The primary purpose of a memorandum of association (MOA) is to define a company’s scope and limitations. The MOA defines the company’s relationship with its members, as well as the members’ rights. Articles of association (AoA), on the other hand, lay down the rules related to the company’s management.
What does ‘Memorandum’ mean?
As per the Company Act 2015 of the United Arab Emirates, ‘memorandum’ is the original MOA a company registered. It may also be one that has undergone changes while still following the rules that were laid down in UAE Company Act.
Contents of a Memorandum of Association
According to UAE legislation, a MOA has to contain crucial details and clauses, which are as follows:
- Name clause – the clause contains the business’ name that ends with the appropriate suffix.
- Object clause – the section provides an idea regarding the objects a business deals in. This may be altered whenever a business decides to expand and add more objects.
- Situation clause – the clause dictates where the company will operate in the UAE and defines the company’s constraints in terms of geography.
- Capital clause – this section will define the capital that was put into the company, the registered number of shares and how shares are or will be divided. If there is one proprietor, then the person is the company’s sole member.
- Liability clause – The clause mentions the company members or shareholders’ liability on whether it is unlimited, limited or government-owned. The liability of shareholders refers to the amount (unpaid) which corresponds to the number of shares each member holds. This is if the company has limited shares. If a business is limited by guarantee, liability refers to the amount every shareholder is to contribute. This may include the company’s assets if it shuts down while the shareholders remain members or a year following retirement. Shareholders are liable in paying liabilities and debts of the company that were amassed while being members. Shareholders are also responsible to settle the charges and costs that have been incurred during the process of company liquidation and for the distribution of contributions as per existing regulations.
Name Guidelines in the Memorandum of Association
In a MOA, the name of the business has to follow the rules listed below.
- The name is not identical or similar to the brand name of an existing company;
- The name should be unique and not used by any other business;
- The name can’t be one that’s offensive or undesirable as per UAE laws;
- The name should not be a word that gives the impression that it has a connection and/or patronage to the government
What are Articles of Association?
As per the Company Act 2015 of the United Arab Emirates, ‘articles’ refer to the original or versions of the articles of association that are registered with regulatory bodies and comply with the provisions stipulated in the UAE Company Act. AoA, as mentioned earlier, are documents that contain regulations or rules that govern company management.
Provisions of Articles of Association for Retrenchment
The articles contain rules for entrenchment, allowing specific provisions to be altered. The rules in an AoA can be made by:
- Public company – with the use of a special resolution;
- Private company – as amended or formed and agreed by all the stakeholders
What is the Difference Between Memorandum of Association and Articles of Association?
While both types of legal documents charter for a company, a memorandum of association contains essential details regarding the company. As for the AoA, it contains the rules and regulations that are designed by the business. An MOA serves as the company’s constitution wherein the business is built. The AoA is the by-laws, helping the company function. Both types of documents require submission for registration prior to the licensing of a company.
Here are the primary differences between MOA and AoA:
- The memorandum of association provides the description of the objects and powers of the business, while the articles of association define operational rules.
- The memorandum of association is the UAE Company Act subordinate while the memorandum’s subordinate is the articles of association.
- The MOA cannot and should not be altered retrospectively. The AoA can have alterations.
- The MOA contains six important clauses while an AoA is drafted if needed by the company;
- A memorandum of association is mandatory for all businesses.
- Alternation may be done in a memorandum of association following the passing of a special resolution from an annual general meeting and after getting the approval of the government. As for an AoA, changes can be made following the passing of a special resolution from an annual general meeting.
As both are important corporate documents, there is a need to hire legal drafting lawyers in Dubai. Seeking the assistance of seasoned lawyers can help ensure the proper drafting of the legal documents. Call us today as initial consultations are free of charge!
Hassan Humaid Al Suwaidi is a UAE Citizen and the founder of the firm HHS Lawyers. He has a vast experience of 20 years of dealing with high-value and complex notary requirements. Hassan has been involved in some of the largest legal settlements in the UAE and is commended for his ability to attain the most favourable outcomes for his clients.