Article of association (AoA) is a document which mentions the operations of the company and its regulations along with the purpose of the company. It elaborates the task and describes how the tasks are accomplished with the organisation, procedure for appointing directors and handling financial records. We can think this article of association as a manual for a company and outlines the methodology. Shareholder meetings, share structure and the provisions of the company are mentioned here which may vary by jurisdiction. Articles of association are known as articles for short in USA and Canada.
Understanding – How does this work?
It is a very descriptive manual kind of thing which is very important for a company where it mentions how a company will issue shares, how financial records will be audited, pay dividends and voting rights will be provided. The content inside the articles of association vary from one jurisdiction to another one but the insight is quite similar which contains different provisions and meetings of the company. A company must have a legal name which will stand as a legal entity. This name is found in the articles of association. Different jurisdictions will have company names with different rules. We must use Inc or Ltd for any company. This suffix shows that the company has a perfect legal entity. Using words which can create confusion for the public such as government or church must not be used. There might be exceptions for a few companies. Even heinous or offensive words cannot be used.
Components of the Article of Association:
These components of AoA specify how a company issues stocks and distributes dividends. This article provides information regarding what does a company to achieve the daily, monthly and yearly goals.
Purpose of the Company
The reason or the purpose for creating a company must be listed or stated in articles of association. For example, it depends upon which company will accept a short or broad purpose. Some accept only “management” whereas other companies will look for a greater detail such as operation of a wholesale bakery.
Articles of association also mention the types of capital and shares of capital. A common share of capital should be there. A company can also have preferred shares inside it. The shares are not issued in the company, but if it is present in the articles of association, it can be issued when needed.
Organization of the company
Legal information about the company is present in the document which includes the registration address, Identity of founders and number of directors and employers . The article also lists the original identity of founders and shareholders. This consists of legal advisors and auditors which depend upon the country’s jurisdiction.
The article of association has a shareholder meeting section which lists the details of notices, resolution and votes along with annual shareholder meetings.
Small Examples of business in Articles of Association
A person or group of persons who are willing to start a business will always refer to a Lawyer before starting. They can also refer to an accountant and take advice from both of them. The company will choose its preferred name and then gets registered at state level or province or federal level. The article of association lays out how shares can be issued or divided among different companies or whether it needs to be done or not. The lawyers will work with the accountants and directors and will have a discussion on how to grow the company and end up being properly structured in the near future.
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