Introduction
Charter Documents are known to be memorandum and articles of association of a company. The Memorandum of Association (MOA) includes the name, situation of the registered office, objects, capital, and liability and subscription clause of the company. On the other hand, the article of association (AOA) states the bye-laws or rules and regulations that help in governing the management and internal affairs of the business.
MOA and AOA popularly known to be the charter documents of a company are required to be registered with the Registrar of Companies (ROC) at the time of the incorporation of the company. Both documents are essential to be registered as they suggest the company’s powers as to see what the company is permitted to do and what not.
Continue reading the article to understand the concept of a Memorandum of Association and Articles of Association along with their purpose, contents stated therein and registration.
What is a Memorandum of Association (MOA)?
MOA constructs the constitution of the company which the company is expected to adhere to as it defines the company’s activities and its relations with the outside world.
The preparation of memorandum of association is not to be done by any person. It is advised to take help of the Company Registration Consultant as they have the special authority to draft the charter documents. In the process of company incorporation, drafting and preparing of the memorandum is the pre-requisite.
As per Section 2(56) of the Act, “memorandum” means the moa of a company as originally framed and altered from time to time in pursuance of any previous company law or Act. All in all, we can conclude the topic of “what is a memorandum of association” by saying that a “memorandum of association” is a charter document of great importance containing the object and scope of the company.
Form of Memorandum of Association
Section 4(6) of the Act provides that the memorandum of association must be in any of the forms as specified in Table A, B, C, D or E of Schedule I to the Act as applicable in relation to the company incorporated
- the Form in Table A is applicable in the case of companies limited by shares;
- the Form in Table B is applicable to companies limited by guarantee not having a share capital;
- the Form in Table C is applicable to companies limited by guarantee having share capital’
- the Form in Table D is applicable to unlimited companies not having a share capital;
- the Form in Table E is applicable to unlimited companies having a share capital;
Therefore, a company shall adopt any of the model Forms of the memorandum of association as may be applicable.
Contents of Memorandum of Association
The Memorandum of Association (MOA) contains some of the essential clause which are given below, namely:-
- Name Clause
- Situation Clause
- Object Clause
- Liability Clause
- Capital Clause
- Subscription Clause
What is an Articles of Association?
Articles of Association (AOA) is the second charter document of a company. Just like MOA, articles of association are also required to be prepared at the time of the incorporation of the company. As per Section (5) of the Companies Act 2013, “articles” means the AOA of a company as originally framed or as altered from time to time or applied in pursuance of any previous company law or of this Act. Thus, AOA specifically contains the bye-laws and regulations for the management of the company.
Contents of Articles of Association
The articles set out the rules and regulations framed by the company for its own working. Here are the essential contents, namely:-
- Exclusion wholly or in part of Table F
- Adoption of preliminary contracts
- Share Capital, variation of rights, number and value of shares
- Issue of preference shares
- Allotment of shares
- Calls on shares
- Lien on shares
- Transfer and transmission of shares
- Nomination
- Forfeiture of shares
- Alteration of capital
- Buy Back
- Share certificates
- Dematerialization
- Conversion of shares into stock
- Voting rights and proxies
- Meetings and rules regarding committees of the Board
- Directors and their appointment and delegation of powers
- Nominee directors
- Issue of Debentures and stocks
- Audit committee
- Managing director, whole-time director, manager, secretary, chief executive officer and chief financial officer.
- Additional directors
- Seal
- Remuneration of directors
- Seal
- Remuneration of directors
- General meetings, procedure at general meetings, adjournment of the meeting
- Board of Directors, proceedings of the board meetings
- Borrowing powers
- Dividends and reserves
- Accounts and audit
- Winding up
- Indemnity
- Capitalization of profits, reserves
- Secrecy
Constructive Notice of Memorandum and Articles
After the registration of the charter documents of a company with the Registrar of Companies (ROC), it becomes publicly visible. It means MOA and AOA shall become visible which will be visible to anyone on payment of the nominal fee.
It also concludes that if a person is interested to enter into contract with a company has proper means of ascertaining and is consequently presumed to know, not only the exact powers but also the extent to which powers have been delegated to directors. Along with it, any of the limitations placed upon exercising the placed.
Hence, every person dealing with the company is deemed to have a “constructive notice” of the contents of the memorandum and articles of the company.
Difference between MOA and AOA
| Memorandum of Association | Articles of Association |
MEANING | |
| It is the charter document defining the fundamentals and objects for which the company is incorporated | It is the second charter document containing the rules and regulations framed to govern the internal management of the company. |
ALTERATION | |
| Alteration of clauses given under the memorandum of association cannot be easily altered as they can be altered in accordance with the mode prescribed by the Act. However, in some case it may require the approval of the Central Government or Court. | Alteration of articles of association is possible by members by passing a special resolution. In this case, no requirement arises to obtain the permission of the court or the central government for articles of association. |
RELATIONSHIP | |
| MOA generally defines the relation between the company and the outsiders | AOA regulates the relationship between the company and the members and between the members inter se |
ACT PERFORMED BEYOND THE SCOPE | |
| Any act done by a company beyond the scope of the memorandum are absolutely void and ultra vires and cannot be ratified even by unanimous vote of all the shareholders. | The Acts of directors beyond the articles can be ratified by the shareholders of the company. |
ADDITION IN THE CLAUSE | |
| MOA cannot include any clause contrary to the provision of the Companies Act. | AOA are subsidiary both to the Companies Act and the memorandum of association |
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