Difference Between Memorandum of Association and Articles of Association

The Memorandum of Association (MoA) and the Articles of Association (AoA) are two essential legal documents that play a crucial role in a company. While both are significant, they differ conceptually, functionally, and legally in their purposes, scope, and importance.

Meaning of Memorandum of Association (MOA)

A Memorandum of Association is a legal document needed in the incorporation process of a company, where it sets out its most important form. It defines the objects of a company, the field of acts that the company may conduct, and the agreements between the members and the general public. Further, it provides certain information about the company such as name, address of the registered office, and authorized capital. Furthermore, it sets out the details regarding the members' liability and intends to state which businesses it will operate. The MOA thus serves as a bedrock for the company's foundation and validity in the eyes of law. It is a public document accessible to that public, which is interested in an orientation upon the structure of the company.

Purpose and Scope of Memorandum of Association

The MoA contains the basic objectives, powers, and scope of operation for a company. It forms the charter for a company that defines its boundaries externally and states its name, registered office, objects, and authorized capital. The MoA sets the company's boundaries with the external world; it states what it can and cannot do.

The Memorandum of Association (MOA) contains the following key clauses:

Name Clause: Gives a specific name of the company to avoid duplication and to qualify for the name reserved to it by the law.
Registered Office Clause: Declare the situation of company’s registered office, defining its jurisdiction.
Object Clause: Outlines the primary and secondary goals for which the company is established.
Liability Clause: Affirms the responsibility of the company members, which can be limited by share, guarantee or has no limit at all.
Capital Clause: Defines the company’s share capital and its breakdown into shares of a fixed nominal value.
Subscription Clause: Has subscribers’ undertaking stating that they will become the company and subscribe to the minimum number of shares.

Meaning of Articles of Association (AOA)

The Articles of Association (AOA) is defined as a legal constitution which states about all the legal policies and provisions concerning a company. It defines what a director can or cannot do, how board meetings should be conducted, and what a shareholder can or cannot do. The AOA works alongside the MOA, but it has provisions and details of the internal management of the company. It explains how organizational decisions are made, how new equity stake is floated, and also the approach to use in the resolution of emergent conflicts. The AOA protects efficient operation by setting a structure for routine business. It may be made to agree with the company’s requirements, only if it is legal.

Purpose and Scope of Articles of Association (AOA)

AoA can be viewed as the regulation of the internal and managerial relations within the company. The articles define how that company will be managed and operationalized especially in matters concerning shareholders, directors and voting as well as ways and manner in which dividends shall be distributed. The AoA gives a structure on how the organization is to be managed on a daily basis and the decisions to be made with regard to the company.

The Articles of Association (AOA) typically include the following contents:

Share Capital and Variation of Rights: Provisions concern ing the issue, transfer and variation of shares as well as shareholders’ rights.
Directors and their Powers: Regulations of the appointment and removal of directors, their authority as well as responsibilities.
Meetings and Proceedings: Procedures on general and board meetings which include notice, quorum and voting.
Dividend and Reserves: The policies for declaration of dividends and distribution of dividends and management of reserves.
Accounts and Audit: Regulations for accounting with the company, audits and financial statements.
Winding Up: Also, measures to be taken in case of dissolution of the company.
Borrowing Powers: Three areas regarding the restrictions imposed to the company about its capacity to borrow money and/or obtain loans.
Other Provisions: Concessions that for instance concern indemnity, arbitration, company seals, or procedural rules of internal organization.