Articles of Association (AOA)

Subject: Company Law

SUBMITTED BY SUBMITTED TO
Prakash Singh Mr. Subodh Kumar Singh

B.B.A.LL.B. Assistant professor

Roll. No. 13 Narayan school of law
7th SEM GNSU, Jamuhar
Narayan school of law

1
 ACKNOWLEDGEMENT

I would like to express my special thanks of gratitude to my teacher Mr. Subodh Kumar Singh
Sir, who gave the golden opportunity to do this wonderful assignment on the topic of “Articles
of Association (AOA)” Which also helps me to know about so many new things.

I‟d also like to express my gratitude to my friends for their recommendations and input
throughout the course of the project.

I will never forget their encouragement, and I hope that I will be shown the same kindness and
direction in my future endeavours.

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 TABLE OF CONTENT

 Introduction…………………………………………………………………………..……4
 Meaning of Articles of Association…………………………………...…………………..5
 Definition of Articles of Association Under The Companies Act, 2013……………...…………..6
 Objective of Articles of Association………………………………………………………7
 Purpose of Articles of Association………………………………………………………..7
 Nature of Articles of Association…………………………………………………………9
 Importance of Articles of Association…………………………………………………….9
 Compliance of Articles of Association (Aoa) With The Law…………………………...10
 Components of Articles of Association…………………………………………..……..11
 Alteration of Articles of Association……………………………………………………12
 Steps For Alteration of Articles Of Association……………………………….………..13
 Alteration of AOA For A Public Company To Become A Private Company.…………..14
 Alteration of Aoa For A Private Company To Become A Public Company………….…15
 Relevant Case Law………………………………………………………..…….….……16
 Conclusion………………………………………………………...…………..…………16

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 INTRODUCTION

A company must prepare certain preliminary documents before applying for company
registration. The Memorandum of Association (MOA) and Articles of Association (AOA) are
two such preliminary documents that every company must prepare. The MOA and AOA should
be filed with the Registrar of the Companies (ROC) along with the company incorporation form.
The Memorandum of Association (MOA) and Articles of Association (AOA) define a
company‟s scope of work, objectives, rules and internal management. The MOA and AOA are
two essential documents that are the basis of the company‟s constitution. They are indispensable,
and the company‟s foundation stands upon them. Therefore, the founders of a company must
draft them with utmost clarity and precision.

A Memorandum of Association (MOA) is a document containing details of the company‟s

constitution and is the foundation of the company‟s structure. It is known as the charter of a
company. It lays down the scope of the company‟s activities, objectives for which it is formed,
determine the scope of its authority and its relationship with the outside world. The creation of
an MOA is the first step towards company registration. During the formation of a company, the
company members must subscribe to the MOA. Subscribing to an MOA means to put one‟s
mark or signature on the document as attestation or approval of its contents and The Articles of
Association (AOA) of the company contains its rules or bye-laws and regulations that control or
govern the conduct of its business and manage its internal affairs. The AOA is subordinate to the
MOA of a company and is governed by the MOA. Every company must have an AOA as it plays
a vital role in defining its internal rights, workings, management and duties. The contents of
AOA should be in sync with the MoA and the Companies Act, 2013.

The Articles of Association (AOA) of a company is one of the most essential documents of a
company. It prescribes the rules, regulations and by-laws according to which the internal matters
of the company are conducted. In simpler terms, it specifies the conduct of the business of a
company and is a document of paramount significance for a company. An AOA is often
compared to a rulebook of a company since it regulates the internal management of a company
while also giving powers and obligations to its officers and employees. This includes regulations
for several details of the company and its workings, such as rights of the shareholders,
qualifications of directors, binding effect of contracts, etc. Moreover, the Articles of Association
4
even establishes contracts between, firstly, members of the company, and secondly, members
and the company. However, it must be noted that while the AOA establishes the regulations of
the company, it is still subordinate to the Memorandum of Association (hereinafter also referred
to as MOA). MOA acts as a constitutional document of the company that supersedes all other
documents within the company. If the AOA exceeds the scope laid down in the provisions of the
MOA, then it would be considered ultra vires, as laid down by the Calcutta High Court in the
landmark judgement of Shyam Chand v. Calcutta Stock Exchange (1945). Thus, in the event of a
conflict between the two, the provisions laid down in the Memorandum of Association would
prevail. Further, in case of any uncertainty of such provision in the MOA, it shall be read along
with the AOA for a more harmonious interpretation and understanding1.

