Difference between MOA and AOA: What is MOA and AOA

An MoA is a legal document that every company needs to file during its registration. It consists of the basic details of the company with its purpose of incorporation. On the other hand, an AoA is a document that lays down the guidelines on which the company will operate. While MoA is mandatory for every company, AoA is mandatory for private companies only. In this article, we will be discussing the difference between MoA and AoA.

In this article, we will discuss the difference between MoA and AoA along with the details of the two documents. We will also discuss what is MoA and AoA as well as the components that constitute these documents.

Table of Contents

• Difference between MoA and AoA 
• What is MoA and AoA:
  • What is MoA?
  • Uses of MoA
  • Components of MoA
  • Benefits of MoA 
  • What is AoA? 
  • Uses of AoA
  • Components of AoA
  • Benefits of AoA
• Similarities between MoA and AoA
• Content-Based Difference Between MoA and AoA

Detailed Difference between MoA and AoA

The following are the difference between MoA and AoA:

Detailed Differences Between Memorandum of Association and Article of Association

• MoA defines the powers and objectives of a company whereas AoA defines the rules.
• In case of any inconsistency between MoA and AoA related to any provision, the Memorandum of Association will prevail over the Articles of Association.
• Memorandum of association consists of information about a company’s powers and objectives. On the other hand, AoA provides information about the company’s rules and regulations.
• A special resolution must be passed at the Annual General Meeting to amend the MoA  with the approval of the central government. Any amendments to the AoA can only be made through a Special Resolution (SR) at Annual General Meeting (AGM).
• During incorporation, an MoA needs to be registered with the Registrar of Companies. For AoA, the company does not need to meet such requirements, however, there is a provision for voluntary registration.

What is a Memorandum of Association (MoA)?

MoA (full form Memorandum of Association) is an important legal document that is used in the incorporation application. According to the Section 2(56) of Companies Act, 2013; ‘memorandum’ means the Memorandum of Association of a company as framed originally and altered regulatory in pursuance of any earlier company act or of this particular act. It is an important document for the registration of a company. This document defines the purpose for which the organisation was founded. Through this document, the company establishes its authority and the terms under which it works.

Uses of MoA

Every business specifies its extent of activities through its Memorandum of Association. Organizations cannot operate outside the limits of the document. In case the company goes beyond its authority, it is deemed supra vires and thus, null. It controls the interaction of a company with its stakeholders.

A memorandum helps shareholders in understanding about the business before they invest in the company’s stocks. Through MoA, shareholders can analyse the scope of investing in a business.

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Components of Memorandum of Association

An MoA has the following components:

1. Name clause: This is a clause through which the name of a company is specified. These names should not be not the same as any existing company. If the company is public, it should include the word ‘limited’ in its name. If it is a private company, then it should include ‘private limited’ in its name. 
2. Registered Office Clause: In this clause, the name of the state where your registered office is situated. Through this, the jurisdiction of the Registrar of Companies is determined. Company has to inform the Registrar of Companies about its registered office location within 30 days of incorporation or commencement. 
3. Object clause: This clause mentions the objective of formation of the company. Object clause defines the purpose and range of activities. It includes the main business of the company, objectives that facilitate the main objective and any other objective.
4. Liability clause: This clause states the responsibility of members of a company. If the company is unrestricted, then the liability is unlimited for a member. When a company is limited by shares, liability is limited by balance outstanding on their shares. If the company is limited by guarantee, the responsibility of members is limited by the amount that each partner agrees to pay. 
5. Capital clause: It mentions the share capital that has been used for registering the company. This clause mentions shares types, number of shares of every type and face value of share. Those companies that need to be listed should have a prescribed face value of shares. Other companies that do not require to be listed can assume any face value based on multiple factors.  
6. Subscription clause: This clause mentions the objective of every shareholder for the incorporation of the company. This clause also states the number of shares that every subscriber is taking up. 

