Article of Association (AOA) is the most required document for a company. It contains the laws, rules, and regulations of a company. Company activities are managed based on this AOA. It specifies the conduct of internal matters in the company. It is considered a significant document of any company.
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What is Article of Association?
AOA is a handbook that contains certain rules and regulations of the company. It also includes the rights and regulations of its members. AOA is inferior to Memorandum of Association (MOA) and sets rules within the limits defined by it.
AOA must adjust with the Companies Act and MOA without any conflicting provisions.
Article of Association is like a manual for a company. This not only handles the internal matters of a company but also gives powers to officers. There are several regulations like company details and workings. Shareholder rights, director’s qualifications, and effects of contracts are also included.
What are the objectives of Article of Association?
The Articles of Association act as a voluntary file for memorandum.
The objectives of AOA are as follows:
- It governs the document that controls internal affairs. It operates the company with rules as well as regulations mentioned in the articles.
- It gives clarity for procedures that must be followed by the company. It is also available to the shareholders of the company.
- Helps in governing the relationship between the company and employees. Also takes care of the relationship among the members.
- It clears the legal rights of the shareholders from different classes.
- AOA is considered necessary for the management of the company.
What is the importance of Article of Association?
AOA is a crucial legal document for any company to handle it. Article of Association has more influence than Memorandum. It is responsible for how a company runs internally. These articles are needed to prove the company’s establishment and legitimacy.
AOA clarifies the rights and powers of the directors and members. However, there is an obligation to AOA before joining a company. That is, all future members must agree to the MOA. Any agreement the company makes with its future members follows the rules set out in these articles. About AOA, the company can add rules as per the requirements. But before enactment, changes need to be signed and approved by the shareholders.
Alteration in Article of Association
Section 14 of the Companies Act of 2013, allows a company to change its AOA if it follows the rules in the MOA and passes a special resolution.
Alteration of AOA has the power to change a private company into a public one. It can be changed by altering the clauses. The Alteration can be done by removing the 3 clauses mentioned under Section 2 (68). This states the private company’s characteristics.
A copy of the revised AOA should be submitted to the Registrar within 15 days of making any changes.
Conclusion
In summary, the Article of Association is the most prominent document. A company cannot be run without this document. It contains important rules and regulations that the company must follow. Companies are not allowed to do any activities beyond that. AOA is a handbook of a company that comes up with every detail of the company.
The AOA is like a company manual, covering rules for members and officers within limits set by the MOA and Companies Act. It explains company operations, shareholder rights, and director qualifications without conflicting with the MOA.
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FAQs
1. What is Article of Association?
Article of Association is a document that contains rules and regulations for the company.
2. How many days will it take for the alteration of AOA?
It takes a minimum of 15 days for the change.
3. What does AOA prove?
These articles prove the company’s establishment and legitimacy.