MEANING OF ARTICLES OF ASSOCIATION

Under Indian Company Law, the Articles of Association is a legal document that outlines the
rules and regulations governing the management and operations of a company. It is a key
document that defines the internal rules and procedures for the company‟s shareholders,
directors, and officers, as well as the company‟s relationship with its stakeholders. The Articles
of Association must be drafted and filed during the incorporation process of the company. It
includes various provisions, such as the company‟s name, its registered office address, the
objectives of the company, the rights and obligations of its members, the number of directors and
their powers and duties, the rules for conducting meetings, and the procedure for issuing and
transferring shares. In addition, the Articles of Association also specify the procedures for
resolving disputes between the company and its shareholders or between the shareholders
themselves. They may also include provisions relating to the appointment and removal of
directors, the distribution of profits and losses, and the winding up of the company. It is
important to note that the Articles of Association are legally binding on the company and its
members and must be adhered to at all times. Any changes to the Articles of Association must be
approved by the shareholders through a special resolution and filed with the Registrar of
Companies.

1
Mayashree Acharya, "Understanding Company MOA and AOA Under the Companies Act," ClearTax,
https://cleartax.in/s/company-moa-aoa-under-companies-act (last visited Feb. 25, 2024)

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Under the framework of Indian Company Law, the Articles of Association (AOA) stands as a
foundational legal document that meticulously delineates the rules and regulations that govern
the intricacies of a company's management and operations. Functioning as a blueprint for
internal governance, the AOA shapes the landscape for the company's shareholders, directors,
officers, and defines the nuanced relationships the company maintains with its stakeholders. This
vital document is not only pivotal for ensuring a smooth and organized functioning but is also a
statutory requirement, necessitating its drafting and filing during the incorporation process of the
company. The breadth of the Articles of Association spans a multitude of provisions, each
playing a significant role in sculpting the company's operational framework. These encompass
fundamental aspects such as the official designation of the company, its registered office address,
the overarching objectives that steer its operations, and the delineation of rights and obligations
vested upon its members. The AOA meticulously outlines the number of directors, their powers,
and corresponding duties, providing a robust framework for effective corporate governance2.

DEFINITION OF ARTICLES OF ASSOCIATION UNDER THE COMPANIES ACT,

2013

The Companies Act, 2013 provides a detailed definition and provisions related to the Articles of
Association in Section 2(5) and Section 5 respectively. According to Section 2(5) of the
Companies Act, 2013, the Articles of Association refers to the document containing the rules and
regulations that govern the management of the company‟s affairs.

Section 5 of the Companies Act, 2013 specifies that the Articles of Association must be in
accordance with the provisions of the Act and must be signed by each subscriber to the
memorandum of association in the presence of at least one witness who attests the signature. The
articles must also be printed and divided into paragraphs and numbered consecutively.
Furthermore, the Act specifies that the articles may contain provisions for the management of the

2
Aditi Vinzanekar & Debapriya Biswas, "Understanding Articles of Association under Indian Company Law,"
IPLeaders Blog, https://blog.ipleaders.in/articles-of-association-under-indian-company-law/ (last visited Feb. 27,
2024)

6
company‟s business, the regulation of its affairs, the conduct of its shareholders and directors,
and other matters incidental to the company‟s operations3.

