ARTICLES OF ASSOCIATION OF A COMPANY.pptx

AoA

1. Articles of Association

2. The ‘articles of association’, briefly called ‘articles’ is the second most important document which has to be filed with the Registrar at the time of registration of the company. The document contains rules and regulations for the internal management of the company. It may be noted that the ‘articles of association’ is subordinate to and controlled by the ‘memorandum of association’.

3. The ‘memorandum of association’ lays down the objectives and powers of the company. And the ‘articles of association’ lays down the modes in which the objects of the company are to be carried out by the members. It may be noted that the ‘articles of association’ is obligatory i.e., legally compulsory for the following companies

4. Private limited companies. Unlimited companies. Public companies limited by guarantee. It is, however not obligatory for public companies limited by shares. It will be interesting to know that three alternative courses are available to a ‘public company limited by shares’ as regards the framing of its articles, namely,

5. it may adopt Table A on full, or it may partly set out its own articles, and adopt part of Table A, or it may wholly exclude Table A and set out its own articles. It may, however, be noted that if such a company does not register any articles, then Table A will automatically apply to it.

6. The articles of association of a company play a very import role in the management of the affairs of a company. The Companies Act contain many provisions under which the company can act only if it is authorised by its articles. Following are some important provisions wherein the company can act only if so authorised by its articles:

7. To issue redeemable preference shares To accept calls in advance from shareholders To increase share capital To consolidate and divide its share capital into shares of large amount than existing shares To convert its fully paid-up shares into stock, and to reconvert that stock into fully paid-up shares

8. To sub-divide its shares into shares of smaller amount than is fixed by the memorandum To reduce its shares capital

9. Form of Articles of Association The articles of association must be printed and divided into paragraphs which should be consecutively (serially) numbered. Generally, each paragraph should contain one regulation. This document should be signed by the subscriber to the ‘memorandum of association’. They must also write their address, description and occupation, if any.

10. The subscriber should sign in presence of at least one witness who shall attest the signature of each subscriber. The witness shall also write his address, description, occupation accordingly.

11. Contents of Articles of Association Definition of important terms and phrases. Adoption or execution of pre-incorporation contracts. Share capital and the rights of the share holders. Allotment of shares. Procedure as to making of calls on shares. Procedure as to forfeiture of shares.

12. Share certificates and share warrants. Alteration of share capital. Dividend, reserve and capitalisation of profits. Appointment of managerial personnel e.g., directors etc. Meetings. Borrowing powers. Accounts and audit.

13. Common seal of a the company. Voting rights and proxies. Winding up of the company. The exclusion, total or partial, of ‘Table A’. As a matter of fact, the subscribers may frame rules and regulations on any matter which is necessary for internal management of the company. But these provisions must not conflict with the provisions of the Companies Act.

14. Moreover, these should also not go beyond the powers of the company as contained in the ‘memorandum of association’. The articles of association of a private company must also contain the three statutory restrictions which make the company a private one, namely: Restrictions on transfer of shares. Restrictions of membership i.e., min. 2 max. 50. Restriction on issue of prospectus.

15. The articles of association of a company limited by guarantee must state the number of members with which the company is to be registered .