What is the difference between “Memorandum of association” and “Articles of Association”?
Ans. “Memorandum of Association” forms the charter of the company and is the “statutory deed of partnership”, whereas the “Articles of Association” of a Company are the rules and regulations formed for the purpose of managing its ‘indoor’ affairs.
Both the memorandum and the articles are essential documents for the formation of a company. But, ‘memorandum of Association’ differs from that of the ‘Articles of Association’ differs from that of the ‘Articles of Association’ in following manners-
1. ‘Memorandum of Association’ of a company are the charter of the company whereas, the ‘Articles of Association’ are the rules and regulations of the company for the internal regulations.
2. Memorandum defines and formulates the fundamental condition of the company’s incorporation whereas, Articles lay down the various modes and methods to fulfill the conditions for company.
3. The memorandum contains the fundamental condition upon which alone the company is incorporated. The articles of the company are subordinate to and controlled by the memorandum of association which is the dominant instrument.
4. The memorandum states the purpose for which the company has been established, whereas the articles provide the manner in which the company is to be carried and its proceedings disposed of.
5. The memorandum defines the field of activity of the company beyond which the company cannot legally traverse whereas, the articles provide the regulations for the conduct of the affairs of the company.
6. A memorandum can be altered by a special resolution in a general meeting and sanctioned by the Court or Company Law Board whereas, articles, can be altered only by a special resolution at a general meeting.
7. The memorandum of association defines the limitations of the powers of the company whereas, the articles of association play a subsidiary part to the memorandum of association. Articles defines the duties, the rights and the powers of the governing body between them and the company.
8. The activities of a company beyond the scope of the objects stated in the memorandum are void whereas, acts done in contravention of the provisions of the articles are only irregular and can be confirmed by ratification of the share-holders.
9. The outsiders can take the benefit of the memorandum of a company but they cannot do so in case of the articles.
10. The acts done in contravention of the provisions contained in the memorandum are void and cannot be validated even by the ratification by an unanimous vote while acts done in contravention of articles are simply irregular and can be ratified by the members.