Explain the subject matter of Articles of Association of a company in detail.

Or

Define Articles of Association. Is it necessary for every company to have its own Articles? State briefly the contents of articles of association.

Or

What is Articles of Association? What are its contents?

Ans.

MEANING AND DEFINITIONS OF ARTICLES OF ASSOCIATION

Article of Association contains regulations for the internal administration of a company’s affairs. They prescribe rules, bye-laws for the general management of the company and for the attainment of its objects as given in its memorandum.

According to Lord Justice Bowen, “The Memorandum contains the fundamental common upon which alone the company is allowed to be incorporated. They are conditioned introduced for the benefit of the creditors, and the outside the public as well as the shareholders. The Articles of Association are the internal regulations of the company and are for the benefit of shareholders.”

According to Lord Cairns, “The Memorandum is, as it were, the area beyond which actions of the company cannot go, inside that area total shareholders may be as such regulations for their own management as think fit in the form of the Articles of Association.”

According to Section 2(5) of the Companies Act, 2013 “Articles means the articles of association of a company as originally formed or as altered from time to time in pursuance of any previous companies law or of this Act.”

Which Company must have Own Articles – In case of the following, the company will be required to have its own Articles.

(a) A private company limited by shares.

(b) A company limited by guarantee

(c) An unlimited company

It is necessary for a private company limited by shares to prepare its AOA and get thorn registered. The signatories to the AOA must be the same as on the MOA.

For a company limited by guarantee, it is mandatory to get the articles registered with the MOA.

An unlimited compan3r must also get its AOA registered.

A public company may or may not have its own Articles. In case it decides not to frame its own Articles, it will be governed by the regulations contained in Table ‘A’ [Section 7]

Legal Requirements – The Articles must be

(a) printed, and

(b) divided into suitable paragraphs,

(c) duly stamped, each subscriber to the Memorandum should also sign the Articles of the Company.

[Section 7(a)]

CONTENTS OF ARTICLES

The Articles usually contain regulations and bye laws relating to the following matters:

(1) Different classes of shares and their rights

(2) Procedure for making an issue of share capital and allotment thereof

(3) Procedure of issuing share certificate

(4) Lien on shares

(5) Forfeiture of shares and the procedure of their re-issue.

(6) Procedure for transfer and transmission of shares.

(7) The time lag between calls on shares.

(8) Conversion of shares into stock.

(9) Payment of commission on shares and debentures to underwriters.

(10) Rules for adoption of preliminary contracts, if any.

(11) Re-organisation and consolidation of share capital.

(12) Alteration of share capital.

(13) Borrowing powers of directors.

(14) Procedure of convening, holding and conducting different kinds of general meetings.

(15) Voting rights of members, proxies and polls.

(16) Payment of dividends and creation of reserves.

(17) Appointment, powers, duties, qualifications, remuneration etc of directors.

(18) Use of the common seal of the company.

(19) Keeping of books of accounts and their audit.

(20) Appointment, remuneration etc. of auditors.

(21) Capitalisation of profit.

(22) Board meetings and proceedings thereof

(23) Rules as to resolutions.

(24) Appointment powers, duties, qualifications, remuneration etc. of Managing Director, Manager and secretary, if any.

(25) Arbitration provision and Secretary, if any

(26) Provision for such powers which cannot be exercised without the authority of articles

(27) Rules at the time of winding up.

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