15 Interesting Differences between MOA and AOA of the Company

An entrepreneur is consistently on thrilled mode when he starts a new business. There are plenty of ideas running in his mind once the business gets started. When a company gets set up, it is a legal entity, governed by the Ministry of Corporate Affairs. It becomes paramount for an entrepreneur to know the dos & don’ts of the legal provisions of a company after registration. A company is mainly governed by two principal documents commonly known as ‘Memorandum of Association’ which is also called as company’s charter document and ‘Articles of Association’ which describes the company’s set of rules and regulations. Consequently, drafting of these documents is on one of the most crucial step in any company. Let us know 15 interesting differences between MOA and AOA of the Company. First lets have a detail note on meaning and role of Articles of Association and Memorandum of Association of the Company.

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What is MOA?

MOA is an abbreviation for “Memorandum of Association” of the Company. It is the supreme document of the company. No company can be registered without MOA of company. MOA sets out boundaries for companies beyond which a company cannot carry on the business activity. Any activity carried out by the company beyond the activities as drawn out in MOA, then it shall be considered as void. The crux of MOA is to inform the shareholders, creditors and other parties about the various spheres of the company.

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Contents of MOA

As per the provisions of Companies Act, 2013, a Memorandum of Association of the company shall cover following contents of MOA. There are three MOA clauses

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A. Name Clause

The name clause of MOA consist of name of the company like below-

“The Name of the Company is………………….ABC Private Limited.”

Seeing at the name clause of MOA, one can determine whether it is a Private Limited company or public limited or any other. Due care must be taken to ensure that the name chosen for the company is not identical to any of the existing name of the company. Also the name selected must be unique.

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B. Situation Clause:

Situation clause mentions the name of the state in which the registered office of the company is situated. This clause allows to make oneself aware about the state in which the company is registered. As every state in India has separate Registrar office to take care of companies from legal point of view.

In MOA situation clause appears as under-

“The Registered office of the company will be situated in the state of………………………….”

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C.Object Clause:

This is the 3^rd clause in the moa of company. Object clause of the company determines the motive behind formation of the company. Usually this object clause of the company is not altered by companies, so it becomes quite crucial to draft it and needs expertise and precision. The company cannot carry on any activity beyond the objects as mentioned in the MOA clause. If the company acts any activities which are not permitted by its moa then it will be termed as ‘Ultra Virus’ and cannot be ratified even by the members.

Object clause can reflect as under in MOA of the company-

3(a) the objects to be pursued by the company on its incorporation are-

3(b) Matters which are necessary for furtherance of the

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D.Liability Clause:

It is the 4^th clause in MOA of company. It determines about the liability of the members of the company. It can either be limited by shares or by guarantee. Liability clause is omitted in case of an unlimited liability.

Liability clause appears as under in MOA of the company-

4. “The liability of the member(s) is limited and this liability is limited to the amount unpaid, if any, on the shares held by them”

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E. Capital Clause:

Capital clause is the 5^th clause in MOA. It defines the capital structure of the company bifurcating into no. of shares, divided into, of Rs each etc…Any kind of special rights and privileges for any shareholders are mentioned here.

Capital clause in MOA is as under-

“The share capital of the company is rupees………………..divided into………………..Equity shares….. of Rs …….. each”

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F.Subscription Clause:

The subscription clause consists of-

1. Name, Address, Description and Occupation.
2. Directors Identification Number/PAN/Passport Number
3. No of shares taken
4. Details of Digitally signed and dated

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What is AOA?

AOA stands for Articles of association of the company. On incorporation, every company needs a set of rules and regulations to manage its internal affairs. AOA is an internal document of the company. It constitutes the internal management of the company and motives to carry out the objectives as mentioned in the memorandum.

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Contents of AOA

AOA is a detailed document consisting of rules and regulations with regards to board of directors, share capital, voting rights, accounts etc- Contents of AOA as per table F of the Companies Act, 2013 are as follows.

