What is Articles of Association of a company
Articles of Association of a company
A company is an incorporated body. So there should be some rules
and regulations are to be formed for the management of its internal
affairs and conduct of its business as well as the relation between the
members and the company. Moreover the rights and duties of its members
and the company are to be recorded. There comes the need and origin of
Articles of Association. The Articles of Association is a document
that contains the purpose of the company as well as the duties and
responsibilities of its members defined and recorded clearly. It is an
important document which needs to be filed with the Registrar of
In the Table A of Schedule 1 of the Companies Act, 1956 is given a model regulations for the management of the company limited by shares. All or any of the regulations contained in Table A may be adopted by a company limited by shares. Articles of Association is a document which all companies should prepare.
Meaning and purpose of articles
Section 2(2) of the Companies Act defines Articles as the Articles of Association of a company as originally framed or as altered from time to time in pursuance of any previous companies law or of this Act. But it is not clearly defined what is an Article of Association. Basically Article of Association contains the rules and regulations relating to the management of companies internal affairs. It is similar to as a partnership deed in a partnership.
Memorandum defines the area or business of the company. A company cannot operate beyond the limits of its memorandum. At the same time an Article contains the rules and regulations of the business of the company. Therefore, Article is subordinate to, and controlled by the Memorandum.
The Article of Association contains the following details:
1. The powers of directors, officers and the shareholders as to voting etc.,
2. The mode and form in which the business of the company is to be carried out
3. The mode and form in which the changes in the internal regulations can be made.
4. The rights, duties and powers of the company as well as the members who are included in the Articles of Association.
The article is binding not only to the existing members, but also to the future members who may join in the future. The hires of members, successors and legal representatives are also bound by whatever is contained in the Article. The Articles bind the company and its members as soon as they sign the document. It is a contract between the company and its members. Members have certain rights and duties towards the company and the company haver certain obligations towards its members. At the same time the company also expects some duties and obligations which the members has to fulfill for the smooth functioning of the company.
Registration of the Articles.
Every private company, an unlimited company and a company limited by
guarantee must have there own Article and it should be registered with
the Registrar of Companies along with the memorandum as per the
Section 26 of the Companies Act, 1956. But it is not necessary for a
Company limited by shares to have their own Articles. It may either
have its own articles or it may adopt either wholly or partly Table A
of Schedule I of the companies Act as Table A of schedule I of the
Companies Act will automatically apply to such companies unless it has
been excluded or modified. There are three options for the company
limited by shares. They are:
1. It may adopt Table A in full or
2. It may wholly exclude Table A and set out its own Articles in full;
3. It may set out its own Articles and adopt part of Table A.
If such a company goes in for the first alternative, then it is not necessary to get any Article of Association Registered. It has only to endorse on the face of the Memorandum of Association that it has adopted Table A as its Articles of Association.
It is important to note that The articles of a private limited company must contain the following details:
1. If the company has a share capital, the amount of share capital with which the company is to be registered.
2. The number of members with which the company is to be registered.
In the case of a company limited by guarantee, the articles should state the number of members with which the company is to be registered as per Section 27 (2) of the companies Act.
The artilces of association must be printed, divided into paragraphs, numbered consecutively and signed by each subscriber of the Memorandum of Association in the presence of at least one witness who shall attest the signature and shall likewise add his address, description and occupation, if any as per Section 30.