What is Articles of Association (AOA)?
Articles of Association (AOA) is an important document of Company. It contains the rules and regulations or bye-laws of the company. They are related to the internal working or management of the company. It is mandatory for every company to have its own Article of Association.
The AOA of company are subordinate to the Memorandum of Association and are also governed by the Memorandum of Association. It is binding on the members in relation to the company as well as on the company in its relation to members.
Objectives of Articles of Association
The Companies Act, 2013 states that the Articles of association:
- Must include the regulations for the management of the company.
- Include matters that have been prescribed under the rules.
They do not prevent a company from including additional matters in the AOA or from doing any alterations as may be considered necessary for the functioning of the company affairs.
Features of Articles of Association
The following are some of the features of Articles of Association:
- It is a part of the constitution of an organization.
- A contract between the members and among the members themselves.
- Furthermore, It lays down the duties of shareholders.
- Few statutory clauses are mandatory in the article of associations. Whereas, other clauses are opted by choice to make the bye-laws of the organization.
- Article of Association can also be inspected by anyone as they are a public document.
Content of Articles of Association
An AOA contains the rules and regulation regarding the following matters:
Share capital including sub-division, rights of various shareholders, the relationship of these rights, share certificates, payment of commission.
Lien of shares
To retain or hold the possession of shares in case the member is unable to pay his debt to the company
Transfer of shares
The AOA include the process for the transfer of shares by the shareholder to other person (transferee).
Transmission of shares
Transmission includes title devolution by succession, death, marriage, insolvency, etc.
Surrender of shares
Surrender of shares is when the shareholders voluntary gives back or return the shares they own to the company.
Conversion of shares in stock
In consonance with the Articles of association, the company can convert the shares into stock by an ordinary resolution in a general meeting.
Alteration of capital
Increase, decrease or rearrangement of capital is according to the Articles of association in a company.
General meetings and proceedings
AOA contains all the provisions relating to the general meetings and the manner in which conducted.
Voting rights of members, voting by poll, proxies
AOA also contains the members right to vote on certain matters and manners in which voting done in a company.
AOA also contains directors appointment, remuneration, qualifications, powers and proceedings of the boards of directors meetings.
Dividends and reserves
The Articles of association of a company also provide for the distribution of dividend to the shareholders.
Accounts and Audits
AOA contains the provisions relating to maintenance of books of accounts of the company and audit of the company
Every company has powers to borrow. The Articles of association of the company contains provisions related to borrowing.
The Articles of association also contains provisions related to the winding up of the company.
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Note: This Post was last updated on November 29, 2022
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