If you have newly registered your company, you would have received MOA & AOA from your professional. Have you ever wondered what the differences are between the two documents? 

The Memorandum of Association (MOA) and Articles of Association (AOA) form the foundational legal documents of a company under the Companies Act, 2013. These documents define the scope, operations, internal management, and governance of the company. While the MOA provides a framework outlining the external scope of the company's operations, the AOA governs the internal workings and management of the company. Both are essential for the incorporation of a company and serve as a binding document for shareholders and the company itself. This GrowthX article by CA Manish Mishra covers the differences between MOA and AOA, the procedure for their alteration, and their adoption under the Companies Act, 2013. It also explores the relevant sections of the law that guide these aspects.

Table of Contents

Overview of MOA and AOA

Definition of MOA

The Memorandum of Association (MOA) is a document that outlines the basic framework of a company’s existence. It defines the company's name, registered office, objectives, liability, and the amount of authorized share capital. As per Section 4 of the Companies Act, 2013, every company must prepare and register an MOA when being incorporated.

Definition of AOA

The Articles of Association (AOA) are a document that defines the internal regulations and governance of the company. It specifies the rules for managing the company, roles of directors, and decision-making protocols. As per Section 5 of the Companies Act, 2013, the AOA governs the relationship between the shareholders and the company as well as among the shareholders themselves.

Key Differences Between MOA and AOA

Memorandum of Association (MOA)

Purpose of MOA

The MOA is considered the charter of a company. It defines the company’s relationship with the outside world and lays out the following essential components:

• The company’s name.
• The address of the company’s registered office.
• The scope of the company’s activities.
• The liability of members, whether limited or unlimited.
• The amount of authorized capital.
• The details of the first subscribers.

Key Clauses in MOA

1. Name Clause: This specifies the name of the company.
2. Registered Office Clause: Details the location of the registered office.
3. Object Clause: Outlines the primary and ancillary objectives of the company.
4. Liability Clause: Defines the liability of members.
5. Capital Clause: States the authorized share capital.
6. Subscription Clause: Lists the subscribers to the memorandum.

According to Section 4 of the Act, any deviation from the objectives listed in the MOA is ultra vires (beyond the powers) and cannot be ratified, even by the shareholders. Therefore, it is important for companies to strictly adhere to their MOA when dealing with third parties.

Articles of Association (AOA)

Purpose of AOA

The AOA defines the internal management rules of a company. While the MOA limits the company’s operations externally, the AOA regulates its internal conduct and the relationship among shareholders.

Key Clauses in AOA

• Directors' Powers: Defines the roles, responsibilities, and powers of directors.
• General Meetings: Lays out the procedures for convening and conducting general meetings.
• Shareholder Rights: Specifies the rights and obligations of shareholders.
• Dividend Policy: Provides guidelines for distribution of profits.
• Voting Rights: Establishes voting procedures for shareholders.

Section 5 of the Act provides that the AOA must be in line with the provisions of the Companies Act and the MOA. While companies have the flexibility to adopt their own articles, they must not contradict the provisions of the Act or the MOA.

Legal Provisions Regarding MOA & AOA

• MOA (Section 4): Provides the statutory guidelines for drafting and filing the MOA.
• AOA (Section 5): Details the legal requirements for drafting and filing the AOA.
• Alteration of MOA (Section 13): Provides for the amendment of the MOA, including shareholder approval and registration with the Registrar of Companies.
• Alteration of AOA (Section 14): Specifies the procedure for amending the AOA through a special resolution.

Process of Alteration of MOA

Conditions and Requirements

Any alteration to the MOA must comply with the provisions under Section 13 of the Companies Act, 2013. The alteration may be necessary in situations such as:

• Changing the company's name.
• Altering the object clause.
• Shifting the registered office.
• Changing the authorized share capital.

Shareholders' Approval

A special resolution must be passed in a general meeting for any alterations to the MOA. Certain alterations, such as a change in the registered office from one state to another, also require approval from the Central Government. You can check our due diligence service to understand more on your current compliance status.

Process of Alteration of AOA

Shareholders’ Consent

Under Section 14 of the Act, the AOA can be altered by passing a special resolution at a general meeting of shareholders. The changes can relate to governance, voting rights, or director roles, among others.

Statutory Procedures

Once the special resolution is passed, the altered AOA must be filed with the Registrar of Companies within 30 days of passing the resolution. Non-compliance may result in penalties.

Adoption of MOA & AOA Under Companies Act, 2013

The Companies Act, 2013, introduced new formats and requirements for MOA and AOA, which differ from the previous Companies Act, 1956. For instance:

• Model Forms: The Act provides different model forms of MOA and AOA for various types of companies, such as private companies, public companies, and one-person companies (OPCs).
• Mandatory Amendments: Companies incorporated before the 2013 Act came into effect had to adopt their MOA and AOA in compliance with the new provisions.

Some Cases Where MOA Alteration is Necessary

• Change in Registered Office: Moving the office from one state to another.
• Change in Objectives: Expanding or modifying the company’s objectives.
• Increase in Share Capital: To issue more shares or raise additional capital.

Some Cases Where AOA Alteration is Necessary

• Modification in Voting Rights: To change the voting rights structure among shareholders.
• Changes to Director Powers: Altering the roles or powers of directors.
• Amendment to Dividend Policy: Modifying how profits are distributed among shareholders.

Filing Requirements for Alterations

After passing a special resolution, the company must file the altered MOA or AOA with the Registrar of Companies along with the necessary forms and fees. Non-compliance can result in penalties under the Companies Act. Various court cases have shaped the interpretation of MOA and AOA. For instance, in Ashbury Railway Carriage & Iron Co Ltd v Riche, it was held that any act beyond the company’s objectives in the MOA is ultra vires and void. If you have any questions, feel free to reach out.

FAQs

What is the main purpose of the MOA?

The MOA defines the company's external scope, objectives, and relationship with third parties.

Can the AOA override the MOA?

No, the AOA cannot override the provisions of the MOA.

What is required to alter the MOA?

A special resolution and in some cases, approval from regulatory authorities.

Is it mandatory to file the MOA and AOA with the Registrar?

Yes, both must be filed for the company’s registration and when any alterations are made.

How often can the AOA be altered?

There are no restrictions on how often the AOA can be altered, but each alteration requires a special resolution.

What happens if a company acts beyond its MOA?

Any act outside the scope of the MOA is considered ultra vires and void.

Can GenZCFO help me with the changes in MOA & AOA?

Yes, you can book a free consultation with us to learn how our professionals can help you with the changes in MOA & AOA.