Every company must draft and register its charter (MOA) and bylaws (AOA) to obtain incorporation.
1. Memorandum of Association (Section 4)
The MOA is the constitution of the company, defining the boundary of its corporate capacity. It regulates the company's relations with the outside world.
The Six Compulsory Clauses of MOA:
- Name Clause: Specifies the company name ending with "Limited" or "Private Limited".
- Situation/Registered Office Clause: Specifies the state in which the company's registered office is situated.
- Object Clause: The most crucial clause. Outlines the primary objects the company will pursue. Any act outside this clause is ultra vires.
- Liability Clause: Specifies that the liability of members is limited by shares or guarantee.
- Capital Clause: Specifies the authorized (nominal) share capital and its division into shares.
- Association/Subscription Clause: Signatures of the initial subscribers confirming their agreement to take shares.
2. Articles of Association (Section 5)
The AOA represents the internal bylaws and regulations governing the management, duties of officers, conduct of meetings, and transfer of shares.
| Memorandum of Association (MOA) | Articles of Association (AOA) |
|---|---|
| Defines the constitution and external boundaries of corporate powers. | Contains the internal rules, regulations, and bylaws for corporate management. |
| Subordinate only to the Companies Act. Supreme over AOA. | Subordinate to both the Companies Act and the MOA. |
| Acts ultra vires the MOA are completely void and cannot be ratified by shareholders. | Acts ultra vires the AOA but intra vires the MOA are merely irregular and can be ratified. |