The Articles of association is the document which defines the purpose for which the company is formed. The Articles of Association defines the rules and regulations for the internal management. The Articles of association forms the company’s constitution along with the memorandum of association. The Articles of association cannot go beyond the powers which are mentioned in the memorandum.
The Articles of association defines the responsibilities of the directors, their powers, their relation with the shareholders, the kind of business to be undertaken by the company, the extent to which the shareholders controls the Board of Directors, etc.
Format of the Articles of Association
The format of Articles of Association is prescribed from Table F to Table J of Schedule 1 of the Companies Act, 2013 depending on the type of a company. The format of Memorandum as per the type of company is as follows:-
|Table||Type of Company|
|Table F||Company limited by shares|
|Table G||Company limited by guarantee having a share capital|
|Table H||Company limited by guarantee not having share capital|
|Table I||Unlimited company having a share capital|
|Table J||Unlimited company not having a share capital|
Contents of the Articles of Association
The contents of the Articles of Association are as follows:-
- Information relating to the distribution of powers among the directors, shareholders, officers, etc.
- Purpose for the formation of the company
- Provisions for the shareholders meeting
- The rights and the duties of the members of the company
- The rights of the shareholders
- The process for the transfer of shares
- The process for the conversion of the shares into stocks
- The procedure and time for holding the general meetings
- The procedure for appointment, removal of directors and also their powers, qualifications and remunerations
- Proceedings of the board meetings
Alterations in the Articles of Association
Any company can alter its Articles by passing a special resolution. The Articles can be altered by way of addition, deletion, substitution, modification or any other way. It is mandatory to alter the Articles in following cases:-
- Conversion of a private company into public company
- Conversion of a public company into private company
- Alteration in any of the existing Articles
In case of the conversion of a public company into a private company and vice-versa, a special resolution is to be passed to alter the Articles of Association. Any alteration made in the Articles is to be noted in every copy of the Articles.
For the alteration of Articles to take effect, a meeting of the Board of Directors is to be convened. The directors must be served a notice at least 7 days prior to the meeting. The board presents the alterations to the members and for the alterations to take effect the resolution needs to be a special resolution, i.e. it must be passed with 75% majority. The alterations in the Articles of Association should be in conformity with the provisions of Companies Act, 2013. Also the alterations should not violate the memorandum of association. The alterations cannot change the objects of the memorandum or any matters which are dealt with by the memorandum. The alteration cannot change the status of a company. In case of the conversion of a private company into public company and vice-versa, prior approval of the Central Government is required.
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