ASSIGNMENT

TOPIC: Memorandum association and articles association

SOLANLI CHIRAG J
ROLL NO: 3
SEMESTER– 3
BATCH: 2023 – 2025
M.B.A
2023 – 2025
BUSINESS AND ENVIRONMENT LAWS
GUIDED BY: Binal gadhvi
DEPARTMENT OF BUSINESS ADMINISTRATION
MAHARAJA KRISHNAKUMARSHINHJI BHAVNAGAR UNIVERSITY
BHAVNAGAR

SIGNETURE WITH DATE

 Introduction

 Memorandum of Association:
The Memorandum of Association (MOA) is a pivotal document in the formation of a
company. It is a public document that lays the foundation of the company’s
constitution, providing essential details about the company’s identity and its intended
scope of operations. Essentially, the MOA serves as the company’s charter, outlining its
objectives and the boundary within which it must operate. It defines the relationship
between the company and the outside world, including its shareholders and creditors.

The MOA is a statutory document, meaning that it is required by law and must be
registered with the relevant authorities, typically during the incorporation process. Once
registered, the MOA becomes a binding contract, not only between the company and its
members but also between the members themselves. This document is significant
because it protects the interests of shareholders by ensuring that the company does not
venture into activities beyond its stated objectives, a concept known as the "doctrine of
ultra vires." Any action taken by the company outside the scope of its MOA is
considered void.

 Articles of Association:
The Articles of Association (AOA) complement the Memorandum of Association by
providing detailed guidelines for the internal management and governance of the
company. While the MOA sets out the fundamental parameters within which the
company operates, the AOA offers a more detailed operational blueprint. It outlines the
procedures for day-to-day management, the rights and responsibilities of directors,
officers, and shareholders, as well as the processes for decision-making and dispute
resolution within the company.

The AOA is essentially a rulebook for the company’s internal affairs. It covers a wide
range of aspects such as the appointment and powers of directors, conduct of board
meetings, and issue of shares, dividend distribution, and more. Unlike the MOA, which is
a public document, the AOA is more focused on the internal workings of the company,
ensuring that everything runs smoothly and in accordance with the established
procedures.

The AOA is also a binding document, but it is primarily binding on the company and its
members, rather than on external parties. It can be tailored to the specific needs and
circumstances of the company, offering flexibility in governance while maintaining
compliance with the overarching legal framework.
 Meaning

 Memorandum of Association:
It is a legal document that outlines the company's purpose, its structure, and its scope
of operations. Essentially, it defines the company's relationship with the outside world
by specifying what the company can and cannot do.

 Articles of Association:
This document sets out the rules and regulations for the internal management of the
company. It governs how the company operates on a day-to-day basis, including the
roles and responsibilities of directors, the process for holding meetings, and the rights of
shareholders.

 Importance

 Importance of Memorandum of Association:

1. Defines Scope of Activities: The MOA outlines the objectives and activities the company is
allowed to engage in. It acts as a boundary, ensuring that the company operates within its
defined purposes.

2. Legal Document for Incorporation: It is a mandatory document for the legal formation of a
company. Without it, a company cannot be registered.

3. Protects Shareholders and Creditors: The MOA informs shareholders, creditors, and the public
about the company's scope of operations, ensuring transparency and protecting their interests.

4. Binding Document: The MOA is a binding document on the company, its shareholders, and
any outside parties. The company cannot undertake activities beyond what is specified in the
MOA.

 Importance of Articles of Association:

1. Regulates Internal Management: The AOA governs the day-to-day operations of the company.
It outlines how meetings should be conducted, the duties of directors, how shares can be issued
or transferred, and other management practices.

2. Establishes Corporate Governance: The AOA sets out the rules for the management of the
company, helping to ensure good corporate governance practices.

3. Provides Flexibility: While the MOA is more rigid, the AOA can be amended as needed to
adapt to changing circumstances, allowing the company to manage its affairs more flexibly.
 4. Safeguards Stakeholder Interests: The AOA defines the rights and responsibilities of
shareholders and directors, ensuring that their interests are protected and that there is clarity in
their roles within the company.

 Contents

 Contents of Memorandum of Association:

1. Name Clause:
Specifies the official name of the company the name must be unique and comply with
the legal requirements of the jurisdiction, including any restrictions on certain words.
Also, if it is a private company, then it should have the word ‘Private Limited’ at the end.
In the case of a public company, then it should add the word “Limited” at the end of its
name. For example, ABC Private Limited in the case of the private, and ABC Ltd for a
public company the name should be in compliance with the provisions laid down in the
Companies Act and Rules.

