A comparative overview of the Memorandum and Articles of Association under the Companies Act, 2013, highlighting their distinct roles in company governance.
Introduction :
As per the Companies Act, 2013, every company must have two main important documents which are the Memorandum of Association (MoA) and the Articles of Association (AoA). Both the Memorandum of Association as well as the Articles of Association are very different from each other in their contents, procedure related to alteration., etc. Through this article, we can understand the differences between the two terms.
Memorandum of Association :
The term ‘Memorandum of Association’ is defined under Section 2(56) of the Companies Act, 2013. It states that, MoA of a company refers to the MoA which was originally made by the company or the MoA which was altered by the company from time to time in pursuance of any previous company law or of this Act.
An MoA is considered as a charter of a company. The main purpose for which it is framed is to define the scope and powers of a company. All companies should abide by their MoA. If any act is done by the company, which is outside the scope of its MoA, it is considered to be ultra vires.
In the case of K. Leela Kumar v. Government of India, it was held by the court that the Memorandum of Association of a company should always comply with the Companies Act. It should not contain any clause which is contrary to the Companies Act.
Contents of Memorandum of Association :
Every MoA consists of the following clauses:
- Name clause
- Registered Office clause
- Object clause
- Liability clause
- Capital clause
Articles of Association :
The term ‘Articles of Association’ is defined under Section 2(5) of the Companies Act, 2013. As per this Section, the term AoA refers to the articles which were originally framed by the company or the articles which were altered by the company from time to time in pursuance of any previous company law or of this Act.
An AoA is considered as the rule book of a company. It consists of the rules and regulations of the company. It is mainly prepared in order to maintain the internal management of the company.
In the case of Shyam Chand v. Calcutta Stock Exchange, it was held by the court that the articles of association of a company should never override the clauses which are contained in the memorandum of association of the company.
Difference Between Memorandum of Association and Articles of Association :
These are the following points of difference between the memorandum and articles of association:
| Memorandum of Association | Articles of Association |
| It is defined under Section 2(56) of the Companies Act, 2013. | It is defined under Section 2(5) of the Companies Act, 2013. |
| It defines the character of the company and the scope of its activities. | It defines the rules and regulations of the company. |
| It consists of five clauses- name, registered office, object, liability and capital clause. | The clauses vary from one company to another. |
| It is the main document of the company and is only subordinate to the Companies Act, 2013. | It is a subsidiary document of the company and is subordinate to both the Memorandum of Association and the Companies Act. |
| It defines the relation of the company with outsiders. | It defines the relation of the company with its own members. |
| It cannot be altered without the approval of a statutory authority. | It can be altered without any approval of the statutory authority by passing a special resolution. |
| Acts beyond MoA cannot be ratified. | Acts beyond AoA can be ratified by the members if they don’t violate the MoA. |
Why is This Important ?
It is important to understand the difference between MoA and AoA as MoA defines the integral and fundamental objectives of the company whereas the AoA governs the internal management and operational rules. Understanding this will help the companies operate within their legal boundaries and maintain clear internal governance.
Conclusion :
Therefore, both the memorandum and articles of association of a company are very essential for effective working of a company. Both of them are supplementary and complementary to each other. A clear understanding of both documents is essential not only for the promoters and members of the company but also for legal practitioners and regulators to ensure compliance, transparency, and effective corporate functioning.
Sources :
READ ALSO – The LawGist – Ultra vires
WRITTEN BY: SHIVANI
EDITED BY: NANCY SHARMA
