Article of Association: Documents and Declaration

By | December 2, 2019
Pledge and bailment: difference & comparison

Abstract

Article of association is the second document which is important and is required to be mentioned with the memorandum. These are the document which is equally important as a memorandum, as it frames the objectives and clauses mentioned in the memorandum as per Company law, 2013. In this paper, we are going to discuss the internal regulations and bye-laws, documents for declaration of incorporation of the company.

Introduction

Meaning: Article of association is defined under Section 2(5)[1] of the Company Law, 2013 and the process of its execution is explained under section 5 of the act.

The article is a document which specifies the motives rule and bye-laws mentioned in the memorandum, it is a subsidiary process to the memorandum of association. It gives a detailed study of a company’s formation which is limited to the internal members and not to the outsiders. The article contains documents that are required to be prescribed from time to time. There can be additional perquisites which will have to be adopted by the company at that time.

Articles mention the rules, regulations, powers of company management while practising or doing business. The article is required to be bound with memorandum so that the members can follow the dos and dots and their powers, but only after declaration on behalf of the company.

The article creates an agreement, contract or partnership among the members of the company in the building relationship with the company. Such a contract are internal factors and such information can’t be reached to the outsiders or breached through its members.[2]

The article can put a restriction on the working of the business, the article and memorandum of associations when gets registered can bind the company with its members and make an agreement in itself on behalf of the company and members.

  • It binds the company with its members and vice versa.
  • Restricts the relation of the company with the outsider.
  • It creates a contract between the members and company inter-se.

It complies with every limited liability company to have an article in the course of incorporation. It is created for the benefit or rights of the shareholders from getting it shares secured, from external forces.

Following are the Provisions should be mentioned in the AOA:

  1. Company Name: the name of the company is required to mentioned with the word limited liability company or limited company, or the limited liability. If the company uses its name in two different languages then it is required to register a name in another language also.
  2. Registered Office: a company can practice nationwide on many addresses of its branches but they are required to have registered office in the name of the business to be mentioned in the memorandum and that will bind the company with the other institutions and governments, and all the notices and formal documents will be sent on this address.
  3. Field of activity: the field of activity is basically the ground on which the business is conducted by the company, so here in this the field requires to have a legal emphasis on the company, as there can be many fields of activity of a company but it is required to be registered and those fields will be legally allowed in the boundaries of our country. And those companies should also have to specify the usage of the asset for the required field of action. There is no exclusive definition required when it comes to the definition part it just requires to be legally binding as a field of activity in the company.
  4. Share Capital: the minimum share capital of a private company is 2500 euros and the public company has 80,000 euros the amount is required to be mentioned either minimum or maximum.
  5. Boards and auditors: the number of directors and auditors to be mentioned in the article of the association including the deputy members with their term of office also to be mentioned. There may be more than one auditor.
  6. General and annual general meeting: the meeting is required to be held in the presence of all the members and for that prior notice to be sent either through a newspaper or electronic basis. And to be sent to the shareholders and members registered, though in case of any of them not registered so it is referred to be sent 1 week prior respectively.
  7. Accounting period: the accounting period will be as per the financial year of 12 months
  8. Other provisions: the article will include all other provisions which are required to be inserted in the limited liability company like the appointment of managing director, manner of calling the general meeting, minimum attendance at the general meeting, the arbitration clause.

 Entrenchment

This clause was not present in 1956 act as the term entrench means to create an attitude, habit, belief, which is tough to break in itself. It is the amendments made which are tough in itself, the company includes its entrenchment proviso in the article. These provisos can be compared with the restrictive effect than those applicable in the case of a special resolution. It is made at the time of incorporation of the company or by way of amendment in the article of association.

The format for the article of association of a company will be prescribed in the form of schedule I of the companies act, 2013.

The article of association is prepared with the professional advises in the company. These are the following requirements:

  • It should be drafted as per the model provided in section 5 of the act, as there is mentioned the preparation of articles it means that the model is provided in the and there can be changes made accordingly insisted by the promoters.
  • all parts mentioned in the model can not be skipped while creating the article, this is to be kept in mind by the promoters and all those changes can be made which is very important in the view of incorporation. Otherwise no changes, alteration, deletion in the model.

Alteration can be made:

As per section 31 company can alter its article to time to time with the authority of the special resolutions made in the meeting and filing it to the registrar. It can be done keeping in mind that it doesn’t contravene the provision in the act.

Article of Association: Documents and DeclarationAlteration can be made in the memorandum.[3] Alteration can be made in breach of contract, alteration in case of fraudulent activity indulged on minority shareholders, in the case of an increase in liability of the member. Hence it is to be exercised with good faith in the interest of the company.

Conclusion

Hence in this paper, it is been cleared that all these articles will be made as per the provisions made according to company law, 2013 and with keeping in mind the objectives and rule laid in the memorandum. And as mentioned above that these articles will be after the memorandum and once it applies model mentioned in the section they even have to make sure that no alteration to be made until there is any interest to be fulfilled of the company.


[1] Articles of Association of a company as originally framed or as altered from time to time or applied in pursuance of any previous company law or this Act.

[2] Naresh Chandra Sanyal vs. Calcutta Stock Exchange Association ltd

[3] Andrew vs. gas meter co. ltd.


  1. Company Favoured as the Form of Business
  2. Different Stakeholders in a Company and their Interests

What did I miss? Don't forget to leave your valuable feedback