Articles of Association

Reviewed by Komal | Updated on Aug 27, 2020

What is the Articles of Association?

Articles of Association form a document outlining the rules for the operations of a company and describing the intent of that business. The document explains how activities within the company are to be performed, including the procedure for naming directors and management of financial records.

Understanding the Articles of Association

Articles of Association also explain the manner in which a company will issue shares, pay dividends, audit financial reports, and offer voting rights. A set of guidelines can be called the company's manual as it outlines the process to perform the everyday activities that need to be accomplished.

Although the nature of the articles of association and the exact terms used differ from country to country, the document is very similar worldwide and usually includes provisions on the name of the company, the intent of the company, the share capital, the structure of the business, and provisions concerning shareholder meetings.

Alteration of Articles of Association

Changing the articles does not allow anything unlawful. They will be for the company's benefit. They should not lead to a contract breach with third parties.

With a special resolution, a company may modify its Articles. Ensuring that the modification of AoA does not interfere with the terms of the memorandum of association or the Companies Act should be given due importance and care. A copy of every special resolution amending the Articles must be sent to the Registrar within 30 days of its approval.

Example of Articles of Association

An individual, or group of people, starting a business should usually seek advice from a lawyer, accountant, or both when setting up a company.

The company will select a name and define its purpose. The company is then registered at the central or state/province level. Remember that it is a different method to trademark one name.

A business can issue shares if it wants to break up the business, but it doesn't have to. Usually, the lawyer or accountant will meet with the company's executives, asking them questions to help them figure out how they want to develop and how the business will ultimately become organised.

The company directors and their personal information are listed. It also provides a business address. Changes can be made after the Director(s) approval in the articles of association.