Difference Between Memorandum of Association and Articles of Association
Both the Memorandum of Association (MOA) and the Articles of Association (AOA) are the constitutional documents of a limited liability company or an organization. These vital documents offer all necessary pieces of information to the shareholders/members, creditors, investors, and others, about the company and its shareholders, its objectives and business policies, its relationship with shareholders and the outside world, and all provisions and regulations for the internal and external management of its business affairs. The Sections of the Indian Companies Act of 2013, which deal mainly with MOA and AOA of a limited liability company are Section 4, 5, 13, 14, 6, 10, 15, etc.However, there are certain significant differences between the MOA and AOA of a company or organization. This webpage now informs the broad difference between memorandum of association and articles of association of a company, with a view to facilitate well-informed and perfect drafting of these two vital documents. The key and major differences between the Memorandum of Association (MOA) and the Articles of Association (AOA) of a company or organization, are the following:
- Definition: --- The MOA is the supreme constitutional document of a company/organization which contains all fundamental information about the establishment and objectives of the entity, including its ambit of activities, distribution of shares, and the provisions governing its relationship with the shareholders and the outside world. On the other hand, the AOA of a company/organization is the subsidiary constitutional document which covers every rules, regulations, powers, and responsibilities related with the management and overall governance of its business and internal affairs.
- Status: --- The MOA is the supreme constitutional document of a company or organization, superior to its AOA. The articles of the AOA must strictly comply with the activities and objectives given in the MOA of the company/organization.
- Content: --- The MOA contains information related with the need and objectives of establishment of the concerned company or organization at the specified place, distribution of its shares, and its relationship with shareholders and external world. As per the Section 4 of the Indian Companies Act of 2013, the MOA must contain the prescribed six clauses. On the other hand, the contents of the AOA are mainly related with the administration and management of its internal affairs and shareholders/members, and this subordinate document may be framed as per the individual requirements and discretion of the company. The Section 5 of the Indian Companies Act of 2013 gives information about the possible and permissible contents of the AOA.
- Objective: --- The main and ultimate objective of the MOA is to offer clear information about the permitted aims, objects, and powers of the company/organization to its shareholders/members, creditors, investors, etc. Thus, the MOA gives answers to every What, Where, Who, and Why associated with the concerned company/organization. Whereas, the AOA gives information about the rules, regulations, and responsibilities associated with its people and activities, mainly for the purpose of the internal management of the company/organization. Thus, the main objective of the AOA is to inform people about how the concerned company is run, governed, and owned perpetually.
- Registrability: --- The MOA is a compulsory document for formation and incorporation or a company or organization, and therefore, this MOA must be submitted to the concerned Registrar at the time of registration. On the other hand, the AOA may be an optional document for registration of any specific company or organization, and therefore, the AOA may not be filed with the Registrar at the time of registration, however a company may file it also voluntarily with the MOA at the time of registration.
- Power: --- The MOA is the supreme and dominant document of a company or organization, and therefore, every rule or provision stipulated in the AOA must be in close conformance to the MOA. Any rule or provision in AOA, as opposed to the MOA, is regarded as invalid. In case of any contradiction between the MOA and AOA regarding any specific clause, the MOA shall prevail over the AOA. Again, the AOA is mainly concerned with the internal management of its people and affairs, and the relationship between the management and its shareholders. On the other hand, the MOA is concerned with both the internal and external powers of the company, and also the relationship of the company with the outside world.
- Alteration: --- Making any alterations or rectifications in the MOA of a company is more hard and tough than that in the case of the AOA. For making any alterations in the AOA of a company, requisite only is passing a Special Resolution at the Annual General Meeting (AGM) of the company. But in case of any alteration in the MOA, the company is also required to get a previous approval to do so from the Central Government or the Company Law Board (CLB), prior to passing a special resolution in this favor at the AGM. The Section 13 of the Companies Act of 2013 deals with the provisions for making alterations in the MOA of a company; while the provisions for making alterations in the AOA are described in the Section 14 of the Act.