When a company is formed, certain rules and regulations are laid down along with the objectives of the company’s operations and its purpose. These laws regulate the internal affairs of a company. There are two important sets of documents that define these objectives and govern the functioning of the company and its directors or internal affairs. These documents are Articles of Association (AOA) and Memorandum of Association (MOA). Here, we will discuss in detail the Articles of association. 

Articles of Association contain the by-laws that regulate the operations and functioning of the company like the appointment of directors and handling of financial records to name a few. Let’s imagine the company as a machine. The articles of association then can be considered the user’s manual for this machine. It defines the operations that the machine is supposed to perform and how to do that on a day-to-day basis.

Definition of Articles of Association of a Company

As per Section 2 (5) of the Companies Act, 2013, Articles of Association have been defined as 

“The Articles of Association (AOA) of a company originally framed or altered or applied in pursuance of any previous company law or this Act.”

Objectives of the Articles of Association

Sec 5 of the Companies Act, 2103 states that the Articles of association:

• Must include the regulations for the management of the company
• Include matters that have been prescribed under the rules

They do not prevent a company from including additional matters in the AOA or from doing any alterations as may be considered necessary for the functioning of the company affairs.

Forms of Articles of Association (AOA)

The forms for Articles of Association (AOA) in tables F, G, H, I, and J for different types of companies have been mentioned under Schedule I of the Companies Act, 2013. AOA must be in the respective form.

• Table F- AOA of a company limited by shares
• Table G- AOA of a company limited by guarantee and having a share capital
• Table H- AOA of a company limited by guarantee and not having a share capital
• Table I- AOA of an unlimited company and having a share capital
• Table J- AOA of an unlimited company and not having a share capital

Registration:

According Section 7 of Companies Act, 2013 and Companies (Incorporation) Rules, 2014, every company shall, at the time of incorporation, register its AOA & MOA with ROC.

Contents of Articles of Association

Contents of Articles of Association of a limited company is prescribed in Table-F of the Companies Act, 2013. Generally, the contents of AOA are as follows:

• Interpretation
• Private Company
• Share Capital and Variation Of Rights
• Preference Shares
• Alteration to Memorandum
• Control of Shares
• Shares held Jointly
• Increase of Capital
• Lien on Shares
• Calls on Shares And Transfer Of Shares
• Transmission of Shares
• Forfeiture of Shares
• Alteration of Capital
• Capitalisation of Profits
• Buy-Back of Shares
• Issue of Shares In Kind
• General Meetings
• Proceedings at General Meetings
• Voting Rights and Proxy
• Directors
• Proceedings of The Board
• Chief Executive Officer, Manager, Company Secretary or Chief Financial Officer.
• Common Seal
• Borrowing Powers
• Operation of Bank Accounts
• Dividends and Reserve
• Accounts
• Audit
• Winding Up
• Secrecy
• Indemnity
• Execution Clause

Alteration of Articles of Association:

A company has a statutory right to alter its articles of association. But the power to alter is subject to the provisions of the Act and to the conditions contained in the memorandum.

According to Section 14(1), a company may, by a special resolution alter its AOA.

Registration of Alteration
According to Section 14(2) read with rule 33 of Companies (Incorporation) Rules, 2014, every alteration of the articles shall be filed with the Registrar, together with a printed copy of the altered articles, within a period of fifteen (15) days in Form No. INC 27 with fee, who shall register the same.

Effect of Alteration of Articles of Association
According to Section 14(3), any alteration of the articles registered with ROC shall, subject to the provisions of this Act, be valid as if it were originally in the articles.

Points to Note

1. The alteration of AOA must not exceed the powers given by the memorandum. In the event of conflict between the memorandum and the articles, it is the memorandum that will prevail.
2. The alteration of AOA must not be inconsistent with any provisions of the Companies Act or any other statute.
3. Articles may impose on the company conditions stricter than those provided under the law;
4. The Articles must not include anything which is illegal or opposed to public policy.
5. The alteration must be bona fide for the benefit of the company as a whole.
6. The alteration must not constitute a fraud on the minority by a majority. If the alteration is not for the benefit of the company as a whole, but for majority of shareholders, then the alteration would be bad.
7. Articles cannot be altered so as to compel an existing member to take or subscribe for more shares or in any way increase his liability to contribute to the share capital, unless he gives his consent in writing (Section 38).
8. By effecting alteration in its articles, a company cannot defeat escape from its contractual obligation with any person.
9. The Articles of Association cannot be altered so as to have retrospective effects.
10. The alteration must not be inconsistent with an order of the Court under Sections 397 or 398 and 404 of the Companies Act, 1956.
11. Section 8 Company cannot alter Article except with the approval of Central Government.