RELATIONSHIP BETWEEN ARTICLE AND MEMORANDA

INTRODUCTION

All the companies has its own Memorandum of Association and Articles of
Association, many people got puzzled between these two. Memorandum of Association
abbreviated as MOA, is the root document of the company, which contains all the basic
details about the company. Articles of Association shortly known as AOA, is also a major
document which contains all the rules and regulations designed by the company. Below you
can see the basic differences between the Memorandum of Association and Articles of
Association.

THE MEMORANDUM & ARTICLES

The constitution of a company comprises two documents:

I. The Memorandum of Association

II. The Articles of Association

The Memorandum regulates the external affairs of the company; the Articles of
Association regulate its internal affairs.

I. MEMORANDUM OF ASSOCIATION

The memorandum of association is the formal, legal constitution governing a

company, often simply called the memorandum. It is the document that governs the
relationship between the company and the outside. It is one of the documents required to
incorporate a company in the United Kingdom, Ireland and India, and is also used in many of
the common law jurisdictions of the Commonwealth. Typically, the memorandum will state
the company's name, the location of its registered office, its objectives, that the liability of its
members is limited and the amount and type of shares. While it is still necessary to file a
memorandum of association to incorporate a new company, since 1 October 2009 it no longer
forms part of the company's constitution and it contains limited information compared to
what was previously required.

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 It is basically a statement that the subscribers wish to form a company under the 2006
Act, have agreed to become members and, in the case of a company that is to have a share
capital, to take at least one share each. It is no longer required to state the name of the
company, the type of company (such as public limited company or private company limited
by shares), the location of its registered office, the objects of the company, and its authorised
share capital. Companies incorporated prior to 1 October 2009 are not required to amend
their memorandum. Those details which are now required to appear in the Articles, such as
the objects clause and details of the share capital, are deemed to form part of the Articles.

CAPACITIES

The memorandum no longer restricts what a company is permitted to do. Since 1

October 2009, if a company's constitution contains any restrictions on the objects at all, those
restrictions will form part of the articles of association. Historically, a company's
memorandum of association contained an objects clause, which limited its capacity to act.
When the first limited companies were incorporated, the objects clause had to be widely
drafted so as not to restrict the board of directors in their day to day trading. In the
Companies Act 1989 the term "General Commercial Company" was introduced which meant
that companies could undertake "any lawful or legal trade or business."

The Companies Act 2006 relaxed the rules even further, removing the need for an
objects clause at all. Companies incorporated on and after 1 October 2009 without an objects
clause are deemed to have have unrestricted objects. Existing companies may take advantage
of this change by passing a special resolution to remove their objects clause. If the company
is to be a non-profit making company, the articles will contain a statement saying that the
profits shall not be distributed to the members.

PURPOSE

The memorandum of association records the agreement of the first subscribers to form
a company under the 2006 Act, to become members and, in the case of a company that is to
have a share capital, to take at least one share each.

REQUIREMENTS

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 While it is still important to file a memorandum of association to incorporate a new
company, it no longer forms part of the companys constitution and it contains limited
information compared to the memorandum that was required prior to 1 October 2010. The
Companies (Registration) Regulation 2008 in fact included pro-forma Memoranda. It is
basically a statement that the subscribers wish to form a company under the 2006 Act, have
agreed to become members and, in the case of a company that is to have a share capital, to
take at least one share each.

It is no longer required to state the name of the company, the type of company (such
as public limited company or private company limited by shares), the location of its
registered office, the objects of the company, and its authorized share capital. Companies
incorporated prior to 1 October 2009 are not required to amend their memorandum. Those
details which are now required to appear in the Articles, such as the objects clause and details
of the share capital, are deemed to form a part of the Articles.

ARTICLES OF ASSOCIATION

The articles of association of a company, often simply referred to as the articles, are
the regulations governing the relationships between the shareholders and directors of the
company, and are a requirement for the establishment of a company under the law of India,
the United Kingdom and many other countries. Together with the memorandum of
association, they form the constitution of a company. A similar term, "articles of agreement",
is often used for non-profit organizations.

In the United Kingdom, model (and default) articles of association known as Table A
have been published since 1865. The articles of association of most companies - particularly
small companies - are Table A, or closely derived from it. However, a company is free to
incorporate under different articles of association, or to amend its articles of association at
any time by a special resolution of its shareholders, provided that they meet the requirements
and restrictions of the Companies Acts. Such requirements tend to be more onerous for public
companies than for private ones.

The Companies Act 2006, which received Royal Assent on 8 November 2006 and was
fully implemented on 1 October 2009, provides for a new form of model articles of
association for companies incorporated in the United Kingdom. Under the new legislation,

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the articles of association will become the single constitutional document for a UK company,
and will subsume the role currently filled by the separate memorandum of association.
Articles can be amended by a resolution formally approved by a meeting of the company's
members. Directors should always study the articles of their company.

DIRECTORS

A Company is essentially run by the shareholders, but for convenience, and day-to-
day working, by the elected Directors. Usually, the shareholders elect a Board of Directors
(BOD) at the Annual General Meeting (AGM), which may be statutory (e.g. India). The
number of Directors depends on the size of the Company and statutory requirements. The
Chairperson is generally a well-known outsider but he /she may be a working Executive of
the company, typically of an American Company. The Directors may, or may not, be
employees of the Company.

SHAREHOLDERS

In the emerging countries there are usually some major shareholders who come
together to form the company. Each usually has the right to nominate, without objection of
the other, a certain number of Directors who become nominees for the election by the
shareholder body at the AGM. The Treasurer and Chairperson is usually the privilege of one
of the JV partners (which nomination can be shared). Shareholders may also elect
Independent Directors (from the public). The Chair would be a person not associated with the
promoters of the company, a person is generally a well-known outsider. Once elected, the
BOD manages the Company. The shareholders play no part till the next AGM/EGM.

CONCLUSION

Memorandum and articles are public documents. They are inter-linked and require to
be registered for the formation of a company.

Where there is any ambiguity or where the memorandum is silent on any point, the
articles may serve to explain or supplement the memorandum. Beyond this, the two
documents have nothing in common and differ from one another in the following respects:

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 Memorandum of association is the charter of the company and defines the scope
of its activities. Articles of association of the company is a document which
regulates the internal management of the company. These are the rules made by
the company for carrying out the objects of the company as set out in the
memorandum.

Memorandum of association defines the relation of the company with the rights of
the members of the company interest and also establishes the relationship of the
company with the members.

Memorandum of association cannot be altered except in the manner and to the

extent provided by the act, whereas the articles being only the byelaws of the
company can be altered by a special resolution.

Memorandum is a supreme document of the company whereas articles are

subordinate to the memorandum. They cannot alter or control the memorandum.

Every company must have its own memorandum. But a company limited by
shares need not register its articles. In such a case table A applies.

A company cannot depart from the provisions contained in its memorandum, and
if it does, it would be ultra-vires the company. Anything done against the
provisions of articles, but which is intra-vires the memorandum, can be ratified.

REFERENCES

http://keydifferences.com/difference-between-memorandum-of-association-and-
articles-of-association.html
http://www.shareyouressays.com/112311/what-is-the-relationship-between-
memorandum-and-articles-of-association-of-a-company
http://www.brefigroup.co.uk/directors/e-
course/board/memorandum_and_articles.html
http://www.preservearticles.com/201104085066/memorandum-and-articles-of-
association.html