Articles of Association

Articles of Association or AOA are the set of rules, norms, laws and regulation around which a company’s internal affairs are conducted. AoA along with the Memorandum of Association (MoA) defines the outline of the company constitution. AoA is ought to be submitted at the time of application for incorporation of the company. 

Features of Articles of Association

• AoA is not a compulsion for companies. A company limited by shares need not have an AoA;
• AoA must be in a printed format and should be made public to the shareholders and potential investors;
• It can act as a partnership deed;
• It is a binding contract between the company and its members;
• AoA must not be inconsistent or in violation of MoA;
• AoA is alterable. The same can be done through a special resolution.

The scope of Articles of Association

An AoA is a contract between the company and its members; as mentioned earlier. It is binding upon the existing members as well as the future members of the company. Further, the person hired by members, successors of members and their legal representatives are bound as well. The members are conferred with some rights and duties with respect to the company and the company also has specific obligations towards its members, all of which is necessary for the proper and desirable functioning of the company.

Contents of Articles of Association

Following can generally be included in the AoA:

• The classes, values, and rights of shares,
• Transfer, forfeiture, and conversion of shares; along with alteration of capital,
• Appointment, rights, duties etc. of Directors,
• Meetings, its minutes, notices etc.
• Voting along with its quorum and percentage, poll and proxy,
• Accounts and audits,
• Dividend policy and reserves,
• Appointment of Auditors and their salaries,
• Borrowing powers of Directors and Managers etc,
• Winding up procedures, including conditions and notices to members,
• Rules relating to use and custody of common seal,
• Minimum Subscription, and
• Rules and Regulations relating to the conversion of fully paid shares into stock.

Amendment of Articles of Association

The following could be the requirements relating to amendment of AoA:

• It is a pragmatic requirement that the amendment of AoA must not sanction any illegal developments or constitute any breach of contract with the third party;

• The sole aim of alteration must be for the benefit of the company;
• It must be through a special resolution as mentioned earlier;
• The alteration must not be in conflict with the provisions of the Companies Act and the MoA;
• It should not proliferate the liabilities of existing members;
• Such alteration may have a retrospective effect;
• No Court has the power to order for an alteration of AoA.