Meaning and Definition of Article of Association
Article of Association is document of the company which contains rules and regulations related to the internal management. It is concern with the internal management of the company and aims to carry the objectives of the company.
According to section 26, Registration of the article is not compulsory as memorandum
- It is optional for public limited companies by shares
- Compulsory for all other companies
This document often defines the manner in which the shares are to be issued, dividend to be paid, the financial records to be audited and the power to be given to the shareholders with the voting rights.
- Legal document
- It contains rules and regulations
- It should be in written form
- It is compulsory for all companies except public companies limited by shares
Importance of Article of Association
The article of association is a important document for every company and its contains rules and regulations of the company which helps the internal management. The importance of Article of Association are discussed below:
1. Basis for the company
- It controls internal affairs
- Valuation of intellectual property
- Appointment of chairpersons, Director, etc
- Operating management
Content of Article of Association
Section 5(1) and section 5(2) of the Companies Act, 2013 provide for the contents of the articles of association. The Article must contain all the rules and regulations of the company and controls internal management.
- Share capital with shareholders rights
- Calls on shares
- Transfer of company shares
- Share forfeited
- Transmission of shares
- Conversion of shares into stock of the company
- Share warrant
- Shares alteration
- Lien of shares
- Members voting rights
- Members of the general, Board or other meeting
- Borrowings of the company
- Winding up of the company.
Thus the Article of association is most important document and necessary to every organisation. It also known as company legal document because it contain companies rules and regulations.