The articles of association of a company and its bye-laws are regulations that govern the management of its internal affairs and the conduct of its business.
They define the duties, rights, powers and authority of the shareholders and the directors in their respective capacities and the company, and the mode and form in which the business of the company is to be carried out.
Registration of Articles
A public company limited by shares may register articles of association signed by the subscribers to the memorandum. There are 3 possible alternatives in which such a company may adopt articles;
- it may adopt Table A in full or,
- it may wholly exclude Table A and set out its regulations in full, or
- may set out its articles and adopt part of Table A.
No Article Company
A company limited by shares may either frame its own set of articles that may adopt all or any of the regulations contained in Table ‘A’. But if it does not register any Articles, Table “‘A’ applies. |
Features of Articles of Association
The major features of articles of association are as follows.
- Structure of the organization along with control mechanism
- Voting pattern and rights of the employees
- Mode of conduct of director’s meetings
- Mode of conduct of AGM of shareholders
- The difference in rights of different kinds of shares
Purpose of Articles of Association
- To promote positive, socially responsible development in Danish construction including improvement of architecture, quality and productivity as an influential voice, and furthermore
- To be a forum for discussion, generation, and communication of common beliefs of professional Danish construction clients to promote the construction clients’ interests
- To influence the laws and regulations concerning construction through informed dialogue, active participation, and co-operation
- To establish and promote the systematic exchange of experience between the members
- To participate in developing new knowledge and tools to support the work of the members
- To organize professional development for the employees of the members
Subject Matter of Articles/Contents
The articles of a company usually deal with the following matters:
- The business of the company;
- The amount of capital issued and the classes of share the increase and reduction of share capital;
- The rights of each class of shareholders and the procedure for variation of their rights;
- The execution or adoption of a preliminary agreement, if any; the allotment of shares; calls and forfeiture of shares for non-payment of calls;
- The allotment of shares; calls and forfeiture of shares for non-payment of calls:
- Transfer and transmission of shares;
- Company’s lien on shares;
- Exercise of borrowing powers including the issue of debentures;
- General meetings, notices, quorum, proxy, poll, voting resolution, minutes;
- Number, appointment, and powers of directors;
- Dividends – interim and final – and general reserves;
- Accounts and audit;
- Keeping of books-both statutory and others.
Form and Signature of Articles
The articles of association of any company not being a company limited by shares shall be in one such form in Tables ‘C’, ‘D’, and ‘E’ in Schedule I as may be applicable. Section 30 requires that articles shall;
- be printed;
- be divided into paragraphs numbered consecutively;
- be signed by each subscriber of the memorandum of association.
Inspection and Copies of the Articles: A company shall, on being so required by a member, send to him within seven days of the requirement, on payment of one rupee, a copy of the articles.
Alteration of Articles
A company may, by special resolution alter or add to its articles.
A printed or typewritten copy of every special resolution altering the articles must be filed with the Registrar within 30 days of the passing of the special resolution.
Effect of Memorandum and Articles/Binding Force of Memorandum and Articles
- Members bound to the company: Each member must observe the provisions of the articles and memorandum.
- Company bound to members: A company is bound to members by whatever is contained in its memorandum and articles of association.
- Member bound to member: The articles bind the member inter i.e., one to another so far as rights and duties arising from the articles are concerned.
- Whether a company or member bound to outsiders? No, the memorandum or articles do not confer any contractual rights to outsiders against the company or its members, even though the name of the outsiders is mentioned in the articles.
- Whether directors are bound by whatever is contained in the Articles? Yes, the directors of the company derive their powers from the articles and are subjected to limitations, if any, placed on their powers by the articles.
Difference Between Memorandum and Articles of Association
Memorandum and articles are important documents of a company. They are interlinked and require to be registered for the formation of a company.
Where there is any ambiguity or where the memorandum is silent on any point, the articles may serve to explain or supplement the memorandum.
Beyond this, the two documents have nothing in common and differ from one another in the following respects:
| Memorandum of Association | Articles of Association |
|---|---|
| Memorandum of association is the charter of the company and defines the scope of its activities | Articles of association of the company are a document which regulates the internal management of the company |
| Memorandum of association cannot be altered except in the manner and to the extent provided by the act | The articles being only the bylaws of the company can be altered by a special resolution |
| Memorandum is a supreme document of the company | Articles are subordinate to the memorandum |
| Every company must have its own memorandum. | But a company limited by shares need not register its articles |
| A company cannot depart from the provisions contained in its memorandum, and if it does, it would be ultra-virus the company. | Anything did against the provisions of articles, but which is intra-virus the memorandum, can be ratified. |