OBJECTIVE OF ARTICLES OF ASSOCIATION

While the Memorandum of Association contains the fundamental elements based upon which the
company is incorporated, the Articles of Association acts as a complementary document to the
Memorandum that fulfils the following objectives:

 To act as a governing document that regulates the internal affairs and operations of the
company with the rules and regulations framed in its articles;

 To provide clarity in regards to the procedures and rules that the company must follow,
which should also be accessible by the shareholders of the company;

 To regulate the relationship between the company and its members (shareholders,
directors, employees, etc.) along with the relationship among the members;

 To clarify the legal rights and obligations of the different classes of shareholders as well
as the directors and other members;

 To cover any additional matters that the Company considers necessary for its governance
and management4.

PURPOSE OF THE ARTICLES OF ASSOCIATION

 Governing document

The Articles of Association stands as the paramount governing document of a company,

establishing a robust framework that delineates the rules and regulations essential for its
seamless management and operation. Within its pages, the document meticulously outlines the
rights, duties, and obligations of key stakeholders, including directors, shareholders, and officers.

3
GK Kapoor & Sanjay Dhamija, Company Law: A Comprehensive Text Book on Companies Act 2013 (Taxmann,
2023)
4
"Articles of Association Under Company Law," Law Bhoomi, https://lawbhoomi.com/articles-of-association-
under-company-law/ (last visited Feb. 27, 2024).

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By serving as a comprehensive guide to internal governance, the Articles of Association plays a
pivotal role in fostering a structured and organized corporate environment.

 Legal requirements

As per the legal landscape governed by the Companies Act, 2013, the Articles of Association is
not merely a recommended document but a statutory mandate for every company. Its
indispensability is highlighted during the incorporation process when it must be drafted and filed
with the Registrar of Companies. This regulatory requirement not only ensures adherence to
legal standards but also contributes to the transparency and accountability of the company's
operations. The Articles of Association, therefore, is not only a practical necessity but also a
legal obligation that lays the foundation for the company's existence.

 Clarity

One of the primary functions of the Articles of Association is to provide clarity to the
stakeholders involved in the company - shareholders, directors, and officers alike. By detailing
the procedures and rules that govern business activities, the document acts as a comprehensive
reference guide. This clarity serves as a cornerstone for informed decision-making, ensuring that
all involved parties have a precise understanding of their roles, responsibilities, and the
operational protocols that must be adhered to. In essence, the Articles of Association acts as a
navigational compass, guiding stakeholders through the intricate terrain of corporate governance.

 Protection

Embedded within the Articles of Association is a crucial function of safeguarding the interests of
the company's shareholders. Through meticulous definition of their rights, the document
establishes a protective shield around shareholders, articulating the mechanisms by which
disputes or conflicts can be addressed. This protective function ensures that the interests of
shareholders are not only acknowledged but also legally upheld. By providing a structured
framework for dispute resolution, the Articles of Association contributes to the overall stability
and integrity of the company.

 Flexibility

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A noteworthy feature of the Articles of Association lies in its adaptability to changing
circumstances. The document is not static; it can be amended over time to suit the evolving
needs of the company. This flexibility, however, comes with the caveat that any amendments
must comply with the stipulations of the Companies Act, 2013. The ability to modify the Articles
of Association allows the company to remain agile and responsive to market dynamics,
technological advancements, and other pertinent changes. It becomes a dynamic tool that evolves
with the company, ensuring that its governance structure remains pertinent and effective5.

NATURE OF ARTICLES OF ASSOCIATION

The Articles of Association (AOA) is like the essential rulebook for a company, laying down the
detailed guidelines for how the company should manage its day-to-day operations. It acts as the
bedrock, ensuring everything runs smoothly internally, from how directors and officers carry out
their responsibilities to the nitty-gritty details of shareholder meetings. Although the AOA is
crucial, it operates under the broader principles set by the Memorandum of Association (MOA),
often seen as the company's constitution. While the MOA sets the fundamental identity and
goals, the AOA gets into the specifics of making those goals a reality. Think of it like a country's
constitution (MOA) setting fundamental principles, and its laws (AOA) detailing specific rules
for everyday governance. Despite its importance, the AOA can be flexible, allowing the
company to adapt its internal rules as needed, as long as these changes align with the MOA and
follow legal requirements outlined in the Companies Act, 20136.

