Eurion Constellation Insights: Difference Between Memorandum and Articles of Association

Unlike in case of Memorandum of Association (MOA), registration of the Articles of Association (AOA) is a non-binding requirement for a company. Section 5 of the Companies Act 2013 provides that the Articles of a company are to contain the rules and regulations for management. Accordingly, the MOA deals with the powers and limitations of the company, while the AOA deals with the powers/limitations of the management personnel. As mentioned, registration of the Articles is optional.

The terms of a MOA must fall within the purview of the Companies Act and the terms of the AOA are subordinated to both, the Act and the registered MOA. Any contravening provisions are automatically deemed invalid.

The MOA must answer 6 specific clauses and therefore, has a definite structure. The format of the Articles, however, is the prerogative of the company and can be structured as required, as long as, it does not contradict the provisions of the Memorandum.

Any subsequent amendment of Articles requires a special resolution and Central Government approval in case of conversion from private limited to public limited and vice-versa. However the amendment of a MOA is a long-winded process with more stringent requirements. In addition to a special resolution, any inter-state change in the office location requires Centre’s approval and intra-state change requires the approval of the Regional Director. Similar requirements apply on an amendment of the name and object clauses. Additional restrictions are applicable in case of change of name by a public company, which is yet to utilize the entire subscription amount raised through an IPO. Increase or decrease of the authorized capital is the only clause which needs only a special resolution.

The above material is presented as an overview and each individual requires a tailored custom approach based upon its own unique set of circumstances. An experienced consultant will make you see all practical and legal fine prints before integrating them into your business. We are a wide scale service provider, assisting from business planning and strategy formation to funding and legal matters. Please visit our website for details about our full line of services or write to us.