MEMORANDUM OF ASSOCIATION :
A memorandum of association (MoA) is the most essential
document in the formation of a company as it highlights the
company’s main objectives and goals. The MoA regulates the
activities of the incorporated company in such a manner that the
company can legally undertake only those activities that are
mentioned in the MoA. This document must be signed by at least
seven members in the case of a public company and by two
persons in the case of a private company.
CONTENTS
The following are the main clauses of the MoA.
(a) The name clause: This includes the name of the company
which has already been approved by the registrar of companies.
It is the name by which the company will be known.
(b) Registered-office clause: This clause mentions the name of
the state where the registered office of the company is situated.
It is not mandatory to submit the exact address of the registered
office at this stage. However, the address needs to be submitted
within 30 days of incorporation of the company.
(c) Objects clause: This is the most important clause in the MoA
as it defines the main objective of the company for which it was
formed. The company cannot undertake activities that are not
stated in the objects clause. The objects clause is divided into the
following two sub-clauses.
(i) The main objects: This sub-clause lists the main objects for
which the company is formed. Any clause that is essential for the
achievement of the main objectives is considered valid even if it
is not contained in the sub-clause.
(ii) Other objects: Objects that are not included in the main-
objects clause can be included in this sub-clause. If a company
wants to initiate a business activity that is mentioned in this
clause, it is required to pass either an ordinary resolution or a
special resolution to get the consent of the central government.
(d) Liability clause: This clause states the liability of each
shareholder according to the amount unpaid by them for the
shares they own.
(e) Capital clause: This clause defines the authorised capital of
the company which it can raise through the issue of shares. It
also states the division of the number of shares.
(f) Association clause: This clause contains the statement by the
signatories to the MoA giving their approval to be a part of the
company. They also give their consent to buy the qualification
shares of the company.
What are Articles of Association?
When a company is formed, certain rules and regulations are laid down
along with the objectives of the company’s operations and its purpose.
These laws regulate the internal affairs of a company. There are two
important sets of documents that define these objectives and govern the
functioning of the company and its directors or internal affairs. These
documents are Articles of Association (AOA) and Memorandum of
Association (MOA). Here, we will discuss in detail the Articles of
association.
Articles of Association contain the by-laws that regulate the operations
and functioning of the company like the appointment of directors and
handling of financial records to name a few. Let’s imagine the company as
a machine. The articles of association then can be considered the user’s
manual for this machine. It defines the operations that the machine is
supposed to perform and how to do that on a day-to-day basis.
Definition of Articles of Association of a Company
As per Section 2 (5) of the Companies Act, 2013, Articles of Association
have been defined as
“The Articles of Association (AOA) of a company originally framed or
altered or applied in pursuance of any previous company law or this Act.”
Objectives of the Articles of Association
Sec 5 of the Companies Act, 2103 states that the Articles of association:
Must include the regulations for the management of the company
Include matters that have been prescribed under the rules
They do not prevent a company from including additional matters in the
AOA or from doing any alterations as may be considered necessary for the
functioning of the company affairs.
Contents of the Articles of Association
The AOA contains the rules and by-laws for the following;
Share capital:
Rights of various shareholders, share certificates, payment of a
commission, etc.
Lien of shares
Calls on shares
The process for the transfer of shares
Transmission of shares
Forfeiture of shares
Surrender of shares
Process for conversion of shares to stocks
Share warrants
Alteration of capital: Increase, decrease, or rearrangement of
capital
General meetings and proceedings
Voting rights of members
The appointment, remuneration, qualifications, powers of directors,
etc.
Proceedings of the boards of directors’ meetings
Dividends and reserves
Accounts and Audits
Borrowing Powers of the company
Provisions relating to the winding up of the company
Forms of Articles of Association (AOA)
The forms for Articles of Association (AOA) in tables F, G, H, I, and J for
different types of companies have been mentioned under Schedule I of
the Companies Act, 2013. AOA must be in the respective form.
Table F- AOA of a company limited by shares
Table G- AOA of a company limited by guarantee and having a share
capital
Table H- AOA of a company limited by guarantee and not having a
share capital
Table I- AOA of an unlimited company and having a share capital
Table J- AOA of an unlimited company and not having a share capital
Difference Between Memorandum and Articles of Association
Parameters of
Difference
MOA AOA
Between MOA
and AOA
The purpose of the
It defines the rules and
Memorandum of
regulations that govern
Association is to define the
The Purpose the internal management
objectives of a company
of the company for
and the conditions for its
achieving its objectives.
incorporation.
It defines the relationship
It defines the relationship between the members of
Parties
of the company with the the company amongst
Concerned
external parties themselves and with the
company
AOA can be altered by
MOA can be altered only
Alteration passing a special
under special conditions
resolution
Contents MOA must contain all the AOA can be framed as
six clauses of the per the discretion of the
Memorandum of company
Association as specified
under the companies act
Any acts beyond the scope Acts that are ultra vires
of the MOA are considered the AOA company but
ultra-vires and void. Such are not ultra-vires MOA
Ratification
acts cannot be ratified by can be ratified by a
the unanimous votes of special resolution of the
the shareholders. shareholders.
It is mandatory to register
The filing of the AOA is
the MOA with the registrar
not mandatory. The
Registration of companies at the time
company may or may not
of the company
file it.
registration
AOA is a subsidiary of
MOA is a subsidiary of the
Subsidiary both the Companies Act
Companies Act
as well as the MOA
A public company limited
Every company must have by shares can opt to
Obligatory
an MOA have Table A in place of
AOA
Memorandum of Articles of Association
Section Under
Association meaning has meaning has been stated
the Companies
been stated under Sec under Sec 2(5) of the
Act
2(56) of the Companies Act Companies Act
CERTIFICATE OF INCORPORATION :
The certificate of incorporation is the certificate which specifies
the birth of the company as a separate entity. A company legally
comes into existence or becomes a separate legal entity on the
date stated in its certificate of incorporation. For instance, if the
certificate is issued on September 30 and the date mentioned on
the certificate is September 27, then the company is said to exist
since September 27 only. The certificate of incorporation acts as
compelling confirmation of the regularity of the incorporation of
the company even if there is any flaw in its registration process.
A company can immediately commence its business once its
certificate of incorporation is issued. Thus, the certificate of
incorporation is conclusive evidence of the existence of a
company.