The Memorandum of Association (MOA) and the Articles of Association (AOA) are
two important documents that play distinct roles in the formation and governance
of a company. While they both serve as foundational documents, they have
different purposes and contents. Here's a distinction between the two:
Memorandum of Association (MOA):
- Purpose: The MOA sets out the fundamental objectives and scope of activities for which the company is incorporated. It defines the company's external relationships, the scope of its business, and the nature of its activities.
- Public Document: The MOA is a public document available for inspection by anyone interested in understanding the company's objectives and scope of activities.
- Binding on Company: The MOA binds the company and its members to the activities and objectives specified in the document. The company is expected to operate within the framework of its MOA.
- Alteration: The MOA can be altered with the approval of shareholders through a special resolution. However, changes to the MOA require greater scrutiny and involve stricter compliance with legal procedures.
- Doctrine of Ultra Vires: Historically, the doctrine of ultra vires prevented a company from engaging in activities beyond those specified in its MOA. The Companies Act, 2013, significantly limits the doctrine, but the MOA still plays a role in defining the company's authorized actions.
Articles of Association (AOA):
- Purpose: The AOA lay down the internal rules, regulations, and procedures for the management and administration of the company. They deal with matters of internal governance and the relationship between the company, its directors, officers, and shareholders.
- Internal Governance: The AOA govern the company's internal operations, including the conduct of meetings, appointment and powers of directors, issuance and transfer of shares, and other internal matters.
- Binding on Members: The AOA are binding on all members (shareholders) and officers of the company. They define the relationships, rights, and obligations among these parties.
- Alteration: The AOA can be altered with the approval of shareholders through a special resolution. Changes to the AOA primarily affect the internal governance structure of the company.
- Flexible Framework: The AOA provide flexibility for a company to customize its internal rules and procedures according to its specific needs. This flexibility allows companies to adapt to changing circumstances.
The Memorandum of Association focuses on the company's external relationships,
its scope of activities, and its fundamental objectives. The Articles of
Association, on the other hand, pertain to the company's internal governance,
management structure, and operational procedures. Both documents together
provide the legal framework for a company's formation, operations, and
relationships with shareholders, directors, and other stakeholders.