Last Updated on December 8, 2023 by admin
The memorandum of association is a foundational document that establishes the fundamental characteristics and objectives of a company. It serves as the constitution or charter of the company, outlining its name, registered office address, type of company, and share capital. The memorandum also determines the liability of its members, which can be limited by shares or limited by guarantee.
The memorandum of association establishes a legal contract between a company and its members. It outlines the mutual agreement and obligations between them. On the other hand, the articles of association are a standard-format document that declares each subscriber’s intention to incorporate the company and become a member, outlining their rights and responsibilities within the organization.
The memorandum of association outlines the relationship between a company and external parties. It provides shareholders, directors, and officers with guidelines on conducting business activities and clarifies their roles and responsibilities.
The memorandum of association is a crucial document for a company as it establishes the fundamental rules that govern its operations and relationships with shareholders and stakeholders. Unlike other internal documents, making amendments to the memorandum requires formal procedures such as passing special resolutions in AGMs with approval from relevant authorities like the Central Government or Company Law Board.
Memorandum of Association and Articles of Association are basically charter documents that are needed in order to set up a company and govern its operations.
Company Memorandum of Association
The company memorandum of association is the most fundamental document of the company and it can be regard as the company constitution .It defines and regulates the company’s status and power and it’s relationship with third parties.
It’s the dominant document to be considered in the registration of a company as it contain both the fundamental condition for the protection of the creditors,the outside public and also the shareholders of the company.
The memorandum is required to state the amount of the authorized share capital . The memorandum of association of the company cannot be amended retrospectively.
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The following are content of memorandum of association
i] Name of the company
ii] Registered office of the company and the fact that it shall be situate in operating country
iii] nature of the business or object of the company
iv] Restriction if any on the power of the company
v] Indication whether the company is private Ltd or public Plc
vi] Limitation of liability
vii] statement of share capital.
Company Article of association
The articles of association play a crucial role in establishing the internal regulations and management framework of a company. In contrast, the memorandum of association primarily focuses on providing basic details and objectives of the company. The articles provide specific guidelines for the company’s internal management and operational procedures.
The articles of association outline the terms and conditions of a company’s operation, including shareholder rights, profit distribution, and procedures for appointing and removing directors. They provide a framework for conducting business and govern key aspects of the company’s functioning.
Furthermore, the articles often outline specific clauses that govern matters such as transferability of shares, restrictions on share transfers or sales outside the company members’ circle (known as pre-emption rights), procedures for increasing or reducing share capital, issuing new shares or debentures, and winding up or dissolution processes.
In addition to these essential provisions, companies may also include additional clauses in their articles to address specific requirements unique to their industry or business model. For instance, technology companies might include clauses related to intellectual property rights while environmentally conscious businesses may incorporate provisions concerning sustainable practices.
The Articles of Association are crucial for governing a company and ensuring its operations are legal and transparent, protecting the interests of stakeholders. They outline the company’s internal workings and decision-making processes.
The law require that company shall be registered in addition to a memorandum of association with article of association .The subscribers of the memorandum shall sign the article and it will prescribe the regulation for the governance of the company .
The Article contain the rules and regulation by which a company internal affairs are governed . The article of association deals with such matter as share ,share capital ,company meetings etc,. .it is important to note that most of the general provision usually contained in the article are now incorporated in the companies and allied matters act
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The article shall be
b] divided into paragraph numbered consecutively
c] signed by each subscriber of the memorandum in the presence of at least one witness who shall attest the signature.
The article shall bear the same stamp duty as if they were contained in the case of a company limited by guarantee ..The article of association shall state the number of members with which the company proposed to be registered .For the purpose of enabling the commission to determine the fees payable on registration.
Alteration can be done in the Articles by passing Special Resolution (SR) at Annual General Meeting (AGM) As a general rule, a power to alter the article must be exercise bona fide and for the benefit of the company as whole .it means the shareholders must proceed upon what in their honest opinion is for the benefit of the company.
Comparing The Differences: Memorandum Of Association Vs Articles Of Association
The Memorandum of Association and Articles of Association are crucial legal documents that govern the structure and operations of a company. While they share a similar purpose, there are distinct differences between them. The Memorandum of Association outlines the company’s objectives, registered office address, authorized share capital, and the scope of its activities. On the other hand, the Articles of Association define the internal regulations, management structure, and decision-making processes within the company.
The memorandum of association serves as a foundational document that outlines the legal scope and objectives of a company. It establishes the company’s identity within the legal framework. On the other hand, the articles of association provide detailed regulations for internal management and operational procedures. They cover matters such as shareholder rights, appointment and removal of directors, dividend distribution policies, and meeting procedures. These articles are essential for ensuring effective corporate governance and decision-making processes within the company.
Both the company’s memorandum of association and articles of association are essential for its constitution. The memorandum outlines the company’s objectives, powers, and scope, while the articles provide guidelines on operations that can be altered with shareholders’ approval