IMPORTANCE OF ARTICLES OF ASSOCIATION

Both Articles of Association and Memorandum of Association are considered the most important
statutory documents of a company. In the case of the Articles of Association, any new company
would find it to be of utmost importance; even more so than a Memorandum in some cases since
the Articles dictate the internal governance of a company. Since many countries have a
necessary requirement for both documents, they hold immeasurable power in the context of the
legitimacy of a company and its foundation. In addition to that, it also acts as a vital document
for shareholders who read and follow it for their due diligence before investing in the company
5
Dr. N.V. Paranjape, Company Law (Paperback, 1 January 2021)
6
Gabriel Lip, "Articles of Association," Corporate Finance Institute,
https://corporatefinanceinstitute.com/resources/equities/articles-of-association/ (last visited Feb. 20, 2024)

9
through stocks and shares or to learn more about their rights and obligations in the company. The
Articles of Association also act as a good first step in regulating plans to achieve the company
objectives mentioned in the Memorandum of Association. Beyond that, it can also be used to
learn more about the internal workings of a company and what it stands for. Moreover, in many
countries, the Articles of Association are also needed while setting up an official bank account
for the company or while taking loans from the bank in the name of the company, which is an
artificial personality7.

COMPLIANCE OF ARTICLES OF ASSOCIATION (AOA) WITH THE LAW

In addition to the Memorandum of Association, which the Articles of Association cannot

contravene or go outside the jurisdiction of, there are also other laws that the provisions in the
Articles of Association must not be against:

 The Constitution of India;

 The Public Policy;

 The laws of the land; and

 The Companies Act.

In the case of Hutton v. The Scarborough Cliff Hotel Company Ltd8, a resolution dealing with
the issue of new shares with preferential dividends was passed in the general meeting of
shareholders of the company, resulting in the alteration of the Articles of Association. However,
the Memorandum of Association of the company provided no such power of alteration in the
aforesaid matter; thus, making the altered clause void and inoperative. The High Court of
Chancery held that the purview of alteration of the Articles, either expressly or impliedly,
depends directly on what is stated in the Memorandum.

In the case of Hari Chandana Joga Deva v. Hindustan Co-Operative Insurance Society Ltd9,
the Defendant Company had issued insurance to the Plaintiff, promising the payment of the

7
"Comprehensive Guide to Articles of Association (AOA)," IndiaFilings,
https://www.indiafilings.com/learn/comprehensive-guide-to-articles-of-association-aoa/ (last visited Feb. 21, 2024)
8
Hutton v. The Scarborough Cliff Hotel Company Ltd : 62 E.R. 717
9
Hari Chandana Joga Deva v. Hindustan Co-Operative Insurance Society Ltd AIR1925CAL690

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prescribed amount on the specified date. However, the Defendant company altered their AOA on
a later date, because of which the fund the insurance was based on, changed. The premise of the
fund changed into a special one, which was declared insolvent by the time the date of the
payment approached. The Calcutta High Court held the case in the favour of the plaintiff, stating
that the alteration was clearly breaching the provisions of the contract by suddenly changing the
type of fund the payment had to be given without consulting the other party. Thus, the altered
clause was declared to be inoperative and void. The Defendant company was further ordered to
compensate Plaintiff for the breach of contract.

COMPONENTS OF ARTICLES OF ASSOCIATION

The Articles of Association is a document that sets out the internal regulations and management
framework for a company. The components of the Articles of Association include:

 Name clause

This clause defines the name of the company and specifies the legal form of the business,
whether it is a private or public company.

