Articles of Association vs. Memorandum: What’s the Difference?

Although both articles of association and memorandum of association are valuable documents for corporate governance, they serve distinct purposes and have significant differences in nature, scope, and legal implications. Here are the key contrasts between these foundational documents:

1. Nature and Scope

The memorandum of association outlines the company’s fundamental constitution, including its name, registered office location, objectives, and authorised capital. It defines the company’s external boundaries, stating what it can and cannot do. 

On the other hand, the articles of association focus on the company’s internal management and operational rules. They provide the framework for day-to-day functioning, addressing matters such as the corporate structure, appointment and powers of directors, share issuance and transfer, dividend policies, and the conduct of general meetings.

2. Public Access

The memorandum of association is a public document accessible to anyone who wishes to understand the company’s foundational details, objectives, and legitimacy to engage in specific business activities. This transparency allows potential investors, partners, and stakeholders to evaluate the company’s purpose and determine its alignment with their interests. 

In contrast, the articles of association are not required to be made publicly available. They remain an internal document that guides the company’s management and is typically shared only with relevant stakeholders, such as shareholders and directors.

3. Alteration Process

Amending the memorandum of association is more complex than the articles of association. Any changes to the memorandum require a special resolution passed by the company’s members and subsequent approval from the regulatory authorities. This stringent process protects the company’s core objectives and ensures that major alterations align with the shareholders’ best interests. 

Conversely, the articles of association can be amended more easily through an ordinary resolution passed during a general meeting. This allows the company to adapt its internal rules and regulations as required, without the same level of formality as required for changes to the memorandum.

4. Relationship with Shareholders

The memorandum of association establishes a contractual relationship between the company and its shareholders. Shareholders invest in the company based on the objectives defined in the memorandum and are entitled to receive dividends and other benefits within its defined scope. 

The articles of association, on the other hand, regulate the relationships between the shareholders and the company’s management. They outline the shareholders’ rights, duties, and voting powers and govern the conduct of meetings and decision-making processes.

5. Binding Nature

The memorandum of association is binding on the company and its members from the moment of incorporation. Any activity carried out by the company that falls outside the memorandum’s scope is considered ultra vires and void, providing a protective shield for stakeholders. 

While crucial for internal management, the articles of association may or may not be adopted immediately upon incorporation. They can be altered later through the amendment process, allowing the company to refine its internal procedures and adapt to changing circumstances as it grows.