A company must prepare certain preliminary documents before
applying for company registration. The Memorandum of Association
(MOA) and Articles of Association (AOA) are two such preliminary
documents that every company must prepare. The MOA and AOA
should be filed with the Registrar of the Companies (ROC) along with
the company incorporation form.
The Memorandum of Association (MOA) and Articles of Association
(AOA) define a company’s scope of work, objectives, rules and
internal management. The MOA and AOA are two essential
documents that are the basis of the company’s constitution. They are
indispensable, and the company’s foundation stands upon them.
Therefore, the founders of a company must draft them with utmost
clarity and precision.
Memorandum of Association (MOA) of a Company
A Memorandum of Association (MOA) is a document containing
details of the company’s constitution and is the foundation of the
company’s structure. It is known as the charter of a company. It lays
down the scope of the company’s activities, objectives for which it is
formed, determine the scope of its authority and its relationship with
the outside world.
The creation of an MOA is the first step towards company
registration. During the formation of a company, the company
members must subscribe to the MOA. Subscribing to an MOA means
to put one’s mark or signature on the document as attestation or
approval of its contents.
Contents of MOA
Every company’s MOA should contain the following five clauses:
Name clause
Registered office clause
Object clause
Liability clause
Capital clause
Articles of Association (AOA) of a Company
The Articles of Association (AOA) of the company contains its rules or
bye-laws and regulations that control or govern the conduct of its
business and manage its internal affairs. The AOA is subordinate to
the MOA of a company and is governed by the MOA. Every company
must have an AOA as it plays a vital role in defining its internal rights,
workings, management and duties. The contents of AOA should be in
sync with the MoA and the Companies Act, 2013.
Contents of AOA
Details regarding the share capital
Details of director’s qualification, appointment, powers,
remuneration, duties etc.
Rules regarding company dividends and reserves
Details regarding company accounts and audit
Provisions relating to the company’s borrowing powers
Provisions relating to conducting meetings
Process of winding up of the company
Difference Between MOA and AOA
Particulars MOA AOA
Defines rules and
Defines the company’s regulations of the company.
constitution, powers, It also defines the duties,
Description
objectives, and constraints of powers, liabilities and rights
the organisation. of individuals associated
with the organisation.
It contains the provisions as
It contains the five
Contents per the requirements of the
mandatory clauses.
organisation.
It defines the relationship
It defines the relationship
Area of between the company and
between the company and
operation its members and also
third parties.
amongst members.
The drafting of AOA is
It is a mandatory document
Filing at the mandatory. However, the
that must be filed with the
time of filing of AOA with the ROC is
ROC at the time of company
registration optional at the time of
registration.
company registration.
MOA is a supreme legal AOA is subordinate to the
Importance
document and subordinate MoA and the Companies
and position
to the Companies Act. Act.
The
MOA is a dominant Any provision in the AOA
relationship
document that helps in the that contradicts the MoA is
between the
drafting of the AoA. considered as null and void.
two
Acts done The acts done beyond the The acts done beyond the
beyond its scope of MOA are void and scope of AOA can be ratified
scope cannot be ratified. by shareholders.
An alteration can be made in
the MOA only after passing a An alteration in the AOA can
special resolution in the be made by passing a
Alteration Annual General Meeting special resolution in the
(AGM) and after obtaining Annual General Meeting
prior approval from the (AGM).
Central Government.
The MOA cannot be
Retrospective The AOA can be amended
amended with retrospective
amendment retrospectively.
effect.
Both the MOA and AOA are essential documents of a company. They
help the company owners and founders run the company efficiently
and streamline its business. Hence, they are vital documents for a
One Person Company (OPC), private company or public limited
company.
What is a Memorandum of Association?
The Memorandum of Association is a legal document that serves as a
charter for a company’s formation. It is a crucial document as it
defines the company’s legal identity and purpose. According to the
Companies Act 2013 in India, a memorandum of association is one of
the documents that must be filed with the Registrar of Companies
during the incorporation process.
It sets out the fundamental and essential elements of a company,
including its name, registered office address, objectives, authorized
share capital, and liability of members. The MOA outlines the
company’s scope of activities and serves as a guide to the company’s
internal operations.
The memorandum of association must comply with the requirements
of the Companies Act and include the mandatory clauses specified by
the Act. Therefore, it is essential for entrepreneurs and business
owners to understand the significance of MOA and create it with
utmost care and attention to detail.
Purpose of MoA
The main purpose of the Memorandum of Association is to define
the legal identity and scope of activities of a company. It serves as a
charter for the company’s formation and sets out the fundamental
and essential elements of the company.
The memorandum of association outlines the company’s name,
registered office address, objectives, authorized share capital, and
liability of members. It also specifies the objects for which the
company is formed and operates.
By defining these crucial elements, the MOA provides clarity and
transparency to the company’s stakeholders, such as investors,
shareholders, creditors, and regulators. It serves as a guide to the
company’s internal operations and helps in ensuring that the
company is managed in accordance with the legal framework.
Landmark cases related to MOA
Here are some landmark cases related to MOA in India:
Ashbury Railway Carriage and Iron Co. Ltd. v. Riche (1875)
This case established the principle that the objects clause of the
memorandum of association is a fundamental document that
determines the capacity and powers of a company. The objects of
the company must be clearly stated in the MOA, and any activity that
falls outside the scope of the objects clause is considered ultra vires
(beyond the legal power) of the company.
Rayala Corporation Pvt. Ltd. v. Director of Income Tax (2016)
In this case, the Supreme Court of India held that the MOA must be
interpreted in a manner that is consistent with the provisions of the
Companies Act 2013. The memorandum of association cannot be
used to circumvent the statutory requirements or to engage in
activities that are prohibited by law.
Sterling Computers Ltd. v. M/s. M & N Publications Ltd. (1993)
This case established that the MOA of a company is a public
document that can be inspected by any person upon payment of the
prescribed fee. Any alteration or amendment to the memorandum of
association must be filed with the Registrar of Companies (ROC) and
must comply with the provisions of the Companies Act 2013.
Messer Holdings Ltd. v. Shyam Madanmohan Ruia (2019)
In this case, the Supreme Court of India held that the MOA of a
company cannot be used to evade statutory obligations. The
company cannot cite the memorandum of association to avoid
compliance with statutory requirements or to engage in activities
that are prohibited by law.
These landmark cases have played an important role in shaping the
interpretation and understanding of the provisions related to MOA in
India.
Conclusion
The Memorandum of Association is an essential document for any
company in India. It outlines the company’s objectives, powers, and
limitations, and serves as a guide for its operations.
The MOA is a public document that can be inspected by any person,
and any alteration or amendment to the memorandum of
association must comply with the provisions of the Companies Act
2013. The MOA cannot be used to circumvent statutory
requirements or to engage in activities that are prohibited by law.
Landmark cases such as Ashbury Railway Carriage and Iron Co. Ltd.
v. Riche and Rayala Corporation Pvt. Ltd. v. Director of Income
Tax have helped to clarify the legal interpretation of the
memorandum of association in India. It is crucial for companies to
understand the clauses of the MOA and their significance in order to
avoid any legal disputes or challenges.
By adhering to the regulations and guidelines outlined in the MOA,
companies can establish a strong foundation for their business and
ensure compliance with the law.
