The Memorandum contains the fundamental conditions upon which alone the company is allowed to be incorporated. They are conditions introduced for the benefit of the creditors, and the outside public, as well as of the shareholders. The Articles of Association are internal regulations of the company.
The main points of difference between memorandum and articles are as follows:
1. Memorandum of Association is the charter of the company. It contains those fundamental conditions upon which alone the company is granted incorporation. Articles of Association contain the rules and regulations framed to govern the internal management of the company.
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2. Different clauses of the Memorandum cannot be easily altered. They can be altered for specified purposes and in accordance with the mode prescribed by the Act. Alteration of some of them requires the permission of the Tribunal/Company Law Board while in other cases sanction of the court is necessary.
In case of Articles of Association, a company has inherent power to alter it. Members can alter the articles by passing a special resolution provided other conditions are satisfied. Permission of the court or the government is not required for ordinary alterations.
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3. Memorandum defines the objects and powers of the company. It fixes up the scope and the extent of the activities of the company. Articles from the bye-laws of the company and provide those regulations by which the objects and powers of the company can be carried out.
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4. Memorandum of Association cannot include any clause contrary to the provisions of the Companies Act. An article of Association is subsidiary to both the Companies Act and the Memorandum of Association. Articles cannot be framed in contravention of the provisions of the Companies Act and the Memorandum.
5. Though both are public documents, Memorandum defines the relation between the company and the outsiders, the Articles regulate the relation between the company and the members or members alone or members inter se.
6. Acts done by a company beyond the scope of the Memorandum are absolutely void and cannot be ratified even by a unanimous vote of all the shareholders. But acts of a company beyond the Articles are simply irregular and not void and can easily be confirmed or subsequently ratified by the shareholders.
7. Every company is required to register its Memorandum of Association, whereas it is optional for a public company limited by shares to have its own Articles of Association.