Friday, September 22, 2017

Memorandum of Association and Article of Association

[1] Memorandum of Association and [2] Article of Association are the documents which define duties, rights and remedies of the Company with the outsiders and vice-a-versa. 

They also define duties, rights and remedies of the Company with their members and vice-a-versa. Both the documents are dwelt at length in Companies Act 2013 as up dated from time to time, and also there are Case Laws (Court Rulings) shedding more light on these documents. Here is the table giving the comparison of the both the documents.

Memorandum of Association (MOA)
Articles of Association (AOA)
Section as per Companies Act 2013
Section 2(56) of the Companies Act, 2013.
Section 2(5) of the Companies Act, 2013.
What it defines
MOA is a document that contains all the fundamental information which is required to be submitted before Registrar Of Companies for the Registration of the company. It defines the relations and responsibilities with outsiders dealing with the Company.

 It contains:

      - Name Clause

-      Address (of the Regd Office) Clause

     - Associate Clause

-      Object Clause.
-      Liability Clause
-      Capital Clause
-     Subscription

The AOA is the document that contains the rules and regulations pertaining to internal administration of the company. It defines the relations and responsibilities with the members and between the members inter se. It defines various aspects of : Shares, Directors’ Appointment, Meetings, Accounting, Auditors, Voting, Rights and Protection of Minority Share Holders, Distribution of Dividend, Common Seal, etc.
Importance for Incorporation of the Co.
Memorandum of association is required at the time Registration of the Company. It must be registered with Registrar of Companies.
Article of association is not required for at the time of Registration of Company. A company limited by shares need not register its articles, in such a case table A applies.
Access to Public
Public document
Public document
The modification or revision in the MOA can be made after passing the special resolution at the Annual General Meeting / Extra Ordinary General Meeting with prior approval of the Central Govt.
Alterations in articles of association are done simply by passing the special resolution at the Annual General Meeting/Extra Ordinary General Meeting.
Effective Date of the amendment
Amendments can take effect only prospectively (i.e. after the date of approval of the Amendment) and not retrospectively.
Amendments can take effect retrospectively (i.e. it can become effective from the date which has already passed before the amendment was approved) if the amendment itself provides for retrospective effect.

It defines the objects, scope, powers and area of operation of the company. A company must act within what is stipulated in MOA. Acting beyond these will be ultra vires for the Company.

It defines rules and regulations for the internal administration and management of the company. It describes the right, responsibilities, powers, duties, etc of the members along with information regarding the accounts and audit of the company.

In case of any conflict between the two, MOA takes precedence.

In case of any conflict between the two, MOA takes precedence as the AOA emanates from MOA.

Ultra Vires Acts
Acts beyond the powers defined in MOA are ultra vires and void entailing serious implication for the Company and the outsiders connected in such acts. Such acts cannot be ratified even by the share holders.
Acts beyond the AOA are simply irregular but not void. It can be ratified by the share holders with due process.

Format and Content
Company Law prescribes the format and content of MOA as under:
-must be printed
-must be divided in paragraph
-paragraph must be numbered
-must be signed by at least 7 persons (in case of Public Ltd Co) and at least 2 persons (in case of Private Ltd Co) in the presence of a witness.
No stipulation under Company Law.
Presumption of Constructive Notice
Law presumes that a person dealing a company is deemed to have knowledge about the rules laid down in MOA of the Company as it is a Public Document available for inspection on payment of nominal fees to Registrar of companies.
Presumption of Constructive Notice is presumed by law as similar to MOA.

21st Sept, 2017.

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