Memorandum and articles of association

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Memorandum and Article of Association, Source: PEXELS

Memorandum of Association and Articles of Association are legal documents which are essential to be drafted while incorporation and registration of the company. MoA & AoA are filled with the incorporation of SPICe in the format Spice AOA & Spice MOA respectively while the other steps for Company Registration are being proceeded with.

The memorandum acts as the face of the company to the market and public after its incorporation. ‘Articles of Association’ describes the structure, functioning, and management of the company. It should be noted that a registered MoA and AoA binds the company and the members.

Memorandum of Association

‘Memorandum of Association’ contains the fundamentals of the company and its relationship with the outside

Memorandum is defined in Section 2(56) and explained in Section 4 of the Companies’ Act, 2013. According to the Act, memorandum of a company shall state-

1. The legal name of the company, with the last word as

• ‘Limited’ in the case of a Public Limited Company,

• ‘Private Limited’ in the case of a private limited company

• The rule does not apply to a Section 8 company

• For OPC, in addition to the above rule, the word ((OPC) must be added;

2. The State in which the registered office of the company shall be situated;

3. The objects for which the company is proposed to being incorporated;

4. Whether the members have limited or unlimited liability, and shall also state that-

• for a company limited by shares, the liability of its members is limited to the amount unpaid on the shares held by them;

• for a company limited by guarantee, the liability is limited to the amount up to which each member undertakes to contribute for the payment of the debts and liabilities of the company and the expenses of winding up, if and when the company winds up while he is a member of within a period of 1 year after he stops being a member.

5. The amount of share capital with which the company has been registered and its division into a fixed number of shares of a fixed amount, which the subscribers have consented to subscribe to.

6. the number of shares with each subscriber shall also be mentioned for each name;

7. For a One Person Company, the name of the nominee.

8. The Memorandum of Association of a company must be drafted as per the Tables in Schedule 1 provided in the Companies Act 2013, whichever shall be applicable to the company.

Articles of Association

‘Articles’ is defined in Section 2 (5), and explained in Section 5 of the Companies’ Act, 2013. The AoA contains the guidelines for the management of the company. It aids in the internal regulation of the company.

The Articles of Association of a company may be drafted taking into consideration the Tables provided in Schedule 1 of the Companies Act 2013; whichever applicable to the company. The company may also insert additional information as it considers essential for its management.

It may contain details relating to

• Interpretation

• Share capital and variation of rights

• Lien

• Calls on shares

• Transfer of shares

• Transmission of shares

• Forfeiture of shares

• Alteration of capital

• Capitalization of profit

• Buy-back of shares

• General meetings, procedure and adjournment

• Voting right & proxy

• Proxy

• Board of Directors & its proceedings

• Members

• Chief Executive Officer, Manager, Company Secretary or Chief Financial Officer

• Seal

• Dividends and Reserve

• Accounts

• Winding up

• Indemnity

How can the Memorandum of Association be altered?

The Memorandum of Association drafted at the time of registration of the company is capable of being altered, by a special resolution and after complying with the procedure alter the provisions of its memorandum.

1. The change in the companies’ name will not have effect except with the approval of the Central Government in writing. When such a change is, the Registrar has to enter the new name in the register of companies in place of the old name and issue a fresh certificate of incorporation with the new name.

2. The change of the place of the registered office from one State to another has to be approved by the Central Government on an application prescribed form and manner.

3. the company shall file with the Registrar following upon change in the memorandum

a. a special resolution passed

b. The approval of the Central Government when the alteration is related to the change in the name of the company.

c. A copy of the order of the Central Government approving the alteration of registered office from one state to another.

4. A company, which through prospectus has raised money from public and has some unutilized amount out of the money so raised, its objects cannot be changed:

a. unless a special resolution to that respect is passed by the company,

b. the details to it are published in the newspapers at the place where the registered office of the company is situated, and

c. Such details should also be displayed on the website of the company.

d. The promoters must give the opportunity to the dissenting shareholders to exit

5. The Registrar has to register such alterations and only then shall the alterations come into effect.

How can the Articles of Association be altered?

The ‘Articles of Association’, are drafted and registered at the time of registration of the company according to the conditions, preferences, objective, circumstances etc prevalent at the time of incorporation. Due to various changes o the said factors, a need to alter the same may arise. Section 14 of the Act provides for the provisions to alter the articles. A company, by a special resolution, is capable of altering its articles including such alterations which result in the conversion of

a. A private company into a public company, or

b. A public company into a private company.

Every alteration of the articles must be made as per the provision of this section under this section and a copy of the order of the Tribunal approving the alteration (required for public company converting into a private company) has to be filed with the Registrar, in addition to a printed copy of the altered articles, within 15 days.