Articles of Association are a document that specifies the regulations for a company’s operations and defines the company’s purpose. It contains the rules and regulations or bye-laws of the company. This is a document, which contains the rules and regulations governing the internal management, organization and the conduct of a joint-stock company. It plays a very important role in the affairs of a company. The document lays out how tasks are to be accomplished within the organization, including the process for appointing directors and the handling of financial records. In it, the qualifications, remunerations,’ powers and duties of the directors and other officers are clearly stated. It also stated the relation of shareholders among themselves, their powers and claims. It includes the responsibilities and powers of the directors and the means by which the members exert control over the board of directors.
The articles of association are comprised of the following provisions:
- Share capital, call of share, forfeiture of share, conversion of share into stock, transfer of shares, share warrant, the surrender of shares, etc.
- Directors, their qualifications, appointment, remuneration, powers, and proceedings of the board of directors meetings.
- Voting rights of shareholders, by poll or proxies and proceeding of shareholders general meetings.
- Dividends and reserves, accounts and audits, borrowing powers and winding up.
The full articles of association should cover:
- The powers, responsibilities, indemnity, and insurance of the directors,
- Details of how directors hold meetings, delegate and handle conflicts of interest,
- How directors are appointed and removed,
- Liability of members,
- Distribution of dividends to members and stockholders,
- How shares are issued, classed, and transferred,
- Company seal.
Articles of association can be thought of as a user’s manual for a company, defining its purpose and outlining the methodology for accomplishing necessary day-to-day tasks. It is comprised of rules and regulations that govern the company’s internal affairs. It deals with the rights of the members of the company between themselves. It covers the information related to the board of directors, general meetings, voting rights, board proceedings, etc. A copy of the articles of association should be kept at the company’s registered office – or a ‘single alternative inspection address’.