Under the Companies Act, 2013, the Memorandum of Association (MoA) is the charter document of a company that defines its constitution, objectives, scope of operations, and relationship with outsiders, while the Articles of Association (AoA) contain the internal rules and regulations for the company’s management and administration. The MoA specifies fundamental details such as the company’s name, registered office, objects, liability of members, and capital structure, whereas the AoA governs matters relating to directors, shareholders, meetings, share transfers, dividends, and other internal procedures. Together, the MoA and AoA form the constitutional framework of a company under the Companies Act, 2013.
Check out CTC X Taxmann's Company Law — A Fictionalised Journey from Incorporation to Winding Up which follows Ayush, a tea entrepreneur from Guwahati, through the complete corporate lifecycle under the Companies Act 2013—from incorporation and capital raising, through board governance and fraud investigation, to winding up—in the exact order a founder encounters each stage. Every legal concept surfaces through Ayush's conversations with friends, lawyers, and professionals, making the statute concrete and immediately applicable, without ever reading as a lecture. Yet precision is never sacrificed—every concept is section-cited in footnotes, and Part Three delivers a standalone compliance reference covering Penalty Tables, 48 E-Forms, and a Company vs. LLP Schedule. Authored by Advocate Sristi Nimodia and reviewed by CS Latesh Shah. Published by Taxmann for the Chamber of Tax Consultants.
The conversation at the coffee house with Siddharth left Ayush with both clarity in mind and fresh questions. He realised that the Companies Act, 2013, isn’t just dry legal document; rather, it is a living and breathing blueprint for business.
The very next day, a sense of purpose firm in his step, Ayush took the decisive step towards incorporation. He approached his lawyer, Mr Amogh, a man whose office exuded quiet authority, filled with scent of old paper and ambitions with bulky leather-bound books. With a calm and analytical look, Mr Amogh was involved in the process of drafting the Memorandum of Association, the MoA, denoting it as the “Constitution of the Company”.
“Ayush”, Mr Amogh began in a low steady voice,
“firstly, we need a name for your company. This name will be featured in the ‘name clause’ of the MoA of your company.
If we register your company as a public company, the word ‘Limited’ will be added as the last word, but if we register your company as a private company, the word ‘Private Limited ‘ will be added as the last word.”1
Then, he leaned back comfortably in his large rotating chair, with a thoughtful expression on his face.
“We need to consider a few crucial points before we finalise the name, as the name isn’t just a label, it is the identity of your company in the legal world. And that legal world is full of rules. The name must not be identical with, or even resemble the name of any existing company.2 The name shouldn’t constitute an offence3 and should not be undesirable in the opinion of the Central Government4. And most importantly, it shouldn’t represent Government patronage5 unless you have obtained approval from the Central Government6.”
Ayush, who had been writing down names for his company for weeks now, felt a new layer of complexity emerge in his mind. All the names he had thought of were creative and catchy, but now he has understood that the name has to pass through a strict legal gate.
“If I suggest a name like ‘Fresh Brew’, and it is available, can we reserve it for the time being and start the registration process in a few days”?
“Of Course”,
affirmed Amogh with a smile.
“We can reserve the name for 20 days7 by simply filing an ‘application for the reservation of name’8 with the Registrar of Companies and paying the relevant fees. And if you have an existing company whose name you wanted to change, then you would have got 60 days9 to reserve the new name.”
Ayush, after his discussion with Siddharth was aware that potential problems may arise, so he raised his concern.
“What will happen, if we file a name, that turns out to be wrong or problematic?”
Mr Amogh removed his hands from his desk and his expressions turned serious. That is a very important question. If the company hasn’t been incorporated yet, then the name which was reserved for 20 days will be cancelled and a penalty will be imposed on you, the Applicant.10 However, if the company is already incorporated, then you will be given an opportunity of being heard by the Registrar of Companies.11 If the name turns out to be wrong or problematic, even after that, then the company will be directed to either change the name within three months12, or the name of the company will be struck off the register13, or a petition for winding up the company might be filed by the Registrar himself14.
Ayush realising the gravity of even such small details, sipped water.
Then, Mr Amogh guided him through other essential clauses that will be a part of the MoA.
“ The MoA will include the ‘registered office clause’ wherein the name of the state in which the company is incorporated will be specified.15 Furthermore, the MoA will include the ‘object clause’, in which the purpose for which the company has been incorporated is stated.16 Ayush this is crucial, as your company can undertake only those activities which fall within these stated objects. Next, we will detail the ‘liability clause’. This clause will define the extent of liability that the members have undertaken to contribute if the company faces winding up.17”
Mr Amogh paused for a moment, allowing Ayush to breathe.
“For a company limited by shares, the liability of the members is limited to the amount unpaid on shares.18
But for a company limited by guarantee, the liability is limited to the specific assets the person undertakes to contribute in the event of winding up of the company.19 Notably, in case of a company limited by guarantee, the liability extends not only to the current members of the company but also to those, who have ceased to be members up to one year before the winding up.20”
Mr Amogh finally arrived at the ‘Capital Clause’.21
“Ayush, this clause will specify the ownership structure, essentially, the number and types of shares in your company. The number of shares that each member intends to take, will be indicated opposite to their names. This is known as the ‘subscription clause’ and the members whose names are entered are known as the ‘subscribers to the MoA’.22 This is where we will formalise your company’s potential to issue shares. Remember that, if your company is limited by guarantee and does not have a share capital, then the total number of shares that the company is authorised to issue can even be zero. But, if your company is limited by shares, then it is a must for your company to have shares and the number of shares that the company is authorised to issue can never be less than one.”23
Ayush then leaned back in his chair with a fresh wave of understanding washing over, and a thought crossed his mind.
