Memorandum of Association Vs Article Of Association

Updated on May 17, 2024
Article byWallstreetmojo Team
Edited byAaron Crowe
Reviewed byDheeraj Vaidya, CFA, FRM

What Is Memorandum of Association Vs Article Of Association?

The key difference between a memorandum of association and an article of association is that the memorandum of association is a document that contains all the bylaws and regulations of the companies. Like the company’s Bible, it is necessary for incorporating any company.

Memorandum-of-Association-vs-Article-of-Association

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But, on the other hand, the article of association is a document containing all the rules and regulations of the company which has registered itself in India and is governed by that. The memorandum and article of the association through which the companies are regulated act as a charter.

Key Takeaways

  • The memorandum of association contains all the companies’ bylaws and regulations. In comparison, the article of association possesses all the company’s rules and regulations registered and governed in India.
  • According to the Companies Act, every company must alter and draft a memorandum of association and article of association before initiating business operations.
  • These documents are what every company’s Director and the founder must prefer since they guide how the company will be in the future and what internal policies and procedures the Directors must implement during its incorporation to draw up the company’s standpoint.

Memorandum of Association Vs Article Of Association Explained

In the companies’ act, every company should amend and draft these two documents, which are vital before commencing its operations. Furthermore, these two documents are what every director and the founder of the company should look forward to, as these documents will pave the path on how the company should look in the future and the internal policies and the procedures that the directors need to lay down when the company is incorporated to lay down the perspective of the company. We will look in detail articles of association vs memorandum of association in this article.

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Infographics

Let us see the articles of association vs memorandum of association.

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Key Differences

  • The memorandum of association talks about the powers and the objectives of the company. It describes the limitations of a company and the capabilities within which the company can operate in a given scenario. On the contrary, the article of association talks about the company’s rules, which generally emphasize the internal controls and the governing of the company.
  • Once registered and submitted with the registrar of the companies act, the memorandum of association cannot be changed and amended within the company’s bylaws. On the other hand, the article of association can always be altered and amended as the scope of the internal procedures and controls of the company can always be changed retrospectively.
  • The memorandum of association is always necessary and is required within the jurisdiction of the companies act. On the other hand, the article of association is not always essential to be made and submitted to the ROC act for a company to get registered.

Example

Let us assume the example of a company A Ltd, which has been formed and will operate as a cosmetics manufacturing company. During its incorporation it is necessary to form both the memorandum and articles of association.

In this case, the memorandum will describe the objective, mission and vision of the entity. It will consist of the markets where it wishes to expand, type of products, how it will benefit its customers, future plans for expansion, etc. The articles will describe that rules and regulations that will help in operating A Ltd, the laws that will be used in case of any legal dispute, the process of settling such disputes, etc. Thus, we can clearly understand from the above example memorandum of association and articles of association in company law.

Comparative Table

This table will highlight the difference between memorandum of association and articles of association in company law.

Memorandum of AssociationArticle of Association
The memorandum of association is defined in the companies act section 2 subsection 56.The article of association is very well represented in the companies act section 2 subsection 5.
The memorandum of association must contain six clauses: object, name, domain, etc.The article of association is drafted and designed as per the choice of the company, and also not necessary to submit to get a company registered.
The memorandum of association defines the relationship between the company and the outsider’s clients, which the company needs to serve. Therefore, it always guides the relationship between the company and the outsiders the company is dealing with.The article of association regulates and directs the internal procedures of the company and its members and the limitations of each member. It mainly emphasizes how well the company is managed internally and governed through its internal policies, which are made at incorporation.
The memorandum of association is an obligatory part of the document in the companies act. Therefore, it is an obligation on the part of the directors to draft the memorandum of association for a company.A public company that is limited by shares if it does not have its article of association can instead adopt Table A present in the companies act.
 
The memorandum of association does not allow the company to act beyond its scope, which is laid in the MOA submitted at its registration.
The company’s shareholders can later easily ratify the article of association.

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