 Registered office clause

This clause specifies the address of the registered office of the company, which is the official
address for all communication and legal proceedings.

 Object clause

This clause defines the main objects and purposes of the company and specifies the activities that
the company is authorized to undertake.

 Liability clause

This clause outlines the liability of the members of the company, whether it is limited or
unlimited.

 Share capital clause

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This clause defines the authorized share capital of the company, the types of shares that can be
issued, and the rights and privileges attached to each class of shares.

 Management clause

This clause defines the powers, duties, and responsibilities of the directors and the procedures for
their appointment, removal, and remuneration.

 General meetings clause

This clause outlines the procedures for convening and conducting general meetings of the
company, including the notice period, quorum, voting rights, and resolution-making process.

 Dividend clause

This clause specifies the rules and procedures for the distribution of dividends to the
shareholders.

 Winding-up clause

This clause outlines the procedures for the winding up of the company in case of bankruptcy,
liquidation, or dissolution.

These components are essential for effective corporate governance and must be drafted in
compliance with the legal requirements of the Companies Act, 201310.

ALTERATION OF ARTICLE OF ASSOCIATION

If a company wishes to make any alterations to its Articles of Association (AOA), it must adhere
to the guidelines set forth in Section 14 of the Companies Act, 2013, along with other relevant
provisions and applicable rules. The company has the flexibility to modify its AOA by adding,
removing, modifying, substituting, or employing any other means, as desired. However, this
alteration process is not arbitrary; it necessitates compliance with the legal framework. Section
14 provides the structured procedure through which these changes can be made, ensuring that the
company follows a lawful and transparent process when adjusting its internal governance rules.

10
GK Kapoor & Sanjay Dhamija, Company Law: A Comprehensive Text Book on Companies Act 2013 (Taxmann,
2023)

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Whether it's a tweak, a substantial change, or a complete overhaul, the company's intentions to
alter its AOA should align with the provisions of the Companies Act, 2013, and any other
relevant regulations in place. This legal framework acts as a safeguard, balancing the company's
need for flexibility with the imperative of maintaining legal compliance and transparency in its
operations11.

STEPS FOR ALTERATION IN ARTICLE OF ASSOCIATION

 STEP – I
 Convey Board Meeting of Directors: (As per section 173 and SS-1 of the Companies Act,
2013).
 To alter the Article of association of Company by giving Notice of at least 7 days.
 STEP –II
 Held Board Meeting: (As per section 173 and SS-1 of the Companies Act, 2013)
 At the Board meeting, the given resolutions in respect of alteration in AOA must be
passed.
 Get Approval to Alteration in Article of Association and recommending the proposal for
members' consideration by way of special resolution.
 Fixing the date, time, and venue of the general meeting and authorizing a director or any
other person to send the notice for the same to the members.
 STEP- III

Issue Notice of General Meeting: (Section 101 of the Companies Act, 2013)

Notice of EGM shall be given at least 21 days before the actual date of EGM. EGM can be called
on Shorter Notice with the consent of atleast majority in number and ninety five percent of such
part of the paid up share capital of the company giving a right to vote at such a meeting:

 All the Directors,

 Members &

11
Aditi Vinzanekar & Debapriya Biswas, "Understanding Articles of Association under Indian Company Law,"
IPLeaders Blog, https://blog.ipleaders.in/articles-of-association-under-indian-company-law/ (last visited Feb. 27,
2024)

13
  Auditors of Company.

The notice shall specify the place, date, day and time of the meeting and contain a statement on
the business to be transacted at the EGM.

 STEP- IV

Hold General Meeting: (Section 101 of the Companies Act, 2013)

 Check the Quorum.

