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OVERVIEW



When a person is incorporating a company, the Memorandum of Association and Article of Association is the legal document that must be established. There are some norms and regulations which has to be followed by any entrepreneur who decides to incorporate his firm. Legally, forming a company is thought to be a tedious task. It is simply due to a large number of paperwork and forms involved. It is also thought to be a time-consuming task. However, company registration is very essential for any firm. It offers the business a legal identity and makes it more trustworthy. Certain paperwork is required when starting a company, and forming such documents typically necessities legal guidance. A Memorandum of Association and Memorandum of Article is thus a necessary part of this process. Now, let's discuss these in detail.


MEMORANDUM OF ASSOCIATION



The Memorandum of Association (MOA) is a document that provides all of the necessary information at the time of the company’s incorporation. Without a Memorandum of Association, a company cannot be incorporated. The firm must be registered with the Registrar of Companies (ROC) at the moment of its formation. It specifies the company’s objective, powers, and scope, as well as the boundaries to which it is permitted to operate, i.e., it restricts the companies range of activities.

Anyone who engages with the company, such as shareholders, creditors, investors, and others, is believed to have read the company, which means they must be familiar with the company’s goals and operations. It is also known as the Charter of the Company.


THE MEMORANDUM OF ASSOCIATION INCLUDES SIX CLAUSES:


1. Name Clause – A company cannot register with a name that CG deems unsuitable, as well as a name that is too similar to another firm’s name.

2. Situation Clause – The name of the state in which the company’s registered office is located must be specified in this clause. If it has not been decided till now, then the temporary details should be mentioned.

3. Object Clause –The purpose and vision of the company for which it was created are contained in this clause.

4. Liability Clause –It contains the information of the company’s members and the nature of the liability of the company.

5. Capital Clause –It contains information about the company’s share capital.

6. Subscribers Clause –The people who have signed up to buy the company’s stock. It should also give information about the witness, i.e., who was present at the moment of subscribers’ appointment, shares taken by them, etc.

All of the specifics, it might be assumed, are provided in the clauses. It's also worth noting that the object clause encompasses all of the company's future endeavors. If the firm intends to enter a certain field of operation after registration, the facts must be explicitly stated in the Memorandum of Association. The update is performed by submitting the MGT-14 form. It is a public document that anybody involved with the company has access to be it shareholders, creditors, or anyone else.

It is critical that the corporation sticks to its Memorandum of Association. The Object clause contains all of the company's outlines and functioning arrangements, which should be respectfully obeyed.



THE KEY DIFFERENCE BETWEEN THESE:



The difference between Memorandum of Association and Memorandum of Article is following:

  • The Memorandum of Association is a supreme document that provides all of the necessary information for the company's incorporation. Whereas, the Articles of Association is a document that contains all of the company's norms and regulations.
  • The Memorandum of Association contains the powers and objects of the company. Whereas, Article of Association contains the rules of the company's administration.
  • The relationship between the corporation and the outside world is defined by the Memorandum of Association, whereas the relationship within the company is defined by the Article of Association.
  • There are six mandatory provisions in the Memorandum of Association. Whereas, Article of Association is framed randomly at the choice of the company's members.
  • The Memorandum of Association can only be altered prospectively, not retrospectively, and only with the previous approval of the Central government (CG)or Company Law Board (CLB), at the Annual General Meeting. Whereas, the Article of Association can be changed retrospectively.
  • The Memorandum of Association is obligatory for all the firms. Whereas, the Article of Association is must be formed by a private corporation, a public company limited by shares can use Table F instead of articles.
  • The Memorandum of Association is must for registering a company. Whereas, an Article of Association is not required.
  • Acts done beyond the scope of the Memorandum of Association is void. Whereas, acts done beyond the Article of association can be justified by shareholders.

CONCLUSION



The firm's Memorandum and Articles are two highly significant papers that must be kept up to date since they govern the company in different problems. They also assist in the efficient administration and operation of the business throughout its lifespan. That is why each business must have its own Memorandum and Articles of Association.