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Article of Association and Memorandum of Association of a Company: Important Distinctions

Setting up a company offers a number of advantages, one of which is you won’t be liable personally for the company’s incurred debts and liabilities. Additionally, you’ll have the capability of raising large amounts of capital in order to finance growth activities for the company.

An important requirement when it comes to company formation in UAE is creating memorandum and articles of association. In this post, we’ll explain all important distinctions between articles of association (AOA) and memorandum of association (MOA).

Memorandum of Association Drafting in UAE

A MOA is a type of corporate document that’s signed by founding members or shareholders that all agree in the establishment of a company. All shareholders are to sign the MOA to confirm their agreement in the formation of the company as per UAE’s regulations.

A memorandum of agreement drafting in UAE has to be done in a particular format. It is advised to seek the help of a team for legal drafting in UAE in order to know the memorandum’s prescribed format. The document is to come complete with a compliance statement and it’s to be submitted to authorities along with the application for business setup.

In the memorandum of association, all names of shareholders are to be listed. Shareholders are also referred to as subscribers in a MOA as they’re subscribing their names in the legal document that’s required with an incorporation process. The legal document comprises of crucial information and its length will depend on the number of subscribers.

As soon as a business is registered in UAE, the company isn’t allowed in making changes to the legal document. This is the reason why it is absolutely important for a business to review the accuracy of its memorandum of association prior to the submission to authorities.

Read more: Memorandum of Association for Joint Liability Company

Article of Association Drafting in UAE

Article of association is a different type of corporate document. It contains the rules and regulations pertain to how the business is to be governed. This documentation is signed by all shareholders, company directors, and the secretary.

An AOA is more detailed in comparison to the MOA of a company. It contains a variety of rules not only for the administration of the company, but also for officers and management. A number of elements are to be covered in an AOA, and they include the following:

Elements of the Articles Of Association

  • Rules related to meetings, conflict of interest, and voting;
  • Members’ liability;
  • Company directors’ liabilities;
  • Process for retaining important corporate documents and company records;
  • Process for the appointment and removal of company directors;
  • Process for decision making to be followed by all company members or shareholders;
  • Share certificates in the case of an establishment or company that’s limited by shares;
  • General administration provisions;
  • Rules related to the use of the seal of the company;
  • Preferred communication medium of the shareholders and company employees
  • Financial accountability of the company shareholders

Company members whose names are in the AOA are to adhere to all rules that are prescribed in the legal document. This document is to be referred to prior to the passing of any business judgment. This is the document that will create restrictions when it comes to the powers or authority of the company directors. Company directors may be required in obtaining approval of all members of the company prior to the pursuit of certain activities or course of action.

Unlike a memorandum of association, an article of association may be changed any time a company sees a change is needed. Any change in the documentation is to be done following the notification of authorities and their approval. In order to make changes to an article of association, majority of the company shareholders are to agree to the changes. Voting may be carried out during a general meeting with all members present. It is advised to seek the advice a legal drafting team in UAE prior to making significant changes to the document.

Read more: Important Things to Know About MOA

Tips in MOA and AOA Drafting in UAE

A MOA and AOA can be customized as per the company’s requirements and needs. A MOA is to perform government authorities that every single member of the company has signed the memorandum and agrees to becoming a shareholder of the company. The memorandum also has to include the name of the company along with the signature and name of every single shareholder.

As for an article of association, it may be submitted during the registration of the company. After the application for company formation has been accepted, the company will be sent by the authorities’ copies of the legal documentation. It is important for a business to retain copies.

If you wish to know more regarding legal drafting in UAE, specifically for memorandum and article of association, reach out to the experts in HHS Lawyers today!

Hazim Darwish

Hazim Darwish, is a Senior Partner of HHS Lawyers in UAE. Practicing law for almost a decade, he has in-depth knowledge on UAE legislation with particular expertise on legal drafting, contract drafting, labor disputes, family law, and regulatory compliance for business organizations. Hazim Darwish also provides counsel on legal rights and obligations in the UAE to clients, including individuals and businesses subject to investigation or prosecution under Criminal Law by major regulators.