2. Registered Office Clause:

Indicates the location of the company's registered office this address determines the
company's domicile and legal jurisdiction for all official correspondence. All
communications, legal notices and documents will be sent to the registered office
address.

3. Object Clause:
Defines the main objectives and purposes for which the company is formed. It can also
include secondary or ancillary objects that support the main objectives.
This clause is critical because it outlines the scope of the company’s activities. The
company is legally restricted to operating within these defined objectives.
Main Objective: It states the main business of the company
Incidental Objective: These are the objects ancillary to the attainment of main objects of
the company
Other objectives: Any other objects which the company may pursue and are not covered
in above (a) and (b)

4. Liability Clause:
 It states the nature of liability of the members of the company in case of any loss or
debts incurred by it. In the case of an unlimited company, the liability of the members
is unlimited. Whereas, in the case of a company limited by shares, the liability of the
members is restricted by the amount unpaid on their share. For a company limited by
guarantee, the liability of the members is restricted by the amount each member has
agreed to contribute.

5. Capital Clause:
This clause details the maximum capital a company can raise, also called the
authorized/nominal capital of the company. It provides the maximum amount of
capital that can be issued to the company shareholders. It also explains the division of
such capital amount into the number of shares of a fixed amount each. It should also
specify the type of shares the company is authorised to issue, i.e. equity shares,
preference shares, or debentures.

6. Association or Subscription Clause:

A declaration by the initial subscribers (also known as the company’s founding
members) confirming their intention to form the company and their agreement to
take up a specified number of shares.
This clause typically includes the signatures of the initial subscribers

 Contents of Articles of Association:

1. Interpretation Clause:
Provides definitions of key terms used throughout the document to ensure clarity
and consistency in the interpretation of the rules.

2. Share Capital and Variation of Rights:

Outlines the types of shares issued, the rights attached to each type, and the
procedures for issuing new shares.
Describes the process for varying the rights of shareholders including obtaining
consent from those affected

3. Lien on Shares:
Specifies the company's right to retain possession of shares in cases where the
shareholder owes money to the company.

4. Calls on Shares:
 Details the process for calling up unpaid amounts on shares, including notice
periods, payment terms, and consequences of non-payment

5. Transfer and Transmission of Shares:

Sets out the rules for transferring shares from one person to another, including
restrictions, approvals, and procedures.
Also covers the transmission of shares in the event of the death or bankruptcy of a
shareholder.

6. Forfeiture of Shares:
Describes the conditions under which shares may be forfeited if a shareholder fails
to meet obligations, such as non-payment of calls.

7. Alteration of Share Capital:

Outlines the procedures for increasing, reducing, or reorganizing the company’s
share capital

8. General Meetings:
Specifies the procedures for convening and conducting general meetings of
shareholders, including notice requirements, quorum, voting rights, and the process
for passing resolutions.

9. Voting Rights and Proxies:

Details the voting rights of shareholders and the procedures for appointing proxies
to vote on their behalf

10. Board of Directors:

Outlines the composition, powers, duties, and procedures for appointing and
removing directors
Specifies the rules for conducting board meetings, including quorum requirements,
voting, and the delegation of powers.

11. Dividends and Reserves:

Sets out the company’s policy on the declaration and distribution of dividends to
shareholders Includes provisions for the creation and management of reserves

12. Accounts and Audit:

Describes the procedures for maintaining the company’s financial accounts,
conducting audits, and presenting financial statements to shareholders

13. Borrowing Powers:

 Specifies the conditions under which the company can borrow money and issue
debt, including the powers of the board to approve such actions.

14. Winding Up:

Outlines the procedures for winding up or dissolving the company, including the
distribution of assets to shareholders after liabilities have been settled

15. Indemnity and Insurance:

Provides for the indemnification of directors and officers against liabilities incurred
in the performance of their duties
Also includes provisions for the company to purchase insurance to cover such
liabilities.

16. Notices:
Specifies the methods for serving notices to shareholders, directors, and other
officers, including the required formats and timelines

17. Seal of the Company:

Describes the use of the company’s official seal, including who is authorized to use
it and for what purposes.

18. Miscellaneous Provisions:

Covers any additional rules or regulations that do not fall under the previous
sections, such as amendments to the AOA and confidentiality requirements

 Form of Memorandum of Association (MOA):

As per section 4 of the companies act, 2013 company shall form the MoA as specified
in Tables A to E in schedule I of the Act. Here is the list of forms with their details:

Table A: Form for a company having limited shares.

