Comparison chart between MOA and AOA
Read Comparison chart between MOA and AOA
| BASIS | MEMORANDUM OF ASSOCIATION | ARTICLES OF ASSOCIATION |
|---|---|---|
| Definition | MOA is a document that contains the details required to incorporate a company. | AOA is a document that contains details about the internal management of a company. |
| Content therein | It contains information about the objectives of the company and its powers. | It contains information about the rules and regulations of the company. |
| Status | It is considered subordinate to the Companies Act, 2013 | It is considered subordinate to the Memorandum of Association. |
| Effect | The MOA of the company does not have a retrospective effect on the amendments. | The AOA of the company does have a retrospective effect on the amendments. |
| Clauses | The MOA has 6 major clauses as discussed above. | The AOA can be created as per each companies needs and thus does not have a particular set of clauses. |
| Obligation | It is mandatory for each company to have a duly signed MOA at the time of incorporation. | Only a private company is required to create an AOA whereas a public company can easily opt for table F. |
| Alteration | MOA can be altered by passing an SR and with the prior approval of the central government. | AOA is an internal matter and thus can be easily altered by just passing an SR. |
What are the treatment and consequences of acts done beyond MOA and AOA?
MOA– In case the act goes beyond the powers of MOA, then it is treated as ultra-vires and void-ab-initio. Nobody can alter that and make changes in their favor then. For example- if it is written in the MOA that a company can take a loan only up to 100 lakhs, then the company is restricted to borrow more, and if the company borrows more, then it is void-ab-initio, and the third party has the right to sue the company. Not even the shareholders can ratify it now.
AOA– In case the act goes beyond the powers of AOA, then it is not treated as ultra-vires and thus not at all void-ab-initio. Shareholders can alter the clauses unless and until it is not affecting the rights of the minority shareholders. To continue the above example, let’s suppose the shareholders can take a loan only up to 10 lakhs from the company as per AOA. But if the shareholders take a loan more than that, then it can be easily ratified by the shareholders by passing an SR.
Thus, acts beyond MOA cannot be ratified, while the acts done beyond AOA can be easily ratified.
MOA vs AOA
- MOA is the charter of the company, while AOA lays down the rules regarding internal management. MOA is a supreme document than AOA.
- MOA’s clauses cannot be altered easily, whereas it is comparatively easy to alter the clauses mentioned in AOA. Prior approval of CG is required to alter the MOA, while no court or government is required to alter AOA.
- Acts done beyond the powers cannot be ratified, while acts done beyond the power of AOA can easily be ratified.
- MOA is required at the time of incorporation, while AOA is not essential.
- MOA overrides AOA, while AOA cannot override MOA.
- MOA defines the relationship between a company and outsiders, while AOA defines the relationship between the company and its members.
Memorandum of Association
As defined under section 2(56) of The Companies Act, 2013 Memorandum of Association is defined as originally drafted or altered during time as per Companies Act or any previous law.
Memorandum of Association, also widely known as the Charter of Company, is the most important document a company has for itself. It is a document required by the company at the time of its incorporation. The registrar of companies asks for an MOA at the time of Incorporation.
Memorandum of Association basically lays down the scope, powers, objective, duties, and authorities of the company and its shareholders. Beyond these powers, a company cannot do anything. Thus, any act did beyond the powers of the MOA is void-ab-initio and ultra vires. This makes the actions of the company restricted.
It protects the company from outsiders and vice-versa. It is assumed that the outsider has complete knowledge of the company and has read the MOA as it is a public document protecting the interests of the company and outsider.
There are six clauses in the Memorandum of Association. They are,
1. Name Clause– it states the name of the company as originally framed or altered from time to time. It can be changed by altering the MOA. However, one should note that name of the company should not be too identical to an existing company or trademark. Also, it should not violate any rule laid down by the central government.
2. Object Clause– it states the objective of the company. Any actions done beyond this are treated to be ultra-vires and void-ab-initio, as stated above. The object clause states the powers and primary and auxiliary objectives of the company as originally framed or altered from time to time.
3. Situation Clause– it states the geographical location of the company and where it is situated. A company should, within 14 days, register its registered office with the registrar. The state where the company has its registered office needs to be disclosed in the MOA under the situation clause.
4. Liability Clause– as originally framed or altered from time to time, the liability clause is the one that states the liability of its members. In the case of a company limited by shares, the liability of its members is limited up to the number of unpaid shares. In the case of a company limited by guarantee, the liability of the member is limited up to the guarantee given by the shareholder. A point to be noted here is that the liability clause cannot be altered, unlike any other clause.
Too read more click here https://ondemandint.com/
Comments
Post a Comment