Memorandum and Articles of Association: What to Include

Short answer: The Memorandum of Association (MOA) is a company's constitution, defining its scope, objects, and relationship with the outside world. The Articles of Association (AOA) are the internal bylaws that govern its day-to-day management, director powers, and shareholder rights. Both are mandatory documents for incorporating a company in India under the Companies Act, 2013 and must be filed with the Registrar of Companies (RoC).

What is a Memorandum of Association (MOA)?

The MOA is the foundational charter of the company, establishing the limits of its operations. Any action taken by the company beyond the scope defined in its MOA is considered 'ultra vires' (beyond its powers) and is legally void. As per Section 4 of the Companies Act, 2013, the MOA of a company limited by shares must contain six key clauses:

1. Name Clause: States the legal name of the company, ending with "Private Limited" for a private company or "Limited" for a public company.
2. Registered Office Clause: Mentions the State in which the company's registered office will be situated. The full address is not required in the MOA, but the State is mandatory.
3. Objects Clause: This is the most critical clause. It details the business activities the company is authorised to undertake. It's divided into main objects and matters considered ancillary for furthering the main objects.
4. Liability Clause: Specifies that the liability of the members (shareholders) is limited to the amount unpaid on their shares.
5. Capital Clause: States the company's authorised share capital, which is the maximum amount of capital it can raise through the issue of shares. This is divided into a specific number of shares of a fixed face value.
6. Subscription Clause: Contains the names and signatures of the first subscribers (first shareholders) to the MOA, along with the number of shares they agree to take. For a private company, there must be at least two subscribers.

What are the Articles of Association (AOA)?

The AOA are the internal rules and regulations that govern the company's day-to-day administration and management. The AOA are subordinate to the MOA and the Companies Act, 2013. They define the rights, responsibilities, and powers of the members and directors. Key matters covered in the AOA include:

• Share capital and variation of rights
• Lien on shares
• Calls on shares
• Transfer and transmission of shares
• Forfeiture of shares
• Alteration of capital
• General meetings (AGM, EGM)
• Voting rights and proxies
• Board of Directors, their appointment, powers, and proceedings
• Appointment of key managerial personnel (KMP)
• Dividends and reserves
• Accounts and audit
• Winding up procedures

What are the key differences between MOA and AOA?

Understanding the distinction between these two documents is crucial for proper corporate governance.

Feature	Memorandum of Association (MOA)	Articles of Association (AOA)
Purpose	Defines the company's constitution and scope of activities.	Regulates internal management and operations.
Relationship	Defines the company's relationship with the outside world.	Defines the relationship between the company, its members, and its directors.
Status	Supreme document. Subordinate only to the Companies Act.	Subordinate to both the MOA and the Companies Act.
Alteration	Difficult to alter; requires a special resolution and, in some cases, central government approval.	Easier to alter; generally requires only a special resolution of members.
Key Content	Name, Registered Office, Objects, Liability, Capital, Subscription.	Rules for share capital, meetings, directors, dividends, etc.
Ultra Vires	Acts beyond the MOA are void and cannot be ratified by shareholders.	Acts beyond the AOA are irregular but can be ratified by shareholders, provided they are within the MOA's scope.

How do I draft the 'Objects Clause' of the MOA?

A carefully drafted objects clause provides operational flexibility while ensuring compliance. The clause is typically divided into two parts:

1. The main objects: This section lists the primary business activities the company will engage in immediately after incorporation. Be specific but also broad enough to accommodate future growth in your core area. For example, instead of "making websites," use "providing information technology enabled services including web design, software development, and digital marketing."

2. Matters which are necessary for furtherance of the objects: This section lists ancillary or incidental activities that support the main objects. This can include activities like opening bank accounts, borrowing funds, investing money, acquiring property, entering into partnerships, and applying for intellectual property rights.

A broad objects clause prevents the company from having to amend the MOA every time it wants to enter a related business line.

Can I change the MOA or AOA after incorporation?

Yes, a company can alter its MOA or AOA at any time after incorporation, but it must follow the procedure laid out in the Companies Act, 2013.

The general process involves:

1. Board Meeting: The Board of Directors must pass a resolution to approve the proposed alteration.
2. Extra-ordinary General Meeting (EGM): The Board calls an EGM of the shareholders to vote on the proposal.
3. Special Resolution: The alteration must be approved by a 'special resolution', which requires the votes in favour to be at least three times the votes against.
4. RoC Filing: Form MGT-14 must be filed with the Registrar of Companies within 30 days of passing the special resolution, along with the altered MOA/AOA.

Specific changes, like altering the name clause or capital clause of the MOA, have additional requirements. For instance, changing the authorised capital requires filing Form SH-7. See our guide on how to increase authorised capital.

