Every company must maintain two documents, also known as charter documents, at the time of company setup and operations. MOA stands for Memorandum of Association, while AOA stands for Articles of Association.
In this article, we have listed some critical differences between MOA and AOA. Have a look at these differences below.
What is a Memorandum of Association?
Under section 2(56) of The Companies Act of 2013, MOA is originally drafted or altered at the time of the company formation. This document is also known as a charter document, and the Company registrar asks for it at the time of the company incorporation.
A Memorandum of Association defines the powers, duties, objectives, scope, and authority of the company and its shareholders. The business cannot carry out activities beyond what is mentioned in the Memorandum of Association. Any act carried out beyond the ones defined in MOA is violated.
Contents of MOA
The Memorandum of Association consists of six clauses. Here are they:
Name Clause: The name clause shows the company’s name as framed initially or altered from time to time. It also shows the company’s nature (Whether an LLC or a Private Limited Company). The company’s name should not be too similar to the existing companies and should not be a trademark.
Situation Clause: It defines the location of the company (like the State) where it is situated and registered. Every State in India has a separate registrar’s office for this. MOA will show the Situation Clause as: “The Registered office of the company will be situated in the state of..”
Object Clause: As the name states, it defines a Company’s objectives. It defines the motive behind the company’s formation. Since you cannot alter the Object Clause, one must have expertise in drafting it. Beyond the objectives mentioned in the MOA, the company cannot carry out any activities.
Liability Clause: It defines the liabilities of the members of the company. If the company is limited by shares, the shareholders and owners of the company have liability only up to the unpaid shares. If the company is limited by guarantee, the owner’s liability is limited only to the guarantee given by the shareholders. The liability clause as well cannot be altered once drafted.
Capital Clause: The Capital Clause defines the capital structure of a company. It can be divided into the number of shares, dividends, etc. If there are any special shares and privileges to any shareholders, that is also mentioned in this clause.
Subscription clause: The Subscription clause consists of data like:
- The number of shares taken.
- Name, Address, Occupation, and Description.
- Details of Digital Sign and date.
- ID number of Directors, PAN details, and Passport Number.
What is an Article of Association?
Article of Association, as per section 2(5) of the Companies Act of 2013, defines the internal relationship of the company. This document is the second most important after the Memorandum of Association document. It contains the rules, regulations, and motives as defined in the MOA.
There is no pre-defined format for AOA. Companies can customize the Article of Association based on size, requirements, and needs. For example, a Public company limited by shares can opt out of AOA and instead choose table F.
Based on the type of companies, here are the tables they can opt for:
Table F – Suitable for a Company limited by shares.
Table G – Suitable for a company limited by guarantee.
Table H – Suitable for a company limited by shares and guarantees.
Table I – Suitable for a company with a share capital.
Table J – Suitable for a company without a share capital.
Contents of AOA
Here are the contents of AOA:
Share Capital Details: It contains the details of the lien on shares, classes of shares and valuation, transfer of shares, etc.
Alternation of the Share Capital: A company can alter the share capital anytime, based on its scaling. It can be decided either in an extraordinary or ordinary resolution in the company’s meeting.
Profit Capitalization: The Company can anytime capitalize any of the company’s amounts, like the money in the reserve accounts, credit of profit and loss, or any other money that is available for distribution.
Shares Buy Back: At any point, the company can buy back the shares at a pre-determined price.
General Meetings: These contain the details like meeting proceedings, adjournment of meetings, proxy, and voting rights.
Board of Directors: It consists of details like who are the first directors of the company, what is the remuneration of the company directors, who is the CEO, CFO, etc.
Seal of the Company: The company’s board provides safe custody of the seal. You shall not affix it to any instrument without permission from the board or the authority.
Reserves and Dividends: In the general meetings, the company can decide on the dividends. The cost of the dividends will not exceed the price recommended by the board.
Accounts: The accounts are open for inspection by the members but only at the determined conditions and time.
Indemnity: Every company member will be indemnified from the assets against any liability incurred by them.
Winding Up: The process for winding up can be either done by the company or by law.
Moa vs AOA
- A Memorandum of Association consists of all the crucial details for the company’s registration. At the same time, the Articles of Association is a document that contains rules and regulations for the company’s administration.
- MOA is a subsidiary of the Companies Act of 2013, while the AOA is a subsidiary of both MOA and the Companies Act of 2013.
- The clauses of MOA cannot be easily altered, while you can easily change the AOA clauses.
- MOA defines the objects and powers of the company. AOA, on the other hand, describes the rules and regulations of a company.
- Six clauses are mandatory to draft an MOA, while the AOA can be framed at the company’s discretion.
- You must register MOA along with the ROC at the time of the company’s registration. On the other hand, the company can register the AOA voluntarily.
- The memorandum of the article defines the relationship between the external parties and the company. On the other hand, the Articles of Association define the relationship between the company and its members.
- Acts done beyond MOA are void, while you can ratify actions beyond AOA based on the shareholders’ voting.
We hope this article has helped you understand the critical differences between an MOA and AOA. These two are essential documents that define the company’s future.