Drafting Memorandum of Association (MoA) for a Company in India

When a company is created, it needs to define its authority and certain terms, which it shall adhere to in its day-to-day processes. This document is known as the Memorandum of Association (MoA). In addition, it is also known as the ‘charter of companies’.

An MoA for a company in India defines the scope of the organization’s activities, the goals for which it has been created, states the scope of its authority and the relationship of the company with the outside world.

Under Section 2 (56) of the Companies Act, 2013, a memorandum refers to a memorandum of association of a company as originally framed or as altered from time to time in pursuance of any previous company law or of this Act.

Contents of an MOA

An MoA must include certain clauses that would serve as the way as per which the company shall work over the years. The clauses that must be included in an MOA are:

• Name Clause: This states the company’s name that ends with a ‘Limited’. If the company is a public company, it should end with ‘Private Limited’.
• Object Clause: This refers to the objects that the company will deal with. When the company expands to include and integrate more objects over time, it may change this clause.
• Situation Clause: This defines the geographical constraints of the organization while mentioning the state in which the company’s registered office will be situated.

Note: As per the Companies Act, 2013, only main objects and objects that are ancillary to main object are covered in the situation clause.

• Capital Clause: It specifies the amount of share capital invested by the company, the registered number of shares and the way the shares are divided. If the company in a one-person company, the founder shall become a member of the company.

Note: As per the Companies Act, 2013, there is no limit for the amount of authorized capital that a company can have in India.

• Liability Clause: It states the liability of the shareholders of the company depending on whether it is a limited, unlimited or a state-owned company.
• Subscription Sheet: The details of initial subscribers such as their names, addresses and contact information are mentioned in the subscription sheet of the MOA.

Note: While at least 2 people are required to create a private limited business, 7 members are must for a public limited company. Such subscribers are required to have at least one share.

Alteration of MOA

• Under Section 13 of the Companies Act, 2013, an MOA can be altered any time, subject to approval of members of the company in a General Meeting.
• The name clause, situation clause, object clause, and capital clause of an MOA may be altered over time.

Articles of Association

Within a company, the Articles of Association (AoA)  is a document that comprises of internal detailed governing aspects of the company’s organization and includes shares (issue and rights attached), details in manner of holding company meetings, the role and powers of the directors of the company.

The ‘Article of Association’ are defined under Section 2(5) of the Companies Act, 2013 and include all the rules and regulations that govern a company policy.

Note: As per the Companies Act, 2013, each company must create their own AOA.

MOA and AOA Tables as per Companies Act, 2013

The format of an MOA is specified in Table A to Table E depending upon the type of the company.

• Table A: MoA of a Company Limited by Shares.
• Table B: MoA of a Company Limited by Guarantee and Not Having a Share Capital.
• Table C: MoA of a Company Limited by Guarantee and Having a Share Capital.
• Table D: MoA of an Unlimited Company and Not Having Share Capital.
• Table E: MoA of an Unlimited Company and Having Share Capital.

The structure of an AoA is specified in Table F to Table J varying upon the type of the company.

• Table F: AoA of a Company Limited by Shares.
• Table G: AoA of a Company Limited by Guarantee and Having a Share Capital.
• Table H: AoA of a Company Limited by Guarantee and Not Having Share Capital.
• Table I: AoA of an Unlimited Company and Having a Share Capital
• Table J Articles of Association of an Unlimited Company and Not Having a Share Capital.

Differences between MoA and AoA

Basis of Comparison	MoA	AoA
Meaning	Contains all fundamental information required for the incorporation of the company.   Defines the constitution of a company.	Contains all the norms, rules & regulations that governs the company, its administration & day to day management. Each company should have its own articles. It contains all the necessary information about the company’s internal affairs & management.
Content	Encloses key details necessary for the company’s incorporation.	Defines rules & regulations of the company. Defines duties, powers, liabilities, rights of individuals associated with the company. Includes rules & regulations regarding the management of the company, such as the powers & duties of the directors, the procedures for holding meetings & voting, rights & responsibilities of shareholders.
Retrospective effect	Cannot be amended retrospectively.	Can be amended retrospectively.
Obligatory/Non-Obligatory	Mandatory for all companies.	Public share company can use Table A in place of an AoA.
Status	It is the supreme legal document & subordinate to the Companies Act.	AoA is subordinate to the MoA & the Companies Act.
Relation	Connects the relationship between the company & the outside world.	Connects a relationship between the company & the board of directors & members.
Contents	Contains five mandatory clauses.	Contains provisions as per requirements of the Company.
Acts outside the Scope	All activities of the company beyond the scope of its memorandum are deemed to be ultra vires & cannot be ratified.	All activities of the company beyond the scope of its articles are also void, but they can be ratified later by the members of the company.
Section under Companies Act, 2013	Sec 4 of the Companies Act, 2013 defines MoA of the company.	Sec 5 of the Companies Act, 2013 defines AoA of the company.
Validity of contracts	Any contract executed against the provisions of MoA shall be considered void.	Any contract executed against the provisions of AoA shall be considered void.
Authority	It will always persuade over AoA.	Cannot prevail over MoA.

Similarities between MoA & AoA

• Both outline the rules and regulations that govern the company, such as its goal, powers and the rights and duties of its members and shareholders.
• Both are filed with the Registrar of Companies when the company is created to register it and make it a legal entity.
• Both can be amended or altered by the members and shareholders of the organization, subject to specific legal requirements and procedures.
• Both play a vital role in explaining the relationship between the company and its members and shareholders.
• Both are public documents. Both members of the company and outsiders can get a copy of these documents and inspect them by paying the prescribed fee in the Registrar’s office.

 

Conclusion

Both MoA and AoA are vital documents for the company and are publicly available for anyone to review and learn more about the organization. It is imperative to define clear and concise rules and regulations in these drafts to ensure all work done in the organization is in accordance with its goals.