Articles of Association contains the rules, regulations or by-laws that regulate the management of internal affairs of a company.
The Articles of Association defines the duties rights and powers of the officers and the Board of Directors.
It also defines the mode as a form in which the business of the company is to be carried on.
The Articles of Association must be printed, divided into paragraphs and serially-numbered.
The signatories to the Memorandum of Association must sign it and it must be duly attested. Companies generally have their own Articles of Association.
However, companies that do not have Articles of Association of their own may adopt the model set 99 articles lists in Table A of the Companies Act, 1956.
Definition of Articles of Association:
1. According to Charlesworth, “The Articles of Association is a document regulating the rights of members of the company among themselves and the manner in which the business of the company shall be Conducted.”
2. According to the Supreme Court of India, “The Articles regulate the intern management of the company.
Features of Articles of Association:
The main characteristics or features of the Articles of Association are discussed below:
1. It contains rules, regulations or bye-laws of a company.
2. It is a subsidiary document to the Memorandum of Association.
3. It regulates the management of the internal affairs of a company.
4. It defines the mode and form in which the business of the company is to be carried on.
5. It defines the powers and duties of directors as well as the officers of the company.
6. It is a public document that is subject to public inspection.
7. It is an alterable document that can be altered by the company by following the procedure laid down under the law.
8. It is a printed document divided into various paragraphs and numerically numbered.
9. It is not essential for a public limited company to have its own articles. If it does not get registered its articles, Table A of Schedule I to the Act applies to it.
10. It forms the basis of a contract between the company and its members and between members themselves.
Contents of the Articles of Association:
The Articles of Association generally contains regulations relating to the following matters:
1.The amount of share capital and different classes of shares.
2. Right of each class of shareholders.
3. Details of contracts made with different persons and parties.
4. Procedure for making allotment of shares. Procedure for issuing share certificates.
5. Procedure for transfer of shares. Procedure for forfeiture and re-issue of forfeited shares.
6. Procedure for conducting meetings, voting, quorum, poll, and proxy.
7. The procedure of appointment, removal, and remuneration of directors, their duties and powers.
8. Procedure for declaration and payment of dividends.
9. Procedure regarding the alteration of share capital.
10. Procedure regarding winding up of the company.
11. Matters relating to the keeping of statutory books and records.
12. Details of rights of members at the general meetings.
13. Details regarding borrowing powers.
Alteration of Articles of Association:
Every company has a statutory power to alter or change its articles by a special resolution.
But this power is subject to the provisions of the Companies Act and conditions of the Memorandum of Association of the company.
If there is any clash between the provisions of Memorandum of Association and Articles of Association, the provisions of Memorandum of Association will hold good.
A few important facts about the alteration of articles are as under:
(i) The articles of a company may be altered by a special resolution subject to the provisions of the Companies Act and conditions of the memorandum.
(ii) Any alteration made may be subject to alteration by a special resolution. In other words, altered articles can again be altered.
(iii) Any alteration made shall become a valid part of the original articles (Sec-31).
(iv) A company cannot replace its articles. But it can change the entire set of articles by a special resolution.
(v) Every member of the company is bound by a valid alteration whether he voted for or against it.
The procedure of Alteration:
The procedure of alteration of articles is discussed below:
1. Approval of the Board: The Board of Directors shall approve the draft resolution on change or alteration to be put before the general meeting.
2. Special Resolution: A special resolution shall be passed at the general meeting for effective alteration in the articles.
3. Filing resolution with the Registrar: The company shall file a certified copy of resolution affecting changes within 30 days of its passing. (Sec-31)
Different Between Memorandum of Association and Articles of Association:
|Memorandum Of Association||Articles of Association|
|The M/A is the charter of a company that defines the fundamental conditions upon which alone the company is allowed to be incorporated.||A/A is a document that contains the rules and regulations for the management of the internal affairs of a company.|
|2. Scope The M/A is a sort of constitution of the company. The company works in the framework given in the memorandum.||The articles contain bye-laws for day to day working of the company. Articles are framed in the orbit of the M/A.|
|3. Contents M/A contains the objects of a company beyond which the company cannot go. Besides, it contains name, place, capital and liability clauses.||It contains rules and regulations for the management of the internal affairs of the company.|
|4. Necessity Every company is required to frame an original M/A for its registration.||A company limited by shares need not frame articles for its registration. If A/A is not registered, Table A applies to it.|
|5. Dominant & Subordinate The WA is a dominant document that cannot be controlled by the articles.||A/A is subordinate to the M/A. It can be controlled and modified by provisions of M/A.|
|6. Alteration M/A can be altered only under certain circumstances and sometimes with the permission of the Central Government or Company Law Board.||Generally, articles can be altered by a special resolution passed in the general meeting of the company|
|7. Compliance of Provisions M/A is prepared by complying with the provisions of the Companies Act. No provision of it can be contrary to the provisions.||A/A is framed by complying with provisions of both the memorandum and the Companies Act.|
|8. Legal Effect Acts done beyond the scope of the M/A are void.||Acts done beyond the scope of Articles can be ratified by the shareholders.|
|9. Relationship It establishes the relationship of the company with the outside world.||It controls the internal relationship between the company and its members.|