An entrepreneur is consistently on thrilled mode when he starts a new business. There are plenty of ideas running in his mind once the business gets started. When a company gets set up, it is a legal entity, governed by the Ministry of Corporate Affairs. It becomes paramount for an entrepreneur to know the dos & don’ts of the legal provisions of a company after registration. A company is mainly governed by two principal documents commonly known as ‘Memorandum of Association’ which is also called as company’s charter document and ‘Articles of Association’ which describes the company’s set of rules and regulations. Consequently, drafting of these documents is on one of the most crucial step in any company. Let us know 15 interesting differences between MOA and AOA of the Company. First lets have a detail note on meaning and role of Articles of Association and Memorandum of Association of the Company.
MOA is an abbreviation for “Memorandum of Association” of the Company. It is the supreme document of the company. No company can be registered without MOA of company. MOA sets out boundaries for companies beyond which a company cannot carry on the business activity. Any activity carried out by the company beyond the activities as drawn out in MOA, then it shall be considered as void. The crux of MOA is to inform the shareholders, creditors and other parties about the various spheres of the company.
As per the provisions of Companies Act, 2013, a Memorandum of Association of the company shall cover following contents of MOA. There are three MOA clauses
The name clause of MOA consist of name of the company like below-
“The Name of the Company is………………….ABC Private Limited.”
Seeing at the name clause of MOA, one can determine whether it is a Private Limited company or public limited or any other. Due care must be taken to ensure that the name chosen for the company is not identical to any of the existing name of the company. Also the name selected must be unique.
Situation clause mentions the name of the state in which the registered office of the company is situated. This clause allows to make oneself aware about the state in which the company is registered. As every state in India has separate Registrar office to take care of companies from legal point of view.
In MOA situation clause appears as under-
“The Registered office of the company will be situated in the state of………………………….”
This is the 3rd clause in the moa of company. Object clause of the company determines the motive behind formation of the company. Usually this object clause of the company is not altered by companies, so it becomes quite crucial to draft it and needs expertise and precision. The company cannot carry on any activity beyond the objects as mentioned in the MOA clause. If the company acts any activities which are not permitted by its moa then it will be termed as ‘Ultra Virus’ and cannot be ratified even by the members.
Object clause can reflect as under in MOA of the company-
3(a) the objects to be pursued by the company on its incorporation are-
3(b) Matters which are necessary for furtherance of the
It is the 4th clause in MOA of company. It determines about the liability of the members of the company. It can either be limited by shares or by guarantee. Liability clause is omitted in case of an unlimited liability.
Liability clause appears as under in MOA of the company-
Capital clause is the 5th clause in MOA. It defines the capital structure of the company bifurcating into no. of shares, divided into, of Rs each etc…Any kind of special rights and privileges for any shareholders are mentioned here.
Capital clause in MOA is as under-
“The share capital of the company is rupees………………..divided into………………..Equity shares….. of Rs …….. each”
The subscription clause consists of-
AOA stands for Articles of association of the company. On incorporation, every company needs a set of rules and regulations to manage its internal affairs. AOA is an internal document of the company. It constitutes the internal management of the company and motives to carry out the objectives as mentioned in the memorandum.
AOA is a detailed document consisting of rules and regulations with regards to board of directors, share capital, voting rights, accounts etc- Contents of AOA as per table F of the Companies Act, 2013 are as follows.
Definition clause in AOA should define whether it is a Private Limited Company or Public Limited or any other company.
A company may anytime alter its capital to increase the share capital from time to time depending upon the needs of the company simply by passing special resolution or ordinary resolution in the meeting of the company.
The company may anytime on recommendation from the board, capitalize any part of the amount of any of the company’s reserve accounts, or to the credit of the, profit and loss account, or otherwise available for distribution.
The company may any time buy back its own shares or other specified securities at a pre-determined price.
i) The Board shall provide for the safe custody of the seal.
(ii) The seal of the company shall not be affixed to any instrument except by the authority of a resolution of the Board or of a committee of the Board authorised by it in that behalf.
The company in general meeting may declare dividends, but no dividend shall exceed the amount recommended by the Board.
Open for inspection to the members or any other of the company provided at a determined time and conditions.
Every officer of the company shall be indemnified out of the assets of the company against any liability incurred by him in defending any proceedings, whether civil or criminal.
The winding up process can either be followed by the-
Basically company can be wound up voluntarily or Compulsory Winding up. The procedures for both are laid down in the Companies Act, 2013
|No||Grounds of Difference||MOA||AOA|
|1||Meaning||MOA means Memorandum of Association of the Company. It contains all fundamental information of the company||AOA means Articles of Association of the Company. It contains rules of the company.|
|2||Registration||It is mandatory to register MOA at the time of registration.||For AOA it is not mandatory to register the document with the Registrar.|
|3||Superiority||MOA is the prime document of the company. It is also called the charter of the company.||AOA is the subsidiary document of the Company.|
|4||Content||MOA consists of all types of activities to be carried out by the Company||AOA is the set of rules and regulations of the company to be adhered.|
|5||Relation||MOA connects a relationship between the company and the outside world||AOA connects a relationship between the company and the board of directors and members|
|6||Regulatory body||MOA is regulated by the Companies Act, 2013||AOA is regulated by the Companies Act, 2013 and its memorandum of association.|
|7||Alteration||MOA cannot be altered easily whereby requires prior approval of central government or NCLT||AOA can be altered easily simply by passing a special resolution.|
|8||Doctrine Of Ultra Virus||All activities of the company beyond the scope of its memorandum are deemed to be ultra vires and cannot be ratified||All activities of the company beyond the scope of its articles are also void, but they can be ratified later by the members of the company.|
|9||Validity of Contract||Any contract executed against the provisions of MOA shall be considered as void.||Any contract executed against the provisions of AOA shall be considered as void.|
|10||Retrospective effect||MOA cannot be amended with retrospective effect.||AOA can be amended with retrospective effect.|
|11||Legal sections||Sec 4 of the Companies Act, 2013 defines MOA of the company||Sec 5 of the Companies Act, 2013 defines AOA of the company|
|12||Information||Powers and objects of the company||Rules of the company|
|13||Clauses||Memorandum of Association consist of Six Clauses||Articles of Association of the company can be drafted as per the choice of the legal expertise.|
|14||Status||It is Major document||It is subsidiary document|
|Persuade||Memorandum of Association will always persuade over Articles of Association||Articles of Association cannot prevail over Memorandum of Association.|