 Check whether auditor is present, if not. Then Leave of absence is Granted or Not. (As
per Section- 146 of the Companies Act, 2013).
 Pass Special Resolution.[Section-114(2) of the Companies Act, 2013]
 Approval of Alteration in AOA.
 STEP- V

Filing of form with ROC: (Section 117 of the Companies Act, 2013)

File Form MGT-14 (Filing of Resolutions and agreements to the Registrar under section117 of
the Companies Act, 2013) with the Registrar along with the requisite filing within 30 days of
passing the special resolution, along with given documents:-

 Certified True Copies of the Special Resolutions along with explanatory statement;
 Copy of the Notice of meeting send to members along with all the annexure;
 A printed copy of the Altered Article of Associations12.

ALTERATION OF AOA FOR A PUBLIC COMPANY TO BECOME A PRIVATE

COMPANY

 To convert a public company into a private company, the AoA needs to be altered by
removing the provisions that make it a public company. The following provisions of the
AoA need to be altered:

12
DIVESH GOYAL, "Process of Alteration in Articles of Association," The Institute of Company Secretaries of
India (ICSI), https://www.icsi.edu/media/filer_public/b3/69/b369729f-f0bb-4057-abec-
8ef9cc1ba6ec/548_process_of_alteration_in_article_of_association.pdf (last visited Feb. 20, 2024)

14
  Remove the provisions related to the minimum number of members, which is seven for a
public company and two for a private company.

 Remove the provisions related to the right to transfer shares, which is unrestricted for a
public company and restricted for a private company.

 Remove the provisions related to the invitation to the public to subscribe for shares or
debentures, which is allowed for a public company and prohibited for a private company.

 The alteration of AoA must be approved by a special resolution of the shareholders, and
the approval of the National Company Law Tribunal (NCLT) is required.

ALTERATION OF AOA FOR A PRIVATE COMPANY TO BECOME A PUBLIC

COMPANY

 To convert a private company into a public company, the AoA needs to be altered by
adding provisions that make it a public company. The following provisions of the AoA
need to be altered:

 Add the provisions related to the minimum number of members, which is seven for a
public company and two for a private company.

 Add the provisions related to the right to transfer shares, which is unrestricted for a public
company and restricted for a private company.

 Add the provisions related to the invitation to the public to subscribe for shares or
debentures, which is allowed for a public company and prohibited for a private company.

 The alteration of AoA must be approved by a special resolution of the shareholders, and
the approval of the NCLT is required.

It is important to note that any alteration of the AoA must be made in accordance with the
provisions of the Companies Act, 2013, and any other applicable laws. Additionally, the altered
AoA must be filed with the Registrar of Companies within 30 days of the alteration13.

13
"Articles of Association Under Company Law," Law Bhoomi, https://lawbhoomi.com/articles-of-association-
under-company-law/ (last visited Feb. 27, 2024).

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 RELEVANT CASES

 Eley v. Positive Government Security Life Assurance Co Ltd14

In this case, the Articles of Association of the Defendant company provided that the Petitioner
would be hired as the company‟s legal representative for his lifetime. However, despite such a
clause, the company dismissed him after some while, resulting in the Petitioner suing the
company for damages for the breach of contract based on the provisions of the Articles of
Association. The Court held that the Petitioner did not have any right of action since the Articles
do not bind the company with any third party or outsider; thus, not constituting such a contract
between the Defendant and the Petitioner.

 Sidebottom v. Kershaw, Leese & Co Ltd15

In the present case, the Defendant company had altered the provision in its Article of Association
to authorise its Directors to order any shareholder of the company to transfer their shares at a
reasonable value to the person nominated by the Board of Directors. The shareholders sued the
company for arbitrariness. However, the Court held the alteration in the Articles of Association
valid, stating that such a clause was made to benefit the company with a bonafide intention. In
simpler terms, even if the interests of a few individuals were to be affected, the alteration in
AOA shall stand valid if it helps in the development of the company. However, since the
alteration caused the benefit of the company as a whole, it was not void.

