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MOA and AOA

Introduction

The charter documents of the company, the memorandum, and the article of association, illustrate the company’s scope, objective, rules, and internal structure of the company. Both, the memorandum and article are necessary to be filed with the Registrar of Companies (ROC).

As MOA contains all the details of the company’s constitution and AOA inclusive of the bye-law governing the conduct of the business and management of internal affairs of the company, must be drafted with due care as once prepared lasts till the end of the company’s life. Only some minor alterations can be made under the MOA and AOA clauses.

So, be careful while drafting the MOA and AOA of your company. Or the best way out that is advisable by our team of experts is to consult a professional and take advice to make sure everything goes well from the initial step itself.

Most people get confused between the two of them and as always a doubt exists whenever a difference is asked between them. So, to make both of the terms clear with their meaning, here is the guide containing the definition, differences, clauses, and contents of MOA and AOA.

What is MOA and AOA?

Memorandum of Association and Article of Association are the two main fundamental documents on which the company’s existence is based. How the company will be working, what all rules shall be applicable, what activities would be performed by the company, all the limitations, etc. shall be included in the MOA and AOA of the company.

Memorandum of Association

MOA is the supreme document that is inclusive of the power and objective of the Company. It means that the document prescribes the activities allowed to be performed by the company which you can say is the scope of the company as well as informs the limitation that the company can misrule Before starting with an additional business, the company will have to check in its MOA whether they are allowed to do such business not. So, if the company finds any doubt then MOA is the only the most prior document that can be taken into consideration. The Memorandum lays down the boundary for the company beyond which the actions of the company cannot go. The company’s memorandum of association must be signed by at least 2 subscribers in case of a private limited company and in case of public limited company, 7 members.

Let us now learn about the clauses stated under MOA: –

Clauses under MOA

1. Name Clause

It is the clause containing the Name of the Company. The Name Clause states some rules or you can say guidelines that must be followed to have a valid Name of the Company. The Name Clause says:-

  • The name of the company must not be identical to any of the existing registered companies.
  • If a private limited company is incorporated then, it must have in its end “Private Limited Company”
  • If a public limited company is incorporated then, it must have in its end “Public Limited Company”

Clauses under the name clause must be considered carefully in order to avoid rejection.

2. Registered Office Clause

The second clause states the name of the state in which the registered office of the company is situated. It is necessary to identify the name as on the basis of it, the jurisdiction of the Registrar of Companies. As per the requirement under law, within 30 days from the date of incorporation of the company, the company is required to inform the location of the company to the Registrar of Companies (ROC).

3. Object Clause

 The third clause includes the objective for which the company has come into existence. The object clause is inclusive primarily of the prime objective then the incidental objective which are ancillary to the attainment of the main object of the company. And the last in the list comes other objectives of the company that are not mentioned in above two object clauses.

4. Liability Clause

The liability clause of the company illustrates the liabilities of the members of the company. Where the company is an unlimited company, the liability of the members stays unlimited. Whereas in case of a company limited by shares, the liability of the members is limited by the amount unpaid by shares. For a company limited by guarantee, the liability of the members is restricted by the amount each member has agreed to continue.

5. Capital Clause

The second last clause is the Capital Clause which contain the detail of the maximum capital that a company can raise which is called the authorized/ nominal capital of the company. This clause also contains the details of the division of the capital amount into the number of shares of a fixed amount each.

6. Subscription Clause

The last clause is the subscription clause which states name of the person, address, occupation and also the number of shares a person is holding in the company.

Articles of Association

As per Section 2(5) of the Companies Act, 2013, Article of Association have been defined as “The Article of Association (AOA) of a company originally framed or altered or applied in pursuance of any previous company law or this Act.”

Articles of Association is the second most important document where the rules and regulations are given which are to be followed by the company. No company is incorporated or registered without having Articles of Association (AOA). The contents of AOA must be in relation with the MOA and the Companies Act 2013. It offers the manner in which a company shall issue shares, pay dividend, audit financial records, and provide voting rights.

For managing day-to-day tasks, the Article of Association includes the methodology to be followed by the company. The objective of the Article of Association says:-

  • AOA must include the regulations for the management of the company
  • Include matters that have been prescribed under the rules

Contents of AOA

  • Details regarding the share of a company
  • Details regarding the director’s rights

Contact EAdvisors regarding any query.

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