Table B: Form for a company limited by guarantee that does not have a share capital.
Table C: Form for a company limited by guarantee having a share capital.
Table D: Form for an unlimited company.
Table E: Form for an unlimited company having a share capital.

 Forms of Articles of Association (AOA):

 The forms of AOA in tables F to J have been mentioned under schedule I for
companies ACT 2013. Here is the list of forms with their details:

Table F: Form for a company limited by shares

Table G: Form for a company limited by guarantee having a share capital
Table H: Form for a company limited by guarantee that does not have a share capital
Table I: Form for an unlimited company having a share capital
Table J: Form for an unlimited company that does not have a share capital

 Difference between Memorandum of Association (MOA) and Articles of

Association (AOA)

Basis of Memorandum of Association Articles of Association (AOA)

Comparison (MOA)

Meaning A document including every A document including every

fundamental rules and regulations governing
information essential for the An organization.
incorporation
Of an organization.

Purpose The purpose of MOA is defining The purpose of AOA is defining

objectives rules and regulations governing
and conditions of an organization and its the internal management of the
Incorporation. organization for the accomplishment
Of its goals.
Status MOA is subordinate to the Companies AOA is subordinate to MOA.
Act.

Defines An MOA defines the objectives, powers, An AOA defines the powers, rights,
and duties, and liabilities that comes
Limits of an organization. With the members of the company.

Relationship An MOA connects the outsiders with the An AOA connects the members of an
Organizations. Organization with the company itself.
Retrospective Effect An organization cannot amend its MOA. An organization can amend its AOA.

Registration MOA is a document compulsory for It is mandatory for a private

every organization irrespective of its company. However, a public company
nature and Type. limited by shares can adopt Table F of
the Companies
Act, 2013.
Compulsion It is mandatory to fill MOA. It is not mandatory to fill AOA.

Alteration An organization can alter MOA after An organization can alter the Articles
passing a SR (Special Resolution) in the after passing SR (Special Resolution) at
Annual General Meeting. Besides, it also the Annual General Meeting (AGM) of
requires a previous approval of Company the company.
Law Board and Central Government.

 Question

1. Which of the following is NOT a required clause in the Memorandum of Association?

A) Name Clause
B) Objects Clause
C) Directors Clause
D) Liability Clause

2. The Memorandum of Association is primarily concerned with which of the following?

A) The internal management of the company
B) The company's relationships with external parties
C) The allocation of shares among shareholders
D) The rules for the board of directors

3. Which clause in the Memorandum of Association specifies the state in which the
company’s registered office is located?
A) Name Clause
B) Registered Office Clause
C) Capital Clause
D) Object Clause
4. What is the purpose of the Objects Clause in the Memorandum of Association?
A) To define the scope of the company’s activities
B) To outline the names of the company's founders
C) To state the amount of capital the company can rise
D) To establish the company's tax obligations

5. Which of the following statements is TRUE about the Memorandum of Association?

A) It is a public document that cannot be altered without the permission of the
company’s board.
B) It can be changed by the company’s directors without any special procedures.
C) It defines the relationship between the company and its shareholders.
D) It must include the procedures for holding annual general meetings.

6. Which of the following is primarily governed by the Articles of Association?

A) The external activities of the company
B) The internal management and conduct of the company
C) The rights of the company's creditors
D) The company's corporate social responsibilities

7. The Articles of Association typically include provisions about which of the following?
A) The company's registered office location
B) The number and appointment of directors
C) The company's objects and purpose
D) The liabilities of shareholders

8. Which document is typically referred to as the "constitution" of a company along with

the Memorandum of Association?
A) Shareholders' Agreement
B) Directors' Resolution
C) Articles of Association
D) Corporate Charter

9. What is the primary function of the Articles of Association?*

A) To regulate the relationship between the company and its employees
B) To outline the scope of the company's external business activities
C) To detail the procedures for managing the company's internal affairs
D) To specify the minimum share capital of the company

10. Can the Articles of Association be amended after a company is incorporated?

 A) No, they are permanent and unchangeable
B) Yes, but only by a special resolution passed by the shareholders
C) Yes, but only with the approval of the company's creditors
D) Yes, but only if authorized by the government

 Conclusion

Hence it is clear that the memorandum of association is the fundamental public agreement of
all kinds of organizations that involves the operational activities, rights, powers, etc. From the
definition of a memorandum of association, we can understand that it is important to check the
format and all clauses without any fail. And the memorandum of association of your company
should be verified and attested by the moa of company law.