Introduction
Each entrepreneur looks forward to the first stage of launching a company: company registration as a legal entity. Important legal documents that specify acceptable activities and limitations provide direction for businesses. While the Articles of Association (AOA) outline the company's internal governance guidelines, the Memorandum of Association (MOA) outlines the scope of the company's operations and interactions with the outside world. It is important to know the differences between MOA and AOA since together they set the foundation and operating rules required for forming a private limited company.
Meaning of MOA (Memorandum of Association)
Memorandum of Association is one of the key documents for company registration. The MOA must include a description of every activity the company is involved in. To put it simply, the Memorandum of Association establishes a connection between the business, its operations, and its interactions with shareholders, creditors, and investors. Only the actions specified in the MOA are subject to liability on the part of the corporation.
Following are the Clause related to the Memorandum of Association
- Name clause: All company-related information, such as the firm's name at the beginning of an article, must be included. This includes the company's legal status (LLP or public limited company) and the industry in which it continues to operate.
- Liability clause: If a company is registered under unlimited liability, it may choose to omit this clause, which contains all the information about member liability in the company.
- Situation clause: This clause contains information on the company's registered office. If the company changes its registered office, the information must be updated in the clause.
- Capital clause: In this clause, the maximum amount of capital that a corporation may raise is specified, along with the share distribution schedule. The capital clause lists the benefits and rights granted to the shareholders.
- The object clause: This clause outlines the purpose behind the formation of the organization. This is usually not adjusted or modified. Because of this, the layout of this part is crucial and needs to be done carefully and with thorough knowledge. Any activity that isn't covered by the MOA's object clause is off-limits to the corporation. Members do not approve of such actions and are known as ultraviruses (beyond capacities).
- Subscription clause: This clause mainly includes names, addresses, and contact details of the first subscribers. A private limited firm must be formed by at least two individuals. A public limited company needs to have seven members. These subscribers must accept at least one share.
Meaning of AOA (Articles of Association)
This supplemental document outlines the management, rights, and obligations of the organization as well as its internal operations. It includes various guidelines and regulations in addition to the bylaws of the firm. The contents of the AOA align with both the Companies Act and the MOA.
A company cannot give up these capabilities. It is possible to amend the article to address topics that are not covered in the memorandum. To adjust, a specific resolution is needed.
Following is the content related to the Articles of Association
- Details about a company's share: include conversion, transfer, and forfeiture information in great detail. Regulations of minimum subscription and fully paid share conversion.
- Details on the responsibilities, rights, and dismissal of directors: These documents contain comprehensive information on the responsibilities, authority, and appointments. Apart from this, the board of directors borrowing rights and the process for removing directors are covered.
- Details on conducting meetings and holdings: Detailed descriptions are provided for holding meetings, sending out notices, and keeping minutes. Rules and regulations about the proxy, voting rights, and the necessary percentage of votes for a director are mentioned.
- Rules and processes for the company's winding up: The articles may be altered if doing so serves the company's best interests. But this shouldn't go against any contracts with other parties. This is accomplished by passing a special resolution and, within 30 days of its passage, submitting a copy to the Registrar. The responsibilities of the current members shouldn't be increased in any way by this modification.
Difference between MOA and AOA
| S.NO | MOA | AOA |
| 1 | MOA is a subsidiary of the company's Act | AOA is a subsidiary of the company's Act and MOA |
| 2 | All of the company's basic details are contained in the MOA. | AOA will provide information on the policies and rights that are governed by the company. |
| 3 | In MOA, clause 6 which is needed to be filled by the company. | AOA can be prepared based on the company's preference. |
| 4 | All the company needs to be met with the MOA. | For private limited companies alone, the AOA is required. |
| 5 | MOA is required at the time of registering a company | AOA is not required at the time of company registration. |
| 6 | Any activity that isn't specified in the MOA is regarded as completely meaningless. | In the case of AOA, the activity can proceed if the shareholders have given their approval. |
Conclusion
The difference between MOA and AOA they serve different purposes. Within a company, the MOA outlines procedures, while the AOA outlines who is responsible for what. To put it simply, the MOA deals with the strategies and plans needed to accomplish goals, whereas the AOA deals with the roles and duties of individuals.
The author is a director and operations manager at Ebizfiling India Private Limited, and has led a team of 50+ professionals in CA, CMS, MBA, and retired bankers. Apart from individual experience in almost every facet of statutory compliances, law, and taxation. She can also be reached at info@ebizfiling.com
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