Differences Between Memorandum of Association And Article of Association: The concept of interpersonal relationship extends to the point at which organizations interact with themselves and the outside world. Communication is a key part of every organization and a major factor that contributes to the growth and development of every stable organization. Communication is regarded as the process of mutual interaction that occurs among people. Communication involves the conveyance of information from one person to another.
It equally entails the systematic dissemination of well-articulated information in a more comprehensive manner from an individual, group or corporate entity to another individual or a larger audiences that has been targeted to consume such information. Communication can be said to be one of the elements of human existence that cannot be replaced, in other words, it is indispensable.
There’s virtually no limit or boundaries with communication except when it goes contrary to the safety and rights of other people. Communication is achieved through diverse means such as verbal interaction like face to face conversation, phone calls and others, gestures such as body and facial expressions that are easily understood to make total sense, written or typed documents such as letters, memos, telegraphs, mails, fax and other electronic means of interaction like social media networks. Communication can also be effected through signs and symbols as well as many other intelligible means of conveying meaningful information.
Having noted some of the popular means if communication, it becomes imperative to point out here that some means of communication has gained more acceptance and usage in some areas of human endeavors when compared to others. An example is the letter writing and Memos as well as phone calls. Knowing fully well how communication has come to be part of our everyday life and has greatly contributed to interpersonal communion and global unity, our social lives or the social aspect of our lives has hinged greatly on the strength of our interpersonal communications. In most of our corporate or official settings and environments, letter writing, fax (though gradually fading now) memos and phone calls has been greatly utilized to achieve effective communication and build the system. This gradually brings us to the point where we consider a few importance of communication.
The importance of communication are quite enormous but knowing that it is not the crux of this article, we would summarily highlight but a few and then consider in detail two of the major means of communication in a formal environment or the corporate world. So, one of the major advantages of communication is that it helps to strengthen interpersonal relationships, it also help to create new ones, it equally serve as a means of gaining or assessing information as well as helping to Foster national development, it increases the chances of multinational bilateral agreements, communication helps foster personal development.
Having discussed extensively on corporate entities with regards to communication It is also important to highlight the establishment of corporate entities and instruments required for each establishment control running and relation with it external environment. In relation to the establishment of a corporate entity and its internal and external relations we will be looking at two important documents with regards to corporate entities, what they are, their similarities and then some of the differences between them. The two basic instruments recognized by corporate entities includes the Memorandum of Association and an Article of Association.
A Memorandum of Association is a company’s official document that regulates its external activities comprising how the company operates and how it interacts with the outside world. A memorandum of association outlines a company’s liabilities and its operational limits and in most cases form part of the required documents for the incorporation of the company.
An Article of Association is a document that outlines the rules and regulations of a company, it is more like a constitution of a corporate entity defining the responsibilities of board of directors and Executives in a company or corporation. It always supplements the memorandum of association in the incorporation of a company in some jurisdiction it is considered as a corporate charter. It also identifies or outlines the mood and extent of control exercised by shareholders and board of directors in a corporate organization. Based on the foregoing it can be established that both memorandum of association and an article of association share mutual similarities which lies and the fact that they are both legal instruments recognized by a corporate body and also contains valued information that pertains to the legality and operation of an organization. Now we shall be taking a look at some of the major differences between a memorandum of association and an article of association.
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Differences Between Memorandums of Association and Article of Association
1. Memorandum of Association forms part of the legal requirements to incorporate a company and what it implies is that, based on the provisions of the Companies Act, a company must provide a well drafted memorandum of association in line with other necessary documents in other to be duly incorporated as a company while an Article is not a necessary requirement for incorporation.
In which case, a Company may be duly registered even without drafting or providing the Article of Association at the time of registration (especially with the private companies).
2. Memo contains the set of rules guiding the company’s external activities and the company’s liabilities while an Article guides the internal affairs and how the company is run.
3. The Article of Association is like the company’s constitution while the Memo encompasses more legal framework that binds the Company legally.
4. The Article stipulates the powers of the shareholders and their level of interest and control but the memo do not contain such.
5. It is a basic and mandatory requirement for the memo to contain six clauses unlike the Article that need not conform to such conditions.
6. Memorandum of Associations cannot be amended retrospectively but Article of Association could be amended retrospectively.
7. Every company is required to have a Memorandum of Association as it forms part of the legal requirements expected of a company by law due to how important the clauses are however, drafting an Article of Association is at the discretion of the company to draft it or operate the Company without a formal Article of Association (especially that of private institutions.
8. Memos are subject to the laws governing incorporation of Companies as legal entities which is the Companies Act but the Article of Association is subject to the provisions of the memorandum of association.
9. Any act done by the company outside the provisions of the memo is considered void but any act done outside the article can be rectified by the board members.
10. Whenever a conflict arises based on the provisions of the memorandum and article of association, the provisions of the Memorandum shall prevail over the provisions of the Article of Association.
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To sum it up, it is important to understand the meaning of the two documents and their legal implications. The interactions between Organizations and their clients has been identified to be a major course of statutory concern and that has predicated the formal incorporation of such document as the memorandum of association and sometimes the Article of Association as well to legitimize their inter-organizational relations.
Edeh Samuel Chukwuemeka ACMC, is a Law Student and a Certified Mediator/Conciliator in Nigeria. He is also a Developer with knowledge in HTML, CSS, JS, PHP and React Native. Samuel is bent on changing the legal profession by building Web and Mobile Apps that will make legal research a lot easier.