What are the Differences Between Memorandum & Articles of Association and the Constitution? - THK Management Advisory Sdn Bhd

What Are The Differences Between Memorandum & Articles of Association and the Constitution?

The Memorandum and Articles of Association (M&A) and the Constitution are governing documents used to regulate the formation and internal governance of companies in Malaysia.
Before the implementation of the Companies Act 2016 (CA 2016), companies were required to adopt two separate documents—the Memorandum of Association, which set out the company’s external powers and objectives, and the Articles of Association, which regulated its internal management.
With the enforcement of the Companies Act 2016 on 31 January 2017, the requirement for two separate documents was replaced by a single consolidated document known as the Constitution.
This reform aimed to simplify company incorporation and governance, enhance flexibility, and better align corporate practices with modern business needs.

Nature

The Memorandum of Association served to define the company’s relationship with the external parties. It outlined key matters such as:

* The company’s name and registered office
* The company’s objects (purpose)
* The liability of members
* The share capital
* and others

The Articles of Association set out the internal rules of the company, including:

* Conduct of meetings
* Appointment and duties of directors
* Rights of shareholders
* Distribution of dividends

In contrast, the Constitution under CA 2016 performs the functions of both documents in a single, unified document, offering more flexibility by:

* Allowing companies to have a single director, whereas for M&A, there is a minimum of 2 directors.
* Removing the need for calling a real meeting by replacing member circulation and retirement of directors.
* Allowing the company to have a clearly defined nature of business.
* To embrace the new era of corporate compliance in line with the requirements of the Companies Act 2016, including the BO authorization requirement.
* and others

Key Differences

Aspect	Memorandum & Articles of Association (M&A)	Constitution (CA 2016)
Document Format	Two separate documents	One integrated document
Governing Law	Companies Act 1965 (Repealed)	Companies Act 2016
Mandatory?	Yes, for all companies	No, unless voluntarily adopted or required by law
Applicability	Companies incorporated before 31 Jan 2017	Companies incorporated on or after 31 Jan 2017 (or by adoption)

Benefits of Sdn. Bhd. Having a Constitution

Customisation of Governance

Enables the company to structure its internal rules according to its specific business model and management preferences.
Allows the adoption of customized procedures for board meetings, appointment of directors, and transfer of shares.

Clarity and Certainty

Clearly sets out the rights and obligations of shareholders, directors, and officers.
Minimizes confusion by providing more precise rules than those offered by the default provisions of the Companies Act, 2016.

Protection of Shareholder Interests

Can include provisions to protect minority shareholders’ rights.
Can restrict share transfers to prevent unwanted parties from becoming shareholders.

Flexibility in Operations

Can modify or replace default rules in Companies Act, 2016 for efficiency (e.g., shorter notice for meetings, specific quorum requirements).

Continuity and Stability

Provides a fixed governance framework that remains in place even if laws change, unless amended by members.
Useful for family-owned or closely held companies.

Enhanced Investor Confidence

Investors often prefer companies with a clear Constitution as it demonstrates well-structured governance.

Conclusion

The transition from the Memorandum and Articles of Association to the Constitution marks a significant shift in Malaysian corporate governance.
The M&A regime under the old Companies Act was often viewed as outdated and rigid, while the Constitution under the current Act allows companies greater freedom to structure their internal rules based on their specific needs.
Understanding the differences between these documents is essential for company officers, shareholders, and professionals involved in corporate compliance.

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