Difference Between Memorandum of Association and Articles of Association
1. Introduction
Every company, at the time of incorporation, must have two essential documents:
Memorandum of Association (MOA) – Defines the scope and objectives of the company.
Articles of Association (AOA) – Contains internal rules and regulations for management and governance of the company.
Both are public documents and are filed with the Registrar of Companies (ROC).
2. Memorandum of Association (MOA)
Definition:
Section 2(56) of the Companies Act, 2013 defines MOA as a document that states the objectives, powers, and scope of a company.
Purpose:
Determines the boundaries within which a company can operate.
Acts as a charter of the company.
Protects shareholders and creditors by defining the company’s powers.
Contents (Section 4 of Companies Act, 2013):
Name Clause – Name of the company with “Limited” suffix.
Registered Office Clause – Location of the company’s registered office.
Object Clause – Main and ancillary objects of the company.
Liability Clause – Liability of members (limited or unlimited).
Capital Clause – Authorized capital and division into shares.
Association Clause – Declaration by subscribers to form the company.
Key Features:
External document – Mainly for outsiders.
Defines scope of business – Acts as a limit on company powers (Ultra Vires doctrine).
Cannot be altered easily – Requires special resolution and ROC approval.
3. Articles of Association (AOA)
Definition:
Section 2(5) of the Companies Act, 2013 defines AOA as a document containing rules for internal management of a company.
Purpose:
Provides rules and procedures for day-to-day management.
Governs rights, duties, and powers of members and directors.
Supplements MOA.
Contents:
Share allotment and transfer rules.
Appointment, powers, and duties of directors.
Dividend declaration procedures.
General meeting rules.
Borrowing powers and meeting notices.
Key Features:
Internal document – Mainly for internal management.
Guides company functioning – How board and members operate.
Flexible – Can be amended with special resolution.
4. Differences Between MOA and AOA
| Aspect | Memorandum of Association (MOA) | Articles of Association (AOA) |
|---|---|---|
| Nature | Charter of the company; defines scope | By-laws; governs internal management |
| Purpose | Specifies company objectives and powers | Specifies rules for internal administration |
| External/Internal | External document | Internal document |
| Alteration | Difficult; requires special resolution + ROC approval | Easier; requires special resolution |
| Legal Effect | Ultra Vires acts are void if beyond MOA | Acts beyond AOA are valid unless contrary to law |
| Reference | For outsiders, creditors, and investors | For internal management and shareholders |
| Examples | Name, object, liability, capital clauses | Share transfer rules, director powers, meeting rules |
5. Case Laws Illustrating MOA and AOA
Case 1: Ashbury Railway Carriage & Iron Co. Ltd. v. Riche (1875) LR 7 HL 653
Facts: Company entered into a contract beyond its object clause.
Principle: Contract was ultra vires (beyond MOA) and therefore void.
Significance: Shows the binding nature of MOA on company powers.
Case 2: Hickman v. Kent or Romney Marsh Sheep-Breeders’ Association (1915) 1 Ch 881
Facts: A member alleged mismanagement by the directors.
Principle: Courts held that the AOA governs internal management, and members must act according to it.
Significance: Shows the binding nature of AOA on internal operations.
Case 3: Imperial Hydropathic Hotel Co. v. Hampson (1883) 23 Ch D 1
Facts: Shareholders tried to challenge a director’s act not permitted by the AOA.
Principle: AOA binds members in internal matters.
Significance: Confirms the internal applicability of AOA.
6. Conclusion
MOA: Defines what a company can do – its objectives and scope. Acts as a charter for outsiders.
AOA: Defines how a company will do it – its rules for internal governance. Acts as a manual for insiders.
Both are complementary, but ultra vires acts beyond MOA are void, while AOA governs internal compliance and can be amended more flexibly.
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