What is Meant by an Article of Association?
“An article of association is secondary to the memorandum of association and is controlled by it. ”
Every business enterprise needs certain laws and rules that are to become the core of its management setup. Such rules and regulations are specified in a detailed document known as the Article of Association. The articles are framed to help the company in achieving the objectives defined in the memorandum of association.
It is a supplementary document to the memorandum. As per various laws prevailing in different countries, such articles of association are to be framed after taking help from the past models. An abrupt change in such a document is totally uncalled for and treated with high suspicion.
All the companies-whether they are private companies limited by shares, companies restricted by guarantee or unlimited companies- are obliged to have their articles of association. A public company limited by shares may or may not have its own articles.
It is not compulsory on the part of a public company limited by shares to plan and register articles of association along with memorandum of association. But this rule also has exceptions in some of the countries.
However, such a company may accept all or any regulation(s) contained in the model set of articles. It means that the company can to a certain extent frame its own articles and in part incorporate some of the regulations.
The articles cannot include anything opposing to the company act and also to the memorandum of associations. If the document contains something divergent to the company act, it is deemed to be out of action.
Each subscriber to the memorandum must sign the articles in the presence of one eyewitness in any case. Articles of association are secondary to the memorandum of association and are controlled by it.
Articles of association must contain the amount, shares, different types of shares, call on shares, etc. for the mutual benefit of the company and the shareholders.
Not only this but various other things like terms regarding the alteration of capital, selection of directors and the course of action to be followed for the dissolution of a company etc. also find mention in the Article of Association.
Author - DeeKay
Tags - Finance, Economy
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