What are the standard formats for MOA and AOA?

The Companies Act, 2013 provides standard template formats in Schedule I, which companies can adopt based on their structure. For example, a private company limited by shares would typically refer to Table F (for MOA) and Table F (for AOA). While you can adopt these tables entirely, it is highly recommended to customise the AOA to reflect any specific agreements between founders, investors, or to include provisions for better governance. You can read more in our guide to private limited company registration.

Worked example

Let's consider a Bengaluru-based AI software startup, "InnovateAI Solutions Private Limited", being incorporated by two founders.

Company Details:

• Name: InnovateAI Solutions Private Limited
• State of Registered Office: Karnataka
• Authorised Share Capital: ₹10,00,000 divided into 1,00,000 equity shares of ₹10 each.
• Subscribers: Anjali and Vikram, each subscribing to 50,000 shares.

Drafting the MOA Objects Clause:

• III (A). The objects to be pursued by the company on its incorporation are:
  • "To conceive, design, develop, customize, implement, maintain, test, and benchmark artificial intelligence, machine learning, and data science based software, algorithms, solutions, and services for various industries including but not limited to finance, healthcare, retail, and manufacturing. To provide Software as a Service (SaaS), Platform as a Service (PaaS) and related cloud computing services."
• III (B). Matters which are necessary for furtherance of the objects specified in clause III(a) are:
  • "To apply for, acquire, and protect intellectual property including patents, copyrights, and trademarks. To enter into technical and financial collaborations. To borrow or raise money. To invest company funds. To acquire office premises, hardware, and other infrastructure. To recruit and train personnel. To conduct marketing and business development activities..." and so on.

This structure gives InnovateAI a clear mandate for its core business while providing the flexibility to undertake all necessary supporting activities without violating its charter.

Common mistakes

1. Making the Objects Clause too narrow: This restricts the company's ability to pivot or expand into adjacent business areas without going through the cumbersome process of altering the MOA.
2. Using a generic template without customisation: A standard AOA may not reflect specific understandings between founders, such as rights of first refusal, tag-along/drag-along rights, or deadlock resolution mechanisms. These are better placed in a shareholders' agreement but the AOA must be amended to reflect them.
3. Contradictions between MOA and AOA: The AOA is subordinate to the MOA. Any provision in the AOA that contradicts the MOA is void.
4. Forgetting to update the MOA Capital Clause: After passing a resolution to increase authorised capital, many companies forget to file the necessary forms and update the MOA, leading to compliance issues during future fundraising.
5. Failing to have 'entrenchment' provisions: For critical matters, founders may want to require a higher voting threshold than a special resolution. This 'entrenchment' must be included in the AOA at the time of incorporation or added later with unanimous consent.

How SP & SC helps

Drafting the MOA and AOA is more than a formality; it's about building a strong legal foundation for your business. At SP & SC, we don't use one-size-fits-all templates. We take the time to understand your business vision, founder dynamics, and future plans. We then draft bespoke MOA and AOA that protect your interests and provide operational flexibility. We handle the entire company incorporation process, including name approval, document drafting, and filing with the Registrar of Companies, ensuring your legal framework is solid from day one.

Frequently asked questions

H3: Is it mandatory for a company to have an MOA and AOA?

Yes, under the Companies Act, 2013, every company must have its own Memorandum of Association and Articles of Association. These documents must be filed with the Registrar of Companies at the time of incorporation.

H3: Can one person sign the MOA?

For a One Person Company (OPC), only one person subscribes to the MOA. For a private limited company, a minimum of two subscribers are required, and for a public limited company, a minimum of seven subscribers are needed.

H3: Where can I find my company's MOA and AOA?

Once filed, the MOA and AOA become public documents. Anyone can view or download them from the Ministry of Corporate Affairs (MCA) portal by paying a nominal fee after searching for the company on MCA Master Data.

H3: What happens if a company acts beyond its MOA?

Any act done or contract made by the company that goes beyond the powers stated in the Objects Clause of its MOA is 'ultra vires' and considered null and void. Such an act cannot be ratified even by the unanimous consent of all shareholders.

H3: Does an LLP have an MOA and AOA?

No, a Limited Liability Partnership (LLP) does not have an MOA or AOA. An LLP is governed by a single document called the LLP Agreement, which outlines the mutual rights and duties of the partners. See our comparison of LLP vs Private Limited Company.

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Your company's constitutional documents are too important to leave to chance. Share your business plan and founder details with us, and we will provide a written, fixed-fee quote for drafting a bespoke MOA and AOA and managing your company's incorporation from start to finish. Contact SP & SC or WhatsApp us at +91 90356 74566 to get started.