictly adhere to Section 4 of the Companies Act, 2013. It mandates specific clauses such as the name, registered office, objects, liability, and capital clauses.
  • AoA: Allows greater flexibility compared to MoA in drafting. While it must comply with the Companies Act, AoA offers discretion in formulating rules tailored to the company’s internal governance requirements.
  • Difference between MoA and AoA: MoA mandates specific clauses; AoA allows customization for internal rules.

4. Registration Requirements

  • MoA: Mandatory registration at the time of company incorporation. Must be submitted to the Registrar of Companies along with other incorporation documents.
  • AoA: Filing is optional for public companies if they adopt Table F from Schedule I of the Companies Act, 2013, containing a model set of articles. However, private companies must file AoA with the Registrar of Companies.
  • Difference between MoA and AoA: MoA must be registered; AoA filing optional for public companies.

5. Doctrine of Ultra Vires

  • MoA: Doctrine applies strictly to activities beyond the objects clause in MoA. Actions outside specified objectives are void ab initio, and the company cannot be bound by such actions.
  • AoA: Actions outside AoA scope can be performed if approved by shareholders in a general meeting. Such actions are valid internally upon shareholder consent.
  • Difference between MoA and AoA: MoA voids actions outside its scope; AoA permits actions with shareholder consent.

Here is a tabulated summary of the differences between the MoA and AoA:

S No.BasisMemorandum of Association (MoA)Articles of Association (AoA)Difference Between MoA and AoA
1Definition and MeaningDefined under Section 2(56) of Companies Act, 2013; Contains 5 essential clauses (name, registered office, objects, liability, capital).Defined under Section 2(5) of Companies Act, 2013; Contains bye-laws regulating internal management and operational procedures.The MoA defines the company’s foundational framework, while the AoA governs internal management and procedures.
2Position/StatusSupreme legal document; Subordinate to the Companies Act, 2013.Subordinate to both the Memorandum of Association (MoA) and the Companies Act, 2013.The MoA is a supreme document, whereas the AoA is subordinate to both the MoA and the Companies Act.
3Registration/FilingMandatory at the time of incorporation; Must be filed with the Registrar of Companies (ROC).Optional for public companies if they adopt Table F provided in Schedule I of the Companies Act, 2013; Mandatory for private companies.MoA is mandatory for all companies at incorporation, while AoA is optional for public companies adopting Table F.
4Major ContentsIncludes clauses such as company name, registered office address, objects clause defining business activities, liability clause specifying member liabilities, and capital clause defining authorized share capital.Varied content tailored to internal governance needs; Can adopt Table F for standardized articles.MoA includes fundamental clauses, whereas AoA includes detailed internal governance rules.
5Mandatory DraftingCompulsory for all companies.Private companies must draft their own AoA; Public companies can adopt Table F as prescribed.Drafting of MoA is compulsory for all, but public companies may adopt a standardized AoA (Table F).
6AlterationRequires special resolution for each alteration, with specific conditions depending on the clause.Can be altered by special resolution in accordance with company needs and shareholder approval.Both require special resolutions for alterations, but MoA alterations are more stringent.
7RelationsGoverns external relations and the company’s dealings with outsiders, including contractual obligations and business operations.Regulates internal management, including rules for meetings, appointment of directors, and distribution of dividends.MoA governs external relations, while AoA regulates internal management.
8BreachDoctrine of ultra vires applies; Actions beyond the MoA’s scope are void and not binding on the company.Binding on internal matters; Breaches can be rectified internally with shareholder approval and amendments.Breach of MoA results in ultra vires actions, while AoA breaches can be rectified internally.

Frequently Asked Questions

Who can witness MoA and AoA?

At least one person must witness the signing of the MoA and AoA by the subscribers, attesting to their signatures. The difference between MoA and AoA in this regard would be that both documents require the same witnessing procedure to ensure the authenticity of the subscribers’ signatures.

Are MoA and AoA mandatory?

  • MoA: Yes, drafting and registration are mandatory at the time of incorporation to define the company’s objectives and operational scope. The difference between MoA and AoA in this regard would be that the MoA sets the fundamental conditions and objectives of the company, making it a foundational document.
  • AoA: Drafting is mandatory for all companies. Public companies can choose not to file AoA if they adopt Table F under Schedule I of the Companies Act, 2013. Private companies must file AoA with the Registrar of Companies (ROC). The difference between MoA and AoA in this regard would be that the AoA governs the internal management and day-to-day operations of the company.

Can we change MOA and AOA?

Yes, amendments to both MoA and AoA are possible. Companies must file the amended documents with the ROC within 30 days of passing a special resolution approving the changes. The difference between MoA and AoA in this regard would be that while both documents can be amended, the MoA often requires more stringent procedures due to its foundational nature.

What are the binding effects of MOA and AOA?

MoA prevails in conflicts between MoA and AoA. Every company must have a unique, compliant MoA that outlines its fundamental conditions and objectives under the Companies Act, 2013. The difference between MoA and AoA in this regard would be that the MoA’s conditions and objectives take precedence over the provisions in the AoA, ensuring that the company’s fundamental purposes are always upheld.

Conclusion

Understanding the difference between MoA and AoA is crucial for navigating legal requirements and ensuring effective corporate governance. The MoA establishes a company’s foundational framework and legal boundaries, while the AoA governs internal management and operational procedures. Compliance with these documents under the Companies Act, 2013 is essential for maintaining legal integrity and operational efficiency. InstaFiling can help streamline this compliance process. With their expertise, they ensure that your MoA and AoA are drafted, filed, and amended correctly, meeting all legal requirements. InstaFiling simplifies the complexities of corporate governance, helping you maintain accurate records and adhere to statutory obligations efficiently.

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