The Relationship between a Memorandum of Association and an Article of Association

 

The Memorandum of a Company is the official document of that company which stipulates the core principles of a company and what the company shall be known for or is known for to the outside world. In order to reduce this meaning into bullet points, we will consider the following key points which illustrate what a memorandum of a company is:

• It is the official document of a company which engineers the relationship between the company and the outside world.
• It engineers the relationship between the officials and the members of the company.
• It also engineers the relationship between the officials, members and the company.

The memorandum of any company contains the powers of that company, name, financial strength as well as the details of actual, nominal and prospective members of the company. 

On the other hand, an Article of Association is an official document of a company which regulates the internal happenings of the company. We may be right to call this kind of document, the rules of procedure of the company which is aimed at guiding the conduct of how the company is run internally. it is divided into paragraphs and numbered consecutively. The procedure of how certain things are achieved in the company is covered by the Article of Association. For instance, where the Memorandum of Association of a company provides that a company has powers to borrow money, the Article of Association provides for how much money the company can borrow. Thus while the Memorandum of Association is the law of the company, the Article of Association is the rules. For legal clarity, we will provide hereunder in bullet points the differences between the aforementioned official documents of a company:  

• While a Memorandum of Association deals with the relationship between the company and the outside world, the Article of Association is a contract between the company and its officers and between the officers and the members of the company. See the case of Eley v Positive Gov't Security Life Association, where the court held that a provision in the Articles that the plaintiff would be the company's solicitor for life was not enforceable by the plaintiff, because he was an outsider and the Articles are not a contract between him and the company.     
• The Memorandum of Association may provide for the power of a company to borrow funds, but the Articles provide for how much the company can borrow in the circumstance.
• The memorandum of Association of a company is solely provided for by the promoters of the company as a pre-incorporation document, while the Articles of Association may either be drafted by the promoters or be adopted as a model Article usually prescribed by the Minister of the Commission. See section 33(1) of the Companies and Allied Matters Act 2020.
• The Memorandum is the law of the company, while the Articles of Association is the rules of the company.