The Articles of Association (AOA) is a document that sets out the rules and regulations for the internal management and administration of a company. It complements the Memorandum of Association (MOA) and together they form the constitution of a company. Here’s an elaboration on the Articles of Association with reference to the Companies Act of 2013:
1. Definition (Section 2(5)):
The Companies Act, 2013 defines Articles of Association as the articles of association of a company as originally framed or as altered from time to time.
2. Nature and Purpose:
The Articles of Association define the internal rules and regulations that govern the management and operation of a company. It is a contract between the company and its members and among the members themselves.
3. Contents of Articles of Association:
The AOA typically includes clauses covering various aspects, such as:
- Share Capital: Describes the types of shares, their issuance, and related matters.
- Voting Rights: Specifies the voting rights attached to different classes of shares.
- Directors and Their Powers: Outlines the powers and responsibilities of directors.
- Dividends: Deals with the declaration and payment of dividends.
- Transmission of Shares: Explains the procedure for the transmission of shares in case of the death of a shareholder.
- General Meetings: Specifies the rules for calling and conducting general meetings.
- Alteration of Capital: Outlines the process for altering the company’s share capital.
4. Alteration of Articles (Section 14):
The AOA can be altered by a special resolution passed by the shareholders. However, any alteration must be within the legal limits set by the Companies Act.
5. Binding Nature:
The Articles of Association are binding not only on the company and its members but also on the company’s officers and its shareholders in their capacities as shareholders.
6. Relation with Memorandum of Association:
While the MOA outlines the external objectives and scope of the company, the AOA defines the internal rules and procedures for achieving those objectives. Both documents work together to form the constitution of the company.
7. Public Inspection (Section 399):
Like the MOA, the AOA is open to public inspection. Any person can request a copy of the AOA by paying a prescribed fee.
8. Doctrine of Indoor Management (Section 131):
The doctrine of indoor management allows outsiders dealing with the company to assume that the internal procedures specified in the AOA have been followed.
9. Adoption of Table A (Section 5):
In case a company doesn’t adopt its own set of articles, the model articles provided in Table A of Schedule I of the Companies Act 2013 are deemed to be the articles of the company.
10. Effect on Company’s Internal Governance:
The AOA plays a crucial role in shaping the internal governance structure of the company, outlining the rights and duties of its members and directors.
Understanding and complying with the Articles of Association is essential for the smooth functioning and governance of a company. It provides a framework for the internal management and regulation of the company’s affairs.