“So, if I register my company as limited by guarantee and not shares, can I make an agreement to give the profit to others, i.e., non-members of the company?”
To his surprise, Mr Amogh shook his head,
“No, you can’t, as any such agreement will be considered void (unacceptable).”24
However, if your company is limited by shares, then you can make an agreement to give the profit to others, i.e., non-members of the company.
The conversation about the contents of the MoA with Mr Amogh, made Ayush realise that MoA is not just a simple document; rather, it was truly the constitutional backbone, the very DNA, of his Company. But then another question came across his mind,
“What about the company’s management? Is there a separate document that outlines how company’s day-to-day task will be managed?”
Mr Amogh’s eyes lit up.
“Ah! an excellent question.”
He explained,
“For that very purpose, the Article of Association (AoA) of the company must be meticulously prepared. These are the internal rulebook, which contains the specific regulations for the management of the company25. Besides outlining the management regulations, the AoA will also include entrenchment provision.26”
Intrigued by the word ‘entrenchment’, Ayush excused himself and headed back home. He needed to get away from the formal setting of Mr Amogh’s office and understand about the ‘entrenchment provision’ in depth. With a cup of freshly brewed green tea, Ayush settled into his armchair and researched. Soon, he discovered that ‘entrenchment provision’ acts like a powerful safeguard for the AoA, by deliberately making its amendment process more difficult than usual. It ensures that the specified provisions of the AoA can only be amended if conditions or procedure more restrictive than a special resolution are met. But what exactly was a ‘special resolution’?
Poring over the digital pages, Ayush finally gained clarity. He got introduced to two distinct concepts: the Ordinary Resolution and the Special Resolution. He learned that,
“an ordinary resolution is passed when the votes cast in favour, including any casting vote, simply exceed the total votes cast against it. It’s a simple majority. In stark contrast, a Special Resolution requires a much higher threshold: the total number of votes casted in favour must be not less than three times the votes cast against it. It is a tool for deciding significant matters of the company.”27
While this clarified how the entrenchment provision worked, Ayush’s next question was about its introduction:
“When exactly can the ‘entrenchment provisions’ be incorporated in the AoA?”
The Companies Act, 2013, he read, clearly states that,
“An entrenchment provision can be introduced either right at the company’s formation, i.e., when the AoA is initially drafted, or even subsequently. If introduced later on, it requires the agreement of all members in the case of a private company and the passing of a special resolution in the case of a public company.28 Furthermore, once entrenchment provisions are included in the AoA, a formal notice must be filed with the Registrar of Companies, in order to update the records of the Company.”29
Ayush also discovered that the AoA refers to ‘model articles’30 (basically the Act provides a standard template for the AoA), that will automatically apply to the company, unless it has been explicitly excluded or modified, by the AoA drafted for the company.31
Learning about all these important details, Ayush leaned back, a mix of exhaustion and satisfaction settling over him. He had now understood that the MoA and AoA are the most powerful documents of the company. He consulted the digital pages of the Act as a final check and learned that while both MoA and AoA are crucial for the existence and operation of the company, the Companies Act, 2013, holds supreme authority over everything.32 It has an overriding effect over both MoA and AoA.
Anything in the MoA or the AoA of the company, that contradicts or overrides, the provisions of the Companies Act, 2013, will simply be considered ‘void’.33 The act, he realised, was the ultimate guardian of the company.
- Section 4(1)(a) of the Companies Act, 2013.
- Section 4(2)(a) of the Companies Act, 2013.
- Section 4(2)(b)(i) of the Companies Act, 2013.
- Section 4(2)(b)(ii) of the Companies Act, 2013.
- Section 4(3)(a) of the Companies Act, 2013.
- Section 4(3)(b) of the Companies Act, 2013.
- Section 4(5)(i) of the Companies Act, 2013.
- Section 4(4) of the Companies Act, 2013.
- Supra at 20.
- Section 4(5)(ii)(a) of the Companies Act, 2013.
- Section 4(5)(ii)(b) of the Companies Act, 2013.
- Section 4(5)(ii)(b)(i) of the Companies Act, 2013.
- Section 4(5)(ii)(b)(ii) of the Companies Act, 2013.
- Section 4(5)(ii)(b)(iii) of the Companies Act, 2013.
- Section 4(1)(b) of the Companies Act, 2013.
- Section 4(1)(c) of the Companies Act, 2013.
- Section 4(1)(d) of the Companies Act, 2013.
- Section 4(1)(d)(i) of the Companies Act, 2013.
- Section 4(1)(d)(ii) of the Companies Act, 2013.
- Section 4(1)(d)(ii)(A) of the Companies Act, 2013.
- Section 4(1)(e) of the Companies Act, 2013.
- Section 4(1)(e)(ii) of the Companies Act, 2013.
- Section 4(1)(e)(i) of the Companies Act, 2013.
- Section 4(7) of the Companies Act, 2013.
- Section 5(1) of the Companies Act, 2013.
- Section 5(3) of the Companies Act, 2013.
- Section 114(1) of the Companies Act, 2013.
- Section 5(4) of the Companies Act, 2013.
- Section 5(5) of the Companies Act, 2013.
- Section 5(7) of the Companies Act, 2013.
- Section 5(8) of the Companies Act, 2013.
- Section 6(a) of the Companies Act, 2013.
- Section 6(b) of the Companies Act, 2013.
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