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Benefits of MoA

A Memorandum of Association is an important company document that has the following benefits:

• MoA helps establish the legal identity and purpose of the company.
• This document distinctly defines the scope of a company's activities.
• MoA is an important company document that specifies the relationship between the company and its shareholders.
• The company's credibility is enhanced among investors and stakeholders through MoA.
• MoA ensures compliance with legal requirements for company registration.

What is an Article of Association (AoA)?

Article of Association (AoA) is a document that provides details on the purpose and regulations of the company’s operations. It is considered a user manual as it outlines the methodology that the company adopts for acquiring day-to-day tasks. The document has a universally similar format. It mentions the purpose, organization, share capital and provisions regarding shareholder meetings. 

Uses of AoA

Through the Articles of Association, one can understand a lot about a company. This includes the method of issuing shares, paying to divide, audit financial records, and providing voting rights. It serves as the primary source that authorities have to assess and grant a separate legal identity to the company from its stakeholders. 

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Components of Article of Association

The following are the different components of an AoA:

1. Company Name: In an Article of Association, it is important the name of the company is present. This name should be distinguishable to establish the company as a legal entity. The name must include words to specify the type of company, such as ‘Ltd.’ or ‘Inc.’.
2. Purpose: Another important component of this charter document is specifying the purpose. They need to elaborate on this purpose for stakeholders to understand what the company aims to achieve in the long term. It can be a general purpose statement or detailed information as per the rules of jurisdiction. 
3. Capital structure: It is also important to state the method used for organizing the capital structure. This represents the manner in which company confers stakes in exchange for the support of stakeholders. 
4. Corporate governance: An Article of Association also mentions the rights and responsibilities of shareholders. The liability of different members in the company varies as per the jurisdiction. Their indemnity is outlined within the AoA. The rules are legally binding once set in writing. The document may also include the frequency of meeting, dispute resolution, quorus, voting and participation.

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Similarities Between MoA and AoA

While there are some difference between AoA and MoA, there do have certain common grounds. Let us now discuss the similarities between the two. Both AoA and MoA are important company documents. These documents have certain similarities, as mentioned below:

• In terms of similarities between MoA and AoA, both require registration with the ROC (Registrar of Companies) during the time of incorporation.
• These two are the primary documents of the company that serve as the constitution of the company.
• Both are public documents that can be inspected by anyone internally and externally.

Difference Between MoA and AoA Based on Their Contents

Based on the content, the difference between MoA and AoA is as follows:

Memorandum of Association (MoA):

1. Name Clause: Specifies the company's name.
2. Registered Office Clause: States the location of the company's registered office.
3. Objects Clause: Outlines the main objectives and business activities of the company.
4. Liability Clause: Defines the extent of members' liability.
5. Capital Clause: States the authorized share capital of the company.
6. Subscription Clause: Lists the initial subscribers to the company's shares.

Articles of Association (AoA):

1. Share Capital and Variation of Rights: Details about types of shares, rights attached to them, and procedures for altering these rights.
2. Meetings and Proceedings: Rules for conducting shareholder and board meetings.
3. Directors and Management: Appointment, removal, powers, and duties of directors.
4. Dividends and Reserves: Policies on dividend declaration and creation of reserves.
5. Accounts and Audit: Procedures for maintaining accounts and conducting audits.
6. Winding Up: Procedures to be followed in case of company liquidation.
7. Indemnity: Provisions for indemnifying directors and officers.
8. Alteration of Articles: Procedures for amending the AoA.
9. Company Seal: Rules regarding the use of the company seal.
10. Borrowing Powers: Limits and procedures for company borrowings.

Benefits of AoA

The Article of Association has the following benefits:

• This document establishes rules for the company's internal management.
• The roles and responsibilities of the directors and officers are defined via the Articles of Association.
• AoA establishes the procedure to be followed for meetings and decision-making processes.
• The document provides a proper mechanism to resolve internal disputes within the company.
• AoA ensures that the company operation is smooth and efficient.

Conclusion

In short, both MoA and AoA are company documents. MoA is a constitution document for the company containing basic details. On the other hand, AoA is also a company document that contains rules and regulations for the purpose of internal management.

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