Under the Companies Act, 2013
1. Introduction
The Memorandum of Association (MoA) and Articles of Association (AoA) are foundational constitutional documents required for the incorporation and functioning of a company in India. While the MoA defines the scope and objectives of the company’s existence, the AoA governs the internal regulations and management of the company.
2. Memorandum of Association (MoA)
Definition [Section 2(56), Companies Act, 2013]
The Memorandum of Association refers to the document that outlines the company’s fundamental objectives and the scope of its operations. It serves as a charter for the company.
Purpose
Memorandum of Association (MoA) and Articles of Association (AoA)
- Establishes the extent of the company’s powers and operations.
- Acts as a public document to inform stakeholders about the company’s permitted activities.
- Restricts the company from engaging in activities outside its object clause (Doctrine of Ultra Vires).
Contents of MoA [Section 4]
- Name Clause: Specifies the legal name of the company. For a private company, the suffix “Private Limited” is mandatory; for a public company, “Limited”.
- Registered Office Clause: Identifies the State in which the company’s registered office is situated.
- Objects Clause:
- Main Objects: The principal business activities.
- Incidental/Ancillary Objects: Activities necessary to achieve the main objects.
- Liability Clause: Declares whether the liability of members is limited by shares, by guarantee, or is unlimited.
- Capital Clause: Specifies the company’s authorized share capital and its division.
- Subscription Clause: Contains the names of initial subscribers and their agreement to take shares.
Alteration of MoA [Section 13]
Alteration of the MoA requires a special resolution of the shareholders. In certain cases, such as a change in the registered office from one State to another, approval of the Central Government is also necessary.
3. Articles of Association (AoA)
Definition [Section 2(5)]
The Articles of Association are the rules and regulations that govern the internal management, administration, and affairs of the company.
Purpose
- Regulates the relationship between the company and its members.
- Prescribes procedures for governance such as appointment of directors, conduct of meetings, and allotment of shares.
Contents of AoA
- Classes and rights of shares
- Lien, forfeiture, and transfer of shares
- Appointment, powers, and duties of directors
- Proceedings of Board and General Meetings
- Dividend declaration and distribution
- Winding up procedures
Alteration of AoA [Section 14]
The Articles may be altered by passing a special resolution, provided such alteration is not inconsistent with the provisions of the Companies Act or the company’s MoA.
4. Legal Status of MoA and AoA [Section 10]
Upon registration, the MoA and AoA constitute a binding contract:
- Between the company and its members.
- Among the members themselves.
This binding nature ensures that members and the company are governed by the provisions of these documents.
5. Key Distinctions Between MoA and AoA
| Aspect | MoA | AoA |
|---|---|---|
| Nature | Charter of the company | Internal rulebook |
| Purpose | Defines scope of operations | Regulates internal governance |
| Priority | Supreme document | Subordinate to MoA |
| Alteration | Requires special resolution; some cases need government approval | Can be altered by special resolution |
| Filing Requirement | Mandatory for incorporation | Mandatory for incorporation |
| Binding Effect | Binds company and outsiders | Binds company and members |
6. Doctrine of Ultra Vires
Any act performed by the company beyond the scope of the object clause of its MoA is ultra vires (beyond powers) and void. Such acts cannot be ratified by the shareholders, even with unanimous consent.
Conclusion
The MoA and AoA are critical legal instruments that define the framework within which a company operates. While the MoA establishes the company’s objectives and limitations, the AoA facilitates its internal governance. Together, they form the legal foundation upon which the company is structured and managed.
