Confound between Memorandum and Articles of Association

Confound between Memorandum and Articles of Association

The memorandum of association of a company states the company name and aims to out the main and subsidiary objectives of the company. An article of Association is a document that contains the purpose of the company as well as the duties and responsibilities of its members defined and recorded clearly.

The fundamental points of distinction between these two important documents i.e. Memorandum and Articles of Association are as follows:

Confound between memorandum and articles of association:

(1) The memorandum contains the fundamental conditions upon which alone the company is allowed to be incorporated. It defines and limits the objects of the company beyond which the action of the company cannot go. The articles are the internal regulations of the company and are subsidiary to the memorandum.

(2)The memorandum is subordinate to the Act only, while the articles are not only subordinate to the Act but also to the memorandum.

(3) The memorandum must compulsorily be filed with the Registrar by all types of companies at the time of incorporation while a public company limited by shares need not file a separate set of articles at the time of incorporation as it may choose to adopt ‘Table A’ – the model set of articles.

(4) The memorandum defines the relationship between the company and the outsiders. e.g., creditors, buyers, sellers, debtors, and members etc. Articles govern the internal relationship between the company and the members and generally have nothing to do with the outsiders.

(5) The memorandum cannot be easily altered while articles are easily alterable by passing a special resolution only.

(6) Acts chine by a company ultra varies the memorandum are void and cannot be ratified by the shareholders. But acts done by a company ultra vires articles but inter wires the memorandum are simply irregular and not void and can be ratified subsequently by the shareholders.

(7) Outsiders have no remedy against the company for contracts entered into ultra vires the memorandum, while they can enforce the contract against the company even if it is ultra vires the articles i.e., where some formality relating to internal regulation like passing of the required resolution, might have not been performed, provided they act carefully and had no notice of the irregularity.