Every company has to file a MOM (memorandum of association) document during its registration. The documents consist of the basic details of the company with the purpose of its incorporation. On the other side, an AOA ( Article of association ) lays down all the operating guidelines of the company. As the MOA is mandatory for every company but the AOA is mandatory for only private companies.
Difference between MOA and AOA
In this article, we are going to discuss the difference between MOA and AOA along with the details of both documents. We are also going to talk about the components that constitute these documents. The difference between MOA and AOA are as follow:
What is MOA and its uses?
MOA (Memorandum of association) is an important document that is used in the incorporation of a company. According to the companies act, 2013, a memorandum means the MOA of a company as framed originally and altered regulatory in pursuance of an earlier company act of this particular act. The document defines the purpose of the company for which the company was formed. In these documents, the company establishes its authority and the terms under which it works.
The use of MOM is pretty simple. Every business specifies its extent of activities through its MOA. Companies cannot operate outside the limits of the documents. In case the company goes beyond its authority, it is deemed supra vires and thus, null. It controls the interaction of a company with its stakeholders
A memorandum helps shareholders in understanding the business before they invest in the company’s stocks. Through MOA, shareholders can analyse the scope of investment in a business
Components of MOA?
An MOA has the following components:
- Name clause: The Name clause specifies the name of the company. The name mentioned should not be the same as any existing company. If the company is private, it should include “privately limited” in its name and if the company is public, it should include “limited” in its name.
- Registered Office Clause: In the Registered office clause, the name of the state where the registered office is located. Through this clause the jurisdiction of the Registrar of Companies (ROC) is determined. The registered company has to inform the ROC about the location of its office within 30 days of incorporation.
- Object clause: The objective clause mentions all the objectives of the formation of the company. It defies the purpose of activities. This clause includes the main business of the company objective and any other objective that facilitates the main objective.
- Liability clause: The liability clause states the responsibilities of all the members of the company. If the company is unrestricted, then the liability is unlimited by members. If the company has limited shares, the liability is limited by the balance outstanding on their shares. If the company is limited by guarantee, the responsibilities of the members are also limited by the amount each of the partners agrees to pay.
- Capital clause: The capital clause mentions the share capital that has been used for registering the company. It also mentions the type of shares, the number of shares types and the face value of shares. Companies that have to be listed should have a prescribed face value of the shares. Companies that do not want to be listed can assume any face value based on multiple factors.
- Subscription clause: The subscription clause mentions all the objectives of every shareholder for company incorporation. The subscription clause also states the no. of shares that are taken up by subscribers.
What is AOA and its uses?
An AOA or Article of association is a document that provides all the details of a company’s operations. It outlines the methodology that the company adopts for doing day-to-day tasks. It mentions the purpose, share capital, organisation and provisions regarding shareholders’ meetings.
Talking about its uses, through an AOA, someone can easily understand a lot about a company. The AOA includes methods of issuing shares, auditing financial records and voting rights. The AOA serves as the primary source that authorities have to grant a separate legal identity to the company from its stakeholders.
Components Of AoA
The components of an Article of Association (AOA) are:
- Company Name: In an AOA it is very important that the name of the company is present. The company’s name should be distinguishable to establish the company as a legal entity. It is required to include words in an AOA to specify the type of company it is like “Ltd” or “Inc”.
- Purpose: Another component of an AOA is to specify the purpose. It needs to properly elaborate the purpose for the stakeholders to clearly understand what the company is aiming to achieve in the long term.
- Capital structure: The process used to organise the capital structure must also be stated. This illustrates how the business grants stakes in return for the support of stakeholders.
- Corporate governance: The AOA discusses the obligations and rights of shareholders. The AOA contains a description of their indemnity. Once they are put in writing, the rules become enforceable. The document may also detail the frequency of meetings, how disagreements are settled, and other relevant information.
Similarities between Memorandum of Association and Article of Association
As we have discussed MOA and AOA differences, as well as differences there are similarities also between MOA and AOA. Both AOA and MOA are important documents for the company. These similarities are as follows:
- Legally binding in nature
- Outline rules and regulations for running a company
- Define the relationship between the company, shareholders and its members
- Filed with government agencies
- Amendable by shareholders, whenever legally required