Difference between Memorandum of Association and Articles of Association

The Companies Act 2015 requires every limited company in Kenya to have a Memorandum of Association and Articles of Association before receiving certification from the Registrar of Companies. Knowing the difference between these two terminologies is important when you are planning to register a company. In this article, we will define both documents and explain the difference between Memorandum of Association and Articles of Association, usually abbreviated as MOA and AOA respectively.

To understand the difference between AOA and MOA, we will first define each term then compare. The Memorandum of Association is a document which contains all the information of the limited company. A simpler definition of Memorandum of Association is that it is the document that forms the company. The Memorandum of Association in company law is a basic requirement during registration of the company and IT is important because a company cannot be formed without it. The Memorandum of Association contains the following sections:

Sections in a Memorandum of Association

1. Name clause

The company should register with a name which is acceptable and it should not copy the name of another company or patented names. For example, if we have company ABC Limited, during registration of your company, you will not be allowed to use the name ABC Limited. Note that if a company is limited by shares or by guarantee, the name of the company should include “limited” as the last word.

2. Location clause

It is a requirement for the company to declare its physical location. For instance, if the company sits in Nairobi, then it will specify Nairobi as the location of its offices.

3. Object clause

The object clause states the activities the company can engage in and the ones it cannot participate in.

4. Liability clause

When the company is a limited company, the liability of the members is limited. The MOA also contains information on the amount each member contributes to the overall assets of the company in case the company winds up.

5. Capital clause

During registration of the company, the share capital should be stated including the face value of each share.

6. Subscription clause

About the Article of Association,

The Article of Association, on the other hand, is a document which contains the rules and regulations which guide the company in its operations. The Article of Association is intended for use by the members of the organization, in this case, the company. The companies are at liberty to tailor-make their Article of Association based on their preferences but it should contain the following:

Contents of the Article of Association

1. The liability of each member.
2. The powers and responsibilities of the directors of the company and other members of the company.
3. Procedures for auditing the accounts of the company.
4. The rights of all members of the company
5. Allocation of dividends to the members.
6. Procedures for appointing and removing directors.
7. Subscription to shares procedures

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Difference between Memorandum of Association and Articles of Association

The following are the main differences between AOA and MOA:

1. Memorandum of Association contains information on the requirements before registration of the company by the Registrar of Companies while the Article of Association contains the regulations which guide the company in its day to day operations.
2. Regarding scope, activities performed outside the scope of the Memorandum of Association are considered null and void. On the other hand, through voting by the owners of the company, acts done outside the scope of Articles of Association can be accepted.
3. The Article of Association focuses on the interaction between the company and outsiders, while the Memorandum of Association concentrates on the interaction between the members and the company.
4. The Articles of Association is not a fundamental requirement during registration of the company, but the Memorandum of Association is an essential requirement during registration of the company by the Registrar of Companies.
5. The Articles of Association are tailored based on the nature of the company while the Memorandum of Association must contain the six clauses discussed above.
6. The Memorandum of Association is second to the Companies Act while the Articles of Association is subordinate to the Act as well as the Memorandum of Association.

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The Memorandum and Articles of Association are essential in directing the company in its activities and preventing conflicts among the members of the company and outsiders. It is crucial to understand the difference between Memorandum of Association and Articles of Association, and the contents of each document as explained above. Additionally, it is vital for a firm to review its Articles of Association regularly so that changes arising can be factored in.

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Jackline Wangare (Lifestyle writer) Jackline Simwa is a content writer at Tuko.co.ke, where she has worked since mid-2021. She tackles diverse topics, including finance, entertainment, sports, and lifestyle. Previously, she worked at The Campanile at Kenyatta University. She has more than five years in writing. Jackline graduated with a Bachelor’s degree in Economics (2019) and a Diploma in Marketing (2015) from Kenyatta University. In 2023, Simwa finished the AFP course on Digital Investigation Techniques and Google News Initiative course in 2024. Email: simwajackie2022@gmail.com.