Memorandum of Association vs Article of Association

Difference Between Memorandum of Association vs Article of Association

Memorandum of Association is a key document of any company that portrays the principals which are required to establish the stepping stone such as the objective, extent of authority, competency, liabilities and legal rights to define its relationship with their shareholders. The memorandum act as a legal code of conduct which binds the company and its shareholders, investors, beneficiaries which are necessitated for any sound organization to grow.

Contents of Memorandum of Association

Under Section 4 of the Companies Act of 2013, a Memorandum of Association comprises of following clauses as discussed below:

1. Name Clause

• For a public Limited company, the name of the company should end with the word ‘Limited’ as the last word.
• For the private limited company, the name of the company should end with the words ‘Private Limited’ as the last words.

Moreover, these words are not covered under Section 8 of the Act they must include one of the following words, as applicable

• Foundation
• Forum
• Association
• Federation
• Chambers
• Confederation
• Council
• Electoral Trust, etc.

2. Registered Office Clause

It specifies in which state the registered office is situated off the company.

3. Object Clause

It defines the objective of the company for which it has been incorporated. If the company does not serve the purpose, then it has a right, can change its name within six months from the date of incorporation.

4. Liability Clause

In this clause, the liabilities of each member of the organization must be well stated in the memorandum. They may be limited by shares or by guarantee. If in the case of unlimited liability, the entire clause will be abolished.

5. Capital Clause

It defines the maximum amount of capital is generated by the members of the company should be specified inside the Memorandum of Association. However, there is no legal limit has been specified by the company of the maximum amount of capital that can be raised.

6. Association or Subscription Clause

In the Memorandum of Association, it should specify the amount of authorized capital and the number of shares owned by each member of the company.

Articles of Association(AOA)

The article of Association is a document which defines the procedures of a company, and it’s various other operations for execution and purpose. It includes various other systematic procedure through which various other tasks are to be accomplished within the organization. The article of association generally contains some of the provision as discussed below.

• Shares belong to a specific class should have their certain value and rights attached to each of them.
• Calls of shares, transfer of shares, forfeiture, conversion of shares, and alteration of capital.
• Directors, their appointment, power, and duties are also included in it.
• Minute of Meeting circulation and their intimation.
• Accounts and their audit at regular interval of time.
• Auditor’s appointments and their remuneration.
• Dividends and Reverse.
• Minimum subscription.
• Formulation of rules to utilize and custody of the common seal.
• Rules and regulation need to convert fully paid shares into stocks.
• The proposed alteration increases the liability of existing members.
• The alteration is allowed only to obtain better results.
• The alteration can be done with retrospective effect.

Head To Head Comparison Between Memorandum of Association vs Article of Association (Infographics)

Below is the top 10 difference between Memorandum of Association vs Article of Association

Key Differences Between Memorandum of Association vs Article of Association

Both Memorandum of Association vs Article of Association are popular choices in the market; let us discuss some of the major Difference:

1. MOA is a document that defines the necessary documents which are required to fulfil the registration of the company. At the same time, the Articles of Association is a document that defines the rules and regulations for the administration of the company.
2. The Indian companies Act 1956; MOA is defined in section 2(56). However, the AOA is elaborated in section(5).
3. MOA is a subsidiary to the Companies Act while AOA is subsidiary to both MOA as well as AOA.
4. In any of the clauses, a contradiction occurs between the Memorandum and Articles, Memorandum of an association will prevail over the Article of Association.
5. MOA is a supremacy body that contains information about the powers of the company. At the same time, AOA contains information about the rules and regulation which need to implement.
6. MOA comprises six clauses, while AOA is designed as per the discretion of the company.
7. MOA establishes the relationship along with external bodies for streamlining the operations of the organization. However, AOA regulates the relationship between the company and its members.

Memorandum of Association vs Article of Association Comparison Table

Below is the 10 topmost comparison between Memorandum of Association vs Article of Association

Basis Of Comparison	Memorandum of Association(MOA)	Article of Association(AOA)
Definition	MOA is a document that specifies all the fundamental data which is required to incorporate a company	AoA is a document that defines the rules and regulations which is required to govern the company.
Registration	MOA is registered during the time of incorporation	Not mandatory to register.
Scope	The Memorandum is the charter, which characterizes and limits powers and constraints of the organization.	The articles define the obligation, rights, and power of an individual which is required to govern the organization.
Status	Major document	Subordinate to the memorandum.
Power	MOM gives a right to the company to violet company act	The act constrains the articles.
Contents	Six clauses are mandatory to write a memorandum.	The company decision is sufficient to write the articles.
Objectives	The objective and power of the company are specified in the memorandum.	The articles are the means to attain the objectives and power.
Validity	MOA is a reserve all the rights to attain the objective.	AOA follow the defined procedure of MOA.
Defined in	Section 2(56)	Section 2(5)
Relation	The relation between company and outsider	A relationship between a company and its members

Conclusion

Memorandum of Association vs Article of Association is two procedures of the documentation where MOA adopt different methods to cater fundamental data which is required to incorporate an organization, along with AOA in which definite sets of rule and regulation need to follow formulated by the MOA. The mutual collaboration of both procedures helps proper management and functioning of the company throughout its life. Due to this reason, every company requires to have its own memorandum and articles.

Recommended Articles

This has been a guide to the top difference between Memorandum of Association vs Article of Association. Here we also discuss the Memorandum of Association vs Article of Association key differences with infographics, and comparison table. You may also have a look at the following articles to learn more.

1. Financial Lease vs Operating Lease
2. Growth Stock vs Value Stock
3. Dividends and Capital Gains
4. Money Market vs Capital Market