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    Thursday, 12 March 2015

    Article of Association and Memorandum of Association

    Introduction
    Companies ordinance has provided specific procedure and rules for registration of company. For registration of public company and private, some documents are filed with registrar before incorporation of company and some documents are filed after incorporation of company. Articles of association and memorandum of association are those documents, which should be filed before incorporation of public and private company.

    1. Article of Association

    “Articles of association” can be defined as that document, which consists of those rules and regulations, which are formed for management of internal affairs of company for conducting of business of company for relation between company and its members and for rights and duties of members of company.

    Preparation of Article of Association


    Following are the points are important to explain preparation of article of association
    • Articles of association should be in printed form
    • Article of association should be properly date.
    • It should be numbered consecutively 
    • It should be divided into paragraphs
    • It should be signed by subscribers.

    Contents of Article of Association

    Following are the contents of article of Association
    • Article of Association states rules and regulations about appointment of directors.
    • It describes rules and regulations about powers and duties of directors.
    • It describes rules and regulations about stamp of company
    • It describes rules and regulations about methods for calling of meetings of company.
    • It describes rules and regulations about winding of company.
    • It states rules and regulations about qualification of directors.
    • It states rules and regulations about dis-qualification of directors.
    • It states rules and regulations about proceedings of directors meetings.
    • It describes rules and regulation about conversion of shares
    • It describes rules and regulation about methods for transfer of shares.
    • It states rules and regulations about voting powers of members of company.

    Alteration of Article of Association

    Following option to explain the alteration of article of association

    i. Special Resolution
    If a company has to after the article of association, a special resolution has to be passed by the company.

    ii. Subject of alteration by special resolution
    The subject of alteration by special resolution shall be valid.

    iii. Vote for alteration
    If the alteration effects the rights or liabilities of members of the company, then vote should be casted at least three fourth. 

    2. Memorandum of Association

    Memorandum of Association can be defined as those documents, which governs relationship between company and outside world.

    Preparation of Memorandum of Association

    Following are the points are important to explain preparation of memorandum of association
    • Memorandum of Association should be in printed form
    • It should be numbered consecutively
    • It should be divided into paragraphs.
    • It should be signed be members.

    Contents of Memorandum of Association

    Following are the contents
    • In Memorandum of Association, company of name is stated. Name of public company ends with limited and name of private company ends with Private company.
    • It states name of place, where registered office of company is to be situated.
    • It states that what kind of Business Company wants to do.
    • It describes total amount of capital, its divisions and value of each share.
    • It states liabilities of share holders whether it is limited or un-limited.

    Alteration of Memorandum of Association

    Memorandum of association can be amended through passing of special resolution or through court or central Govt.

    Difference between Article of Association and Memorandum of Association

    Following are the difference between article of association and memorandum of association.
    • Sec 26 related to Article of association and sec 16 related to Memorandum of association
    • Article of association Document Company can change it condition in any time but memorandum of association is not alterable.
    • Memorandum of association is a compulsory document for formation of company and article of association is an optional document for formation of company.
    • Any act, against MOA is illegal and any act against AOA is not illegal
    • MOA is that document which defines external powers of company and AOA is that documents which contain internal management.
    • MOA defines the relationship between company and outside world and AOA defines relationship between management and shareholders.
    • MOA is like a controller of company and AOA is the subordinate to MOA.

    Finial Analysis
    I say, I include that it can be stated that memorandum of association and article of association are public documents. They inter-linked. Whenever there is any ambiguity or whenever memorandum of association is silent on any point, articles of association can give explanation. Beyond this, these two documents have nothing in common and differ from each other.
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    Item Reviewed: Article of Association and Memorandum of Association Rating: 5 Reviewed By: Usman Ali
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