Business Law – Articles of Association

Articles of Association is a document, which is mandatory for every company to prepare. It contains the following details −
● The powers and privileges enjoyed by the directors, shareholders and officers while voting.
● The type of business to be carried out by the company.
● The type of changes, which can be made in the internal regulations of the company.
● The rights, duties, powers and privileges of the company and its members.

Articles of Association

Articles of Association can be considered as a contract between the members and the company. These articles bind the present as well as the future members of the company. The company and its members are bound by the articles as soon as the document is signed.
● Members have various rights and duties towards the company.
● The articles together with the memorandum of association make the constitution of the company.
The Articles of association may cover the following topics −
● The issuing and different classes of shares
● Valuation of intellectual rights
● The appointment of directors
● The directors’ meetings
● Management decisions
● Transferability of Shares
● The dividend policy
● Winding up
● Confidentiality of know-how and the founders’ agreement and penalties for disclosure
The company is essentially run by the shareholders but for convenience, it is run by a board of directors. The shareholders elect a board of directors and the directors are elected at the Annual General Meeting. The directors may or may not be employees of the company. Shareholders may also elect independent directors.
● Once elected, the board of directors manages the company.
● The shareholders play no part till the next Annual General Meeting.
● The shareholders and the Memorandum of Association determine the objectives and the goals of the company in advance.
● The auditors of the Annual General Meetings are elected by the shareholders.
● The auditors may be internal auditors (employees) or external auditors.
● The Board meets several times in an year.
● An agenda is prepared before each meeting.
● The board meetings are presided over by a chairperson.
● In the absence of the chairperson, the vice chairperson presides over the meetings.