Article explains What is Article of Association (AOA), Why a company need Articles of Association, Features of Articles of Association, Provisions for Entrenchment, Who can enforce Articles of Association, Do Articles of Association override the Companies Act, Form of Article, Contents of AOA, Where do you find Articles of Association and Signing of AOA.
|1.||What is Article of Association (AOA)?||The Articles of Association is similar to a rule book, within a company. This document contains internal detailed governing aspects of the company’s organisation. These include shares, (issue and rights attached), details in manner of holding the company meetings, the role and powers of the directors.
Section 2(5) of the Companies Act, 2013 defines the “Article of Association.”
AOA contains all the rules and regulations that govern the company policy. According to the Companies Act, 2013, every company must have its own AOA.
|2.||Why does your company need Articles of Association?||Every company formed in India under Companies Act is required to have articles, without which a company cannot legally be formed. This requirement applies to all types of Companies|
|3.||Features of Articles of Association||1. It is a part of the constitution of an organization.
2. A contract between the members and among the members themselves.
3. It lays down the duties of shareholders.
4. Few statutory clauses should be included in the article of associations. Other clauses can be chosen to make the bye-laws of the organization.
5. Article of Association can be inspected by anyone as they are a public document.
|4.||Provisions for Entrenchment||The word “entrench” means to establish an attitude, habit, or belief so firmly that change is very difficult or unlikely.
An entrenchment clause is the one which makes certain amendments either impossible or difficult. The articles may contain provisions for entrenchment to the effect that specified provisions of the articles and may be altered only if conditions or procedures as that are more restrictive than those applicable in the case of a special resolution, are met or complied with.
The provisions for entrenchment shall only be made by
1. Private Company
2. Public Company
|5.||Can Articles of Association be enforced and by whom?||The Articles of a company bind the company to its members, and vice-versa and binds the members to each other, they constitute a contract amongst themselves.
A member may sue the company and vice-versa to enforce and restrain breach of the articles of the company.
|6.||Do Articles of Association override the Companies Act?||Section 6 of the Companies Act 2013 states that the Companies Act overrides the Articles.
In the case of existing companies, in so far as their articles are inconsistent with the Companies Act, the requirements of the Companies Act will override those of the existing articles.
|7.||Form of Article||
Depending upon the applicability, a company may adopt all or any of the regulations contained in the model Article.
|9.||Where do you find Articles of Association?||The Articles of Association of a Company are available under Public documents section on Ministry of Corporate Affairs portal.|
|10.||Signing of AOA||The AOA is required to be signed by all subscribers using their Digital Signature Certificates (DSC), who are further required to add their names, addresses and occupation, in the presence of at least one witness, who must attest the signatures with his own signature and details.
Conclusion: The article of a company is an important document which is company’s rule book, defines the responsibilities of its directors, the different means by which the shareholders may exert their control over the directors and the company. While the memorandum defines the objectives of the company, the articles lay down the rules through which the objectives are to be achieved. In cases of conflict, Act overrides the Articles;-
The entrenchment provisions in the Articles of a company is to protect the interests of all the minority shareholders by ensuring that amendment in Articles of Association shall be possible after obtaining the requisite prior approval of the shareholders. The Articles of a company bind the company to its members, and vice-versa and binds the members to each other, they constitute a contract amongst themselves.
About Authors- This article is co-authored by Mrs. Asha Diwakar (Practicing Company Secretary, Bangalore) who is Co-founder and Designated Partner of M/s CLAAT Corporate Advisors LLP (Chhota CFO). Mrs. Asha Diwakar may be contacted at [email protected]/ [email protected]
Disclaimer: Utmost care has been taken to prepare the article. However, inadvertently if any error occurs, please note that the authors shall not be held responsible for any such cause. The content published is only for educational purpose and shall not be construed as rendering of any professional advice in any manner whatsoever. The readers must exercise their own judgement and refer the original source before any implementation. The content is an original work of the authors and may be used only after prior written permission.