Memorandum of Association (MOA) and Articles of Association (AOA) are two important business documents of a company. Every company needs a set of rules and regulations to manage its internal affairs and the AOA specifies the internal regulations of the company. In simple words, AOA contains the bye-laws of the company, according to which the director and other members must perform their functions.
In this article we will discuss the following topics under AOA in detail:
Articles of Association (AOA) Definition
As per Section 2(5) of the Companies Act, 2013 articles means the Articles of Association (AOA) of a company originally framed or altered or applied in pursuance of any previous company law or of this Act.
Objectives of Articles of Association (AOA)
- The AOA of a company shall contain the regulations for management of the company.
- The AOA shall also contain such matters, as may be prescribed.
- Further, it shall not prevent a company from including such additional matters in its AOA as may be considered necessary for its management.
Forms of Articles of Association (AOA)
Schedule I of the Companies Act, 2013 provides forms for Articles of Association (AOA) in tables F, G, H, I and J for different types of companies. Further, AOA must be in the respective form.
Articles of Association of a company limited by shares
Articles of Association of a company limited by guarantee and having share capital
Articles of Association of a company limited by guarantee and not having share capital
Articles of Association of an unlimited company and having share capital
Articles of Association of an unlimited company and not having share capital
Depending upon the applicability a company may adopt all or any of the regulations contained in the model Article.
In case of any company, which is registered after the commencement of this Act, in so far as the registered AOA of such company does not exclude or modify the regulations contained in the model AOA, those regulations shall be the regulations of that company in the same manner and to the extent as if they were contained in the duly registered AOA of the company, so far as applicable.
Content of Articles of Association (AOA)
An AOA contains the rules and regulation regarding the following matters:
- Share capital including sub-division, rights of various shareholders, the relationship of these rights, share certificates, payment of commission.
- Lien of shares: To retain or hold the possession of shares in case the member is unable to pay his debt to the company
- Calls on shares: Calls on shares includes the whole or part unpaid on each share which has to be paid by the shareholders on the demand of the company.
- Transfer of shares: The AOA include the process for the transfer of shares by the shareholder to other person (transferee).
- Transmission of shares: Transmission includes title devolution by succession, death, marriage, insolvency, etc.
- Forfeiture of shares: The AOA provides for the forfeiture of shares if the purchase requirements such as paying call money are not met with.
- Surrender of shares: Surrender of shares is when the shareholders voluntary gives back or return the shares they own to the company.
- Conversion of shares in stock: In consonance with the Articles of association, the company can convert the shares into stock by an ordinary resolution in a general meeting.
- Share warrant: A share warrant is a bearer document relating to the title of shares and cannot be issued by private companies; only public limited companies can issue a share warrant.
- Alteration of capital: Increase, decrease or rearrangement of capital must be done as the Articles of association provide.
- General meetings and proceedings: All the provisions relating to the general meetings and the manner in which they are to be conducted are to be contained in the Articles of association.
- Voting rights of members, voting by poll, proxies: The members right to vote on certain company matters and the manner in which voting can be done is provided in the Articles of association.
- Directors, their appointment, remuneration, qualifications, powers and proceedings of the boards of directors meetings.
- Dividends and reserves: The Articles of association of a company also provide for the distribution of dividend to the shareholders.
- Accounts and Audits: The auditing of a company shall be done subject to the provisions of the Articles of association of the company.
- Borrowing Powers: Every company has powers to borrow. However; this must be done according to the Articles of association of the company.
- Winding Up: Provisions relating to the winding up of the company finds mention in Articles of association of the company and must be done accordingly.
Difference between Memorandum of Association and Articles of Association
It defines the objectives of a company. Further, it specifies the conditions of incorporation.
It contains the rules and regulations as well as bye-laws for the internal management of the company.
It defines the relationship of the company with the external world.
It defines the relationship between the members and the company.
Only under special circumstances, it can be altered.
By passing a special resolution, It can be altered.
Any acts beyond the scope of the MOA are ultra-vires and void. Furthermore, even unanimous votes for the consent of such act from all the shareholders cannot ratify it.
Acts which are ultra-vires the AOA can be ratified by a special resolution of the shareholders. However, such acts should not ultra-vires the MOA.