Memorandum and Articles of Association

Posted on

This article is authored by Pankhuri Pankaj, a 2nd year student pursuing her BA-LLB degree from Vivekananda Institute of Professional Studies. This article summarises certain key provisions of the Memorandum and Articles of Association under the Companies Act and is qualified in its entirety by reference to the Companies Act, 2013.

Memorandum of Association of a Company

The Memorandum of association of a company, or the MOA, is a document which forms the charter of the company and defines the scope of its activities. According to Section 2(56) of the Companies Act, 2013, a “memorandum” means the originally framed memorandum of association of a company or as altered from time to time in pursuance of any previous company law or of this Act. The Memorandum of Association is basically the foundation on which a company is built and it can be defined as the constitution of the company which lays down the scopes and powers of the company. It contains rules regarding the capital structure, the liability of the members, the objects clause, and other important matters of the company, and basically it delimits the area beyond which the company cannot go, hence, the company cannot depart from the memorandum and if done so, the act will be ultra vires the company and void.

A Memorandum of Association of a company is supposed to be a public document, as defined under Section 399 of the Companies Act, 2013, to make it available for any person who enters into a contract with the company. 

What does a Memorandum of Association Contain?

Section 4 of the Companies Act, 2013, illustrates what a Memorandum of Association shall contain, like:

  1. The Name Clause, which lays down that in the case of a public limited company the last word of the company shall be “Limited”, and for a private limited company it will be “Private Limited”.
  2. The Situation clause which would deal with the state in which the registered office of the company is to be situated.
  3. The Object clause would illustrate the object for which the company is proposed to be incorporated and any matter necessary in furtherance thereof.
  4. The Liability clause which defines, whether limited or unlimited, the liability of the members of the company, and also state:

(i) the liability of the members to be limited to the amount paid, if any, on the shares held by them, in the case of a company limited by shares;

(ii) the amount to which each member undertakes to contribute in the case of a company limited by guarantee.

  1. The Capital clause implies the amount of share capital with which the company is to be registered and the division thereof into shares of a fixed amount and the number of shares which the subscribers to the memorandum agree to subscribe which shall not be less than one share, and the number of shares each subscriber to the memorandum intends to take, indicated opposite his name.
  2. The Association clause is the last clause and it specifies the desire of the subscriber to form a company.

FORMAT OF THE MEMORANDUM OF ASSOCIATION

Companies must draw their Memorandum of Association according to Section 4 of the Companies Act, 2013, in the form provided in Tables A-E in the First Schedule of the Act.

  1. TABLE A is the form designated for the memorandum of association of a company limited by shares.
  2. TABLE B is the form for the memorandum of association of a company limited by guarantee and not having a share capital.
  3. TABLE C is the form for the memorandum of association of a company limited by guarantee and having a share capital.
  4. TABLE D lays down the form for the memorandum of association of an unlimited company.
  5. TABLE E is the form for the memorandum of association of an unlimited company and having a share capital.

PRINTING AND SIGNING OF MEMORANDUM OF ASSOCIATION

Section 15 of the Companies Act lays down the memorandum of association should be: printed, divided into paragraphs and numbered consecutively, and it should be signed by seven members in case of a private company.

The memorandum of association should be signed by every member and their address, occupation, and description should be there in the presence of at least one witness, who also must attest his signature and add his address, occupation, and description.

A company can subscribe to a memorandum of Association through its agent. A minor cannot sign an MOA, however, the guardian of the minor if subscribes to the MOA on his/her behalf and the person will be deemed to have subscribed in his personal capacity.

In addition to all the facts stated above, a company is eligible to attach additional provisions if required along with the mandatory ones.

ARTICLES OF ASSOCIATION OF A COMPANY

According to Section 2(5) of the Companies Act, 2013, the term “articles” means the articles of association of a company as originally framed or as altered from time to time or applied in pursuance of any previous company law or of this Act. Section 5 of this act defines “articles of association” and says that the articles of a company shall contain the management regulations of the company and shall also contain matters, as may be prescribed. But it shall not prevent a company from including additional matters in its articles if it understands them to be necessary for management. 

In basic words, the Articles of Association of a company can be understood as the rule book of the company’s working which regulates the management and powers of the company. For the internal management, they describe rules, regulations, by-laws, and hold high significance in the life of a company. It is also responsible for describing various details about the company’s inner workings like manner of making calls, director’s/employees qualifications, power and duties of the auditors, forfeiture of shares and a lot more.

FORMS OF ARTICLES OF ASSOCIATION

Under Section 30 of the Companies Act, model forms of Articles have been laid down.  In schedule I of the section from Table F-J model forms of Article association can be found.

  1. Table F deals with the form for Articles of Association of a company limited by shares.
  2. TABLE G  illustrates forms for the Article of Association of a company limited by guarantee and having a share capital.
  3. TABLE H lays down the form for Articles of Association of a company limited by guarantee and not having a share capital.
  4. TABLE I  deals with the form for Articles of Association of an unlimited company and having a share capital.
  5. TABLE J  includes the form for Articles of Association of an unlimited company and not having a share capital.

A company need not adopt all or any of the regulations contained in the model articles applicable to such company.

CONTENT OF ARTICLES OF ASSOCIATION

The articles of association of different companies, according to Companies Act, 2013, are supposed to be framed in the prescribed form, since the model of articles is different for the different type of companies like Limited by shares, companies limited by guarantee having share capital and the ones not having a share capital, and unlimited company having share capital and the ones not having a share capital.

For a public-private limited company the articles of association usually include Number and value of shares, share capital, a variation of shareholders’ rights, payment of a commission, share certificate, preliminary contracts (if any), loan on shares, call on shares, transfer and transmission of shares, forfeiture of shares, share warrants, alteration of capital, general meeting, voting rights of members, directors and their remunerations, secretary and manager, dividend and reserves, account and audit, and winding up.

The printing and signing of Articles of the association are the same as that of Memorandum of Association.

In addition to all the facts stated above, the Articles of Association also establish a contract. This contract can exist between the members and also between the members and the company. This contract established governs the ordinary rights and obligations that are incidental to having membership in the company.

DIFFERENCE BETWEEN- MEMORANDUM OF ASSOCIATION AND ARTICLE OF ASSOCIATION

It is important to note that articles of association are in fact subordinates to the memorandum of association, which is the more dominant one, of a company. In Shyam Chand v. Calcutta Stock Exchange, it was held that any and all articles that happen to go further beyond the memorandum of association of the company will be marked ultra vires and void. Therefore, no article should go beyond the memorandum of association. 

If there’s a conflict between the memorandum of association and the articles of association of that company, then the memorandum of association will prevail. 

In case of any ambiguity regarding the details in the memorandum, it needs to be read along with the articles of association of that company.

Latest Posts

Archives

Leave a Reply

Your email address will not be published. Required fields are marked *