In this article, we will cover what are the contents of the Memorandum of Association (MOA), and the difference between MOA and AOA.
Every nation has a constitution that lays out the laws and regulations which every citizen should abide by, and which every Govt employee should follow.
The constitution is the legal conscience based on which a nation operates, and runs. Similarly, every registered business has a set of rules and regulations, which govern its actions and ideologies. Without these rules and regulations, the business can fall apart, and unethical practices can involuntarily creep in.
If a registered company is limited: Either a Private Limited Company (Pvt Ltd), a Public Limited Company, or Limited Liability Partnership (LLP), then they will need such a set of documents which will act as the constitution for that company.
This is the reason that such registered limited companies need MOA and AOA.
In this blog, we will cover what are the contents of the Memorandum of Association (MOA), Articles of Association (AOA). Also, we will share the MOA and AOA differences in terms of the contents and purpose.
But first, understand what is MOA and AOA?
What is MOA & AOA?
MOA is a Memorandum of Association and AOA is Articles of Association.
These two together constitute the heart and soul of regulations, rules, and conditions which govern the operations of any registered limited entity.
These two sets of documents are mandatory while registering for the company, and without them, the Govt won’t give legal status to the limited companies.
Difference Between MOA and AOA
MOA or Memorandum of Association is considered the most important legal document for a registered company, as it constitutes the foundation of the rules and regulations, which will govern the company. Even the AOA will need to follow the guidelines and the rules as approved under MOA. It sets the structure, the foundation based on which the rules are written in AOA.
On the other hand, AOA or The Articles of Association has the rules and regulations written, based on MOA, which that company and all stakeholders need to follow and comply with.
While MOA has the purpose of the company and the reasons behind its existence, the AOA has the by-laws, responsibilities, duties of the management, their rights, and procedures on how to run the company.
For easy understanding, if the business is the human body, then MOA can be considered as the mind, which derives the conscience and makes the decision.
Meanwhile, AOA can be considered organs. Based on the instructions of the mind, the organs will function and based on the functioning of the organs, the body will proceed, operate, and survive.
What are the Contents of the Memorandum of Association?
A standard Memorandum of Association (MOA) document will have:
- Clause of Name: The name of the registered business or company.
- Clause of Address: The registered address of the business or company, as stated in the official records.
- Clause of Objective: The very purpose of the registered business/company is mentioned in this space. Care should be taken to draft an in-depth, and focussed objective clause of the registered business since it will determine the business model, monetization model, and growth options.
- Clause of Association: The business owner/partners need to mention every association of the shareholders and their relationship between them. Besides, the number of shares allocated to each partner needs to be mentioned and highlighted.
- Clause of Capital: What is the initial capital which has been allocated to the business by the founders and partners? This information needs to be entered here, with explicit details about paid-up capital, share capital, minimum paid-up capital, and more.
- Clause of Liability: Since MOA is needed for all limited companies, the shareholders and the partners need to mention all the state of liabilities associated with both the company and individual shareholders.
Articles of Association Content:
- Care should be taken while drafting Articles of Association content since it shouldn’t violate the clauses mentioned in the MOA.
A standard AOA document will have:
- Share Allocation: Details about each and every share allocated to the shareholders, and the logic behind this allocation of shares need to be mentioned here.
- Voting Rights: Details about the specific voting rights of all shareholders need to be mentioned here. If a shareholder is eligible to vote, then how much weightage needs to be given, and why.
- Chairman Election Process: The process to elect a Chairman of the company needs to be explained in detail. Besides, the scope of the Chairman’s voting rights needs to be explained.
- List of Directors: The full list of Directors of the limited company needs to be mentioned. Details of the first of Directors or Directors for Life, and their remuneration, power, duties, voting rights, appointment procedure, qualifications, etc. need to be explained. The procedure of conducting Board Of Director Meetings needs to be highlighted.
- Borrowing Plans: If the company plans to raise funds, then the borrowing plan, how much equity can be offloaded, and the terms and conditions should be mentioned.
- Audit Process: Details about the audit process are required to be entered in the AOA. The frequency of audits, who will audit, how to select the auditors, etc. needs a detailed explanation.
- Dividends & Reserves: How and when the company will roll out dividends for all stakeholders and investors need to be mentioned and explained. Details about the reserves of the company, how much liquid and fixed assets need to be present, and more.
- Exit Strategy: If the need arises, how will the company be dissolved, and how will the partners and shareholders exit the organization, and what the terms and conditions.
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