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Memorandum of Association (MOA) and Articles of Association (AOA)

Memorandum of Association (MOA)

  • It contains the essential regulations governing the company's formation.
  • It specifies how the company will be organized and what type of job it will perform.
  • It lays out the constitution of the company.
  • It is the basis upon which the company's structure is built.
  • Its objective is to inform shareholders, creditors, and others who engage with the company about the company's permissible spectrum of operations.
  • It defines and limits the company's power.

Contents of the Memorandum:

  1. Name Clause
    A corporation may not be registered under a name that is unfavourable, identical, or confusingly similar to that of another company [Section 20]. With regard to its goal, it must not be misleading or meant to deceive. A simple resemblance in name does not justify an injunction; there must be a risk of deception or confusion. An accidental name change can be made by passing an ordinary resolution and gaining written approval from the Central Government. The name and address must be printed or affixed outside every office in English and local language.
     
  2. Situation Clause
    The state where the Registered Office is located is the only one stated. Within 30 days of formation, the exact address can be filled out individually in Form 18 with the RoC.
     
  3. Object Clause
    The object clause must be divided into two sub-clauses: Main Objects and Other Objects.
    • Because it establishes the company's purpose and capacity, it is extremely important.
    • Acts that go beyond this scope are considered supra vires and so null and void. Such acts cannot be ratified even by the full shareholder assembly.
    • Subscribers have complete control over the objects they get.
       
  4. Liability Clause
    A corporation limited by shares or by guarantee must specify in its Memorandum that its members liability is limited. If a members obligation is limited by shares, he or she may be required to pay only the unpaid balance on his or her shares. In the event of a business limited by guarantee, members are accountable up to the maximum amount promised; in the case of a corporation limited by both share and guarantee, members obligation is dual.
     
  5. Capital Clause
    Fixed-value shares are required. Capital, whether nominal, authorised, or registered. Unless the Memorandum is changed, it is not permitted to issue capital in excess of its authorised capital. In the event of an unlimited corporation with share capital, responsibility against creditors is unlimited only if the firm is wound up; in the event of a going concern, liability is limited to the shares subscribed.
     
  6. Association Clause
    Each subscriber must sign in front of one witness. At least one share must be taken by each subscriber. A subscriber cannot disclaim his duty after the company has been registered, even if he was induced to sign due to misrepresentation.

Articles of Association (AOA)

Articles are by-laws or rules and regulations that regulate the organization's internal issues and business operations, as well as the regulations in Table A of Schedule I. Inter alia, it deals with the members rights. Articles are in control of subordinate and it is in charge of them. Corporations with unlimited liability, limited liability companies, and private companies must all have their own AOA. It must be printed, split into paragraphs, sequentially numbered, appropriately stamped, acknowledged by each Memorandum subscriber, and properly witnessed.

Alteration of Articles:

A corporation can change its Articles by resolution plan, pursuant to the Act and Memorandum's restrictions [Section 31]. The change binds members the same manner as the original Articles did. A corporation cannot deny itself the ability to change its Articles in any way.

Limitation on Alteration:

  • The power granted in the Memorandum must not be exceeded.
  • It must not be in conflict with the provisions of the act.
  • It must not contain anything that is illegal or contrary to public policy.
  • Must be genuine for the advantage of the company.
  • It must not be a kind of minority fraud.
  • It cannot be changed in such a way that it has a retroactive effect.
  • Stock Exchange permission is required in the case of publicly traded enterprises.

Differences between MOA and AOA

  1. The first distinction between MOA and AOA is that although MOA (Memorandum of Association) specifies the company's powers and objectives, the AOA (Article of Association) establishes the company's rules.
  2. The Memorandum of Association (MOA) is subject to the Companies Act, and the Articles of Association (AOA) is subordinate to the Memorandum of Association.
  3. While the memorandum cannot be revised retroactively, the AOA (Article of Association) can.
  4. The fundamental difference between a memorandum of association and an article of association is that a memorandum has six clauses, whereas an article can be prepared according to the needs of the company.
  5. The MOA is required for all businesses, although a public firm can utilise Table A instead of an AOA (Article of Association).
  6. Changes to a MOA can only be made by adopting a Special Resolution in the Annual General Meeting and receiving prior approval from the Central Government, but changes to an AOA can be made at any time by passing Special Resolution (SR) at Annual General Meeting (AGM).

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