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Law of Commerce

Law of Commerce

explain the significance of the memorandum of association articles of incorporation and articles of


Memorandum of Association and the Articles of Association are some of the important
legal documents that are critical in the formation and running of companies. These important
legal documents are drafted by experts at the time of incorporation of the company and they are

useful throughout the existence of the company. Whereas the memorandum of association is a
legal document that governs the relationships of a company with the outside parties, the articles
of association governs the internal relationships of a company. The contents in the memorandum
of association include: name clause, registered office clause, objects clause, limitation of liability
clause, capital clause, association clause (Cheeseman, 2012). The memorandum of association is
the basic document needed for the formation of a joint stock company, thus, is known as the
charter of the company. The significance of this document is that it sets the limits by which the
company operates, thus it becomes unlawful for the company to operate beyond its scope. In this
regard, it enables the stakeholders and others who deal with the company to ascertain the
permitted range of the company to avoid coming in conflict with the law. On the other hand, the
articles of association are a company formation document that specifies the regulations of the
company operations. The document helps to define the company’s purpose and lays how the
tasks are to be accomplished within the organization such as handling of finances and
appointment of various directors and managers. In addition, the article of association defines the
roles and responsibilities of the company directors and the means by which the company
shareholders exert control over the board of directors.

Cheeseman, H.R. (2012). Business Law 8 th Edition. Prentice Hall

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