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1.Definition of the company

Definition clause in AOA should define whether it is a Private Limited Company or Public Limited or any other company.

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2.Share Capital details

• Classes of shares and valuation
• Lien on shares
• Call on shares
• Transfer of shares
• Transmission of shares
• Forfeiture of Shares

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3.Alteration of share capital

A company may anytime alter its capital to increase the share capital from time to time depending upon the needs of the company simply by passing special resolution or ordinary resolution in the meeting of the company.

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4.Capitalization of Profits

The company may anytime on recommendation from the board, capitalize any part of the amount of any of the company’s reserve accounts, or to the credit of the, profit and loss account, or otherwise available for distribution.

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5.Buy Back of share

The company may any time buy back its own shares or other specified securities at a pre-determined price.

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6. General Meetings

• Proceedings of the Meetings
• Adjournment of meeting
• Voting Rights
• Proxy

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7. Board of Directors

• First directors of the company
• Remuneration of the Directors
• Proceedings of the Board
• Page 8 of 11
• Proceedings of the Board
• Chief Executive Officer, Manager, Company Secretary or Chief Financial Officer

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8. Seal of the Company

i) The Board shall provide for the safe custody of the seal.

(ii) The seal of the company shall not be affixed to any instrument except by the authority of a resolution of the Board or of a committee of the Board authorised by it in that behalf.

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9. Dividends and Reserves

The company in general meeting may declare dividends, but no dividend shall exceed the amount recommended by the Board.

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10.Accounts

Open for inspection to the members or any other of the company provided at a determined time and conditions.

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11. Indemnity

Every officer of the company shall be indemnified out of the assets of the company against any liability incurred by him in defending any proceedings, whether civil or criminal.

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12. Winding up

The winding up process can either be followed by the-

1. Company itself or
2. By law

Basically company can be wound up voluntarily or Compulsory Winding up. The procedures for both are laid down in the Companies Act, 2013

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Difference between MOA and AOA

No	Grounds of Difference	MOA	AOA
1	Meaning	MOA means Memorandum of Association of the Company. It contains all fundamental information of the company	AOA means Articles of Association of the Company. It contains rules of the company.
2	Registration	It is mandatory to register MOA at the time of registration.	For AOA it is not mandatory to register the document with the Registrar.
3	Superiority	MOA is the prime document of the company. It is also called the charter of the company.	AOA is the subsidiary document of the Company.
4	Content	MOA consists of all types of activities to be carried out by the Company	AOA is the set of rules and regulations of the company to be adhered.
5	Relation	MOA connects a relationship between the company and the outside world	AOA connects a relationship between the company and the board of directors and members
6	Regulatory body	MOA is regulated by the Companies Act, 2013	AOA is regulated by the Companies Act, 2013 and its memorandum of association.
7	Alteration	MOA cannot be altered easily whereby requires prior approval of central government or NCLT	AOA can be altered easily simply by passing a special resolution.
8	Doctrine Of Ultra Virus	All activities of the company beyond the scope of its memorandum are deemed to be ultra vires and cannot be ratified	All activities of the company beyond the scope of its articles are also void, but they can be ratified later by the members of the company.
9	Validity of Contract	Any contract executed against the provisions of MOA shall be considered as void.	Any contract executed against the provisions of AOA shall be considered as void.
10	Retrospective effect	MOA cannot be amended with retrospective effect.	AOA can be amended with retrospective effect.
11	Legal sections	Sec 4 of the Companies Act, 2013 defines MOA of the company	Sec 5 of the Companies Act, 2013 defines AOA of the company
12	Information	Powers and objects of the company	Rules of the company
13	Clauses	Memorandum of Association consist of Six Clauses	Articles of Association of the company can be drafted as per the choice of the legal expertise.
14	Status	It is Major document	It is subsidiary document
15	Persuade	Memorandum of Association will always persuade over Articles of Association	Articles of Association cannot prevail over Memorandum of Association.