Memorandum vs. Articles of Association: difference explained

What are the Memorandum of Association and Articles of Association, and how do they differ? These two documents constitute the company's constitution and define its “rules of life.” When asking about the “memorandum and articles of association,” people often try to understand what exactly each of these papers contains. In essence, the MOA is the basis for the creation of a company (the company's external passport), and the AOA is its internal management regulations.

What is a Memorandum of Association?

Definition and meaning of memorandum of association

Both an MOA and a Memorandum of Association are legal documents that are drawn up during the registration of a company. It's got all the key info about a company that's still in the works, like the name, where it's registered, its main goal, how much capital it needs, and what the founder's responsibilities are. Basically, it sets up the rules that let the business operate legally. As is customary around the world, the memorandum is often referred to as governing the company's external affairs, and the articles are referred to as its internal constitution. That's why the memorandum of association is called a public document. It's basically a record of the parties involved, their positions, and their status.

Key contents of an MOA

The memorandum of association usually consists of several standard clauses:

• Name clause — official name of the entity.

• Registered office clause — address of registration and jurisdiction.

• Object clause — a list of the main objectives and types of business for which the company is being established.

• Liability clause — usually states that the participants have limited liability (limited to their contribution).

• Capital clause — reflects the total amount of authorized capital and the distribution of shares or interests among the founders.

• Association clause — a declaration by the founders of their desire to establish a firm or enterprise and acquire shares in the capital.

To better understand the structure of an MOA, it is enough to look at a typical company memorandum example, where all the standard sections are clearly visible — from the purpose of the activity to the amount of capital.

What are Articles of Association?

Definition and role

The articles of association are basically a business's main internal docs. They lay out the rules for how it's run and the relationships between the participants. It lays out how to choose and empower directors, schedule shareholders’ meetings, do votes, and handle other parts of running a business. The Articles of Association are like the “rules of the game” for management and shareholders. According to a professional source, articles of association are basically internal documents that lay out the rules for how a company operates and what its purpose is. British experts say that the articles of association “regulate how the company is managed” and the shareholders' rights.

Articles of Association example

The articles of association usually include the following sections: company name, objectives, capital structure, and organizational structure. For example, the articles of association may stipulate that two persons are sufficient to hold a meeting of the board of directors or may specify the procedure for issuing new shares and distributing dividends. The articles of association often also contain provisions on reporting, auditing, shareholder voting rights, and restrictions on directors. Such a doc is more flexible—it can be amended by a special resolution of the shareholders.

Why both documents matter in company law

Compliance and legal framework

Both these papers are defined in laws; they must follow these laws. The articles of association and memorandum of association usually include specific rules that are required by company law. The articles of association are a set of rules that the entity and its participants must follow. Many of these rules are also laws, so if you break them, it's considered illegal. Most legal systems require a company to have articles of association and a memorandum to exist legally. These docs are the foundation of the company's legal rules, protecting the interests of shareholders and other parties dealing with the company.

FAQ on MOA and AOA

What is the difference between MOA and AOA?

The Memo is a doc that explains the basic information about a company. It includes details such as who started the company, what its goals are, and how much money was used to start it. The Articles of Association explain the company's internal rules in detail. These rules include how the company is managed and the rights and obligations of the directors and shareholders. 

Is the Memorandum of Association still required today?

In many jurisdictions, you still need a Memo when registering a new entity. But it's not as important as it used to be. For example, in the US, there is usually no separate document for this, because corporate founding documents are called something else there. Depending on the country, a Memo of Association may be required or replaced by local equivalents.

How do MOA and AOA work together?

These two documents together make up the company's complete set of rules. The Memorandum gives outside stakeholders basic information about the company, such as its purpose, capital, and founders. The Articles define the rules for internal management.