Understanding the Difference between MOA and AOA

Companies in India are governed by the provisions of the Companies Act, 2013. Apart from that, each company that is incorporated in India, is also governed by the provisions of its charter documents, as drafted by its shareholders. The idea of companies being governed by the MOA and AOA in company law gives way to the benefit of a separate legal existence for the company. Moreover, as a result, pvt ltd company registration gained popularity. The Memorandum of Association and Articles of Association are two most important documents of the company. So, it is vital to understand all the aspects of these two documents. Hence, in this blog we focus on deciphering the difference between MOA and AOA. At a glance, they seem similar, but knowing the comparison and the details of how MOA vs AOA works, is really important for potential company owners.  

What is MoA and AoA?

MoA is an abbreviation for Memorandum of Association, and AoA stands for Articles of Association. Collectively, the MoA and AoA govern all the areas of a company. These are the key documents required for company registration. Also, they safeguard and structure your business, helping in establishing the company’s identity, working methodology, and goal.

What is Memorandum of Association?

As per the Companies Act, 2013, a memorandum covers the following essentials;

Name Clause

• Is usually written in the opening paragraph of the article.
• States the name under which the company functions.
• States whether the company is a private limited or a public limited.

Now, there are certain key points to keep in mind while choosing the name of the company. They are;

• Having a unique name and not identical to an existing company.
• Not having any offensive words, connotations, or “sensitive” expressions that may offend any cultural or religious community.
• Not indicating a connection with the government or local authorities unless you have a permission to do so.

Registered office clause

This clause mentions the State in which a company has its registered office. If the future demands changing of registered office address, then the same must be updated in it.

Also Read: What is private limited company?

Object Clause

This clause defines the purpose for company formation. This is usually not altered or changed. Hence drafting of this clause is very crucial and should be done with precision and expertise. The company cannot carry on any activity that is not part of object clause of MOA. Such activities are Ultra Virus, which means they’re beyond the powers of a company.

Liability clause

This clause states the liability of members of the company. You can limit your liability either by shares or guarantee. When there is no limitation on liability, you dont need to add anything in this clause. Hence, it is the duty of company promoters to fill in appropriate details in the liability clause of MOA. 

Capital Clause

This clause specifies the minimum paid up capital and maximum amount of capital a company can raise along with its distribution into shares. The company can only secure a specified capital amount mentioned in this clause. Any special rights or privileges given to shareholders are a part of this clause.

Also Read: Separate Legal Existence of a Company

Subscription clause

This clause has the names, addresses and the details of its first subscribers. A private limited company needs at least two members. Public limited companies will have a minimum of seven members. It is mandatory for these subscribers to take at least one share.

Articles of association in Company Law

This is the secondary document playing a vital role in defining the company’s internal workings, their rights, duties and management. It contains the by-laws and other rules & regulations that a company runs by. The contents of AoA remain in sync with the MoA and the Companies Act. To see the difference between MOA and AOA, it is vital that you understand the different things that both of the documents cover individually. So, before moving on with the MOA v/s AOA comparison, you will have to know the components of AOA.

Contents of Articles of Association

Details regarding the shares of a company

• Classes and valuation of shares.
• Transfer, conversion, Lien, and forfeiture of shares.
• Rights attached to the shares and rules about the alteration of capital.
• Rules regarding the minimum subscription and conversion of fully paid shares into stock.

Details regarding directors’ rights, duties, and their removal

• Directors appointment, powers, and duties. Borrowing rights of the Board of Directors and the procedure to remove them.

Information regarding holding and conducting meetings

• Conducting Meetings, maintaining minutes, and sending out notices. It also states rules regarding voting rights and proxy that includes quorum required with the percentage of votes with directors. It mentions the accounts & audit, and appointment and remuneration of auditors.

Process and rules regarding winding up of the company

It is possible to make alterations in the articles if that benefits the company. But that should not be in contradiction with any third-party contracts. You can do this alteration by passing a special resolution by filing a copy of it with the Registrar, within 30 days of its passing. Such alteration should not, in any way, increase the liabilities of its existing members.

MOA vs AOA : Comparison

	MoA	AoA
1.	Defines the constitution of a company.	A set of rule and regulations governing the company’s working.
2.	Defines the objectives, powers and constraints of the organization.	Describe powers, duties, rights and liabilities of individuals associated with the organization.
3.	Six clauses are mandatory.	Its drafting is as per the requirements of the organization.
4.	It is a mandatory document for all the companies.	Can opt for Table A instead of AoA in public limited company by shares.
5.	Filing at the time of company registration.	Filing at the time of company registration is optional.
6.	A supreme legal document for companies and subordinate to Companies Act.	A subordinate to the MoA.
7.	A dominant document that helps drafting AoA.	Any article in this document that contradicts the MoA is considered null and void.
8.	Cannot be amended with retrospective effect.	Can be amended retrospectively.
9.	Section 2 (28) of the Companies Act 1956 defines it.	Section 2 (2) of the Companies Act 1956 defines it.
10.	It is subordinate to the Companies Act.	Subordinate to the Companies Act, as well as is memorandum.
11.	Defines the objectives of a company.	Defines regulations with which the company will achieve objectives defined in MOA.

Importance of Understanding the Difference between MOA and AOA 

If you want to give your business your all, it is vital that you understand the complex legal issues revolving around it. The MOA and AOA, are the first agreements that any type of company enters into, with its shareholders. So, they serve a major purpose. As a result, it is important for business owners to have clarity on its meanings. In fact, not just the meaning, but the owners also need to be highly aware of the difference between MOA and AOA to stay at the top of their game. Let’s see the reasons why it is important: 

Legal and Regulatory Compliance

As these are the charter documents of a company, the company registration process cannot be complete without the submission of these documents. To correctly draft, sign and submit the MOA and AOA is the duty of the company owners. Hence, understanding all the aspects, including the differences is important to maintain the legal and regulatory compliance. 

Scope of Business

The MOA defines the scope of your business and its ancillary business activities. If you don’t understand the difference between the MOA and AOA, it may get difficult for you to maintain the activities within the scope provided. 

Roles and Responsibilities

When you fail to understand the fundamental paperwork of your company, it will be difficult to grasp the roles and responsibilities that you have to act on. Moreover, these documents will help you figure out who can be a director in a company and more. Hence, knowing the differences between MOA and AOA is vital.

Conflict Resolution

Knowing the intricacies of the MOA and AOA, including its differences can help in preventing any confusion or conflicts arising from the resolutions. Collectively,  both the MOA And AOA provide the procedure for resolving all the conflicts that may arise between the shareholders or the Board of Directors. 

Conclusion

Memorandum of Association and Articles of Association are very important documents. They help the owners to run the company with ease and help in streamlining the business. Properly defined functions and rules increase efficiency and transparency. Hence, they are indispensable for any private or public limited company.