 Southern Foundries (1926) Ltd v. Shirlaw16,

In this case, the Articles of Association of the Appellant company provided that the Managing
Director of the company had to be a Director, and any early ceasement would result in the
inability to function as a Director. The Respondent was a Director of the company for three
years, with a contract period of ten years. However, he was removed from the directorship once
the company was taken over by another parent company. Grieved by such removal, the case was
brought in front of the Court which held that such alteration had enabled the company to commit

14
Eley v. Positive Government Security Life Assurance Co Ltd (1876) 1 Ex D 88
15
Sidebottom v. Kershaw, Leese & Co Ltd [1920] 1 Ch 154
16
Southern Foundries (1926) Ltd v. Shirlaw [1940] AC 701

16
such a breach of contract and thus, the company was liable to pay damages for such breach to the
Respondent due to his early dismissal before the term of his contract was over.

 Economy Hotels India Services Pvt Ltd v. Registrar of Companies17

In this case, the Appellant Company had filed a petition to the NCLAT, stating that the special
resolution passed had a few typographical errors due to which the NCLT had rejected its
application confirming the amendment for reduction of share capital. The Court observed that the
resolution passed under Section 66 of the Companies Act, 2013 was not only unanimous in its
voting but also had only one typographical error in the extract of the Minutes of the Meeting
characterising the „special resolution‟ as „unanimous ordinary resolution‟. However, since the
resolution was also registered to the Registrar, all the required conditions were met and the
resolution was sound despite such clerical errors. Thus, the appeal was allowed.

CONCLUSION

In conclusion, the Memorandum of Association (MOA) and Articles of Association (AOA) are
indispensable pillars in the foundation of any company, intricately shaping its identity,
governance, and operational framework. These preliminary documents are not mere bureaucratic
requisites but serve as the guiding principles that define a company's purpose, internal workings,
and relationships with its stakeholders. The MOA, often regarded as the company's charter, lays
the groundwork by outlining its scope of activities, objectives, and authority, effectively acting
as the constitutional document during the company's inception. Subscribing to the MOA is the
inaugural step for company members, symbolizing their commitment to its foundational
principles. On the other hand, the AOA functions as the essential rulebook, delving into the
specifics of the company's day-to-day operations. Governed by the MOA, the AOA meticulously
prescribes rules, regulations, and by-laws that regulate internal matters. It serves as a dynamic
tool, adapting to the company's evolving needs while safeguarding the rights and obligations of
key stakeholders, including shareholders, directors, and officers. The statutory significance of
these documents is further emphasized by legal requirements under the Companies Act, 2013.
The MOA and AOA must be filed with the Registrar of Companies during the incorporation
process, ensuring not only practical functionality but also legal adherence. They become

17
Economy Hotels India Services Pvt Ltd v. Registrar of Companies Company Appeal (AT) No. 97 of 2020

17
paramount in establishing the legitimacy of a company and are critical for shareholders who rely
on them for due diligence before investing. The purpose of the AOA is multifaceted. Firstly, it
acts as a governing document, providing a structured framework for seamless management and
operation. Secondly, it serves legal requirements, ensuring compliance with the Companies Act,
2013. Thirdly, it offers clarity, guiding stakeholders through the company's procedures and rules.
Fourthly, it functions as a protective shield, defining the rights of shareholders and providing
mechanisms for dispute resolution. Lastly, it exemplifies flexibility, allowing for amendments to
suit the changing needs of the company within the bounds of legal provisions.

While the AOA is crucial, it operates under the broader principles set by the MOA, akin to a
constitution and laws in a country. Despite its importance, the AOA allows for flexibility,
permitting adaptations to internal rules as needed, provided these changes align with the MOA
and legal requirements outlined in the Companies Act, 2013. Furthermore, the alteration of the
AOA is a regulated process under Section 14 of the Companies Act, 2013. Any changes must
align with legal provisions, ensuring a transparent and lawful process. The AOA's adaptability is
not unlimited, with alterations subject to compliance with legal frameworks, maintaining a
delicate balance between flexibility and legal accountability.

18