WHAT IS ARTICLE OF ASSOCIATION?
As per section of 2(5) of the Companies Act, 2013 “articles means articles of association of a company as originally framed or altered from time to time or applied in pursuance of any previous company law or of this Act.”
Generally, it is a document which contains the rules and regulations for the management of the company. In the Companies Act, there is a certain format of Articles of Association which is already provided in the form of Table F to Table J but the companies can adopt either provided table or can draft their own article of association. This is drafted and submitted for the approval to the Registrar at the time of company registration. No company can operate its activity without the Article of Association, as it is the main document of the company it contains the bye-laws related to the company activity. The company cannot do any activity beyond the power of its Article of Association, if the business activity is not mentioned in the article then first it needs to alter the same with the approval of the majority shareholder in the general meeting.
CONTENTS OF THE ARTICLE OF ASSOCIATION
Basically, the article of association of the company contains the following things:
- Name of the company which is approved by the MCA
- The restriction provided under companies act if the company is a Private Limited Company and One Person Company
- The provision related to the share capital and variation of rights like:
- Alteration of capital
- Transfer/ Transmission of shares
- Buy-Back of the share; etc
- The procedure to call meeting either board meeting and general meeting and all other provision for example; procedure to adjourn the meeting, proceedings of the board meeting, proxy, voting right, and etc.
- Details about the First Directors of the Company
- Dividend and reserves
- Accounts of the company
- The provisions related to winding up
- The list of the subscribers of the company along with the information of a witness.
- And all other provisions related to the management of the company.
The director of the company may include any extra point as they deemed fit for the regulation of the company. There are the different format of Article of Association provided under the Companies Act for the different categories of the company like:
- Table F: Companies Limited by Share
- Table G: Companies Limited by Guarantee and having Share Capital
- Table H: Companies Limited by Guarantee and not having Share Capital
- Table I: An Unlimited Companies having Share Capital
- Table J: An Unlimited Companies not having Share Capital
Every private limited company shall have to add these lines on its Article of Association:
“The Company is a Private Company within the meaning of Section 2(68) of the Companies Act, 2013 and accordingly:-
(i) Restricts the right to transfer its shares;
(ii) Limits the number of its members to two hundred:
Provide that where two or more persons hold one or more shares in a company jointly, they shall, for the
purposes of this clause, be treated as a single member:
Provided further that-
(a) persons who are in the employment of the company; and
(b) persons who, having been formerly in the employment of the company, were members of the company
while in the employment and have continued to be members after the employment ceased,
Shall not be included in the number of members; and(iii) Prohibits any invitation to the public to subscribe for any securities of the company.”
And every One Person Company shall have to mention these lines including above:
“PRIVATE COMPANY (OPC)
The Company is a One Person Company within the meaning of Section 2(62) of the Companies Act, 2013 and accordingly
- Limits the number of its member to One person.”
ALTERATION OF ARTICLE OF ASSOCIATION
Every company can alter its article of association any time during its tenure but only after the prior approval of the majority shareholders by passing required resolution in the general meeting of the company and the same alteration shall also have to be submitted the Registrar in whose jurisdiction the registered office of the companies fall along with the documents and requisite fees. An article of association is a very important document of the company no company can be registered or operate its function or management without the Article of Association and it is very important that it should not violate any provision of Companies Act or any other law