Introduction
Both Memorandum and Article of Association are considered the constitution documents of a company. An article of association helps to lay down rules for the internal management of your company and is regarded as an indispensable document after the Memorandum of Association which defines the scope of business of an entity. Memorandum and Articles of Association are two key documents that form the constitutional framework within which the company functions. Both the Memorandum and Articles of Association have to be submitted to the Ministry of Corporate Affairs for obtaining the certificate of Incorporation.
It is like executing a contractual promise, the parties to this contract are the company and the members of the company. They are binding in nature upon fulfilment of conditions like any other contractual promise executed between the parties. The shareholders being the members of the company share both the profit and losses of the company; hence the asset and liabilities are equally shared amongst the members of the company.
Scope of Articles of Association
The Articles of Association is binding on not only the existing members of the company but also on future members who will join the company. It is a document that governs all the members of the company, which includes but is not limited to the successors and representatives.
It helps in laying down broad guidelines for the smooth functioning of the company, any deviation from the same is considered as violation of the laws pertaining to that company and a violation of the contract in general which attracts penalty.
What does it constitute of ?
1. Articles of Association define the nature of a company, for instance, a company can be a Company limited by shares, Company limited by guarantee, Company limited by both shares and guarantee or can be an unlimited company having/not having a share capital; the said information can be extracted from the Articles of Association of a company.
2. Apart from the nature of the company, the Articles of Association clearly define what would be the role and responsibilities executed by the directors of the company.
3. Articles of Association also define the various means by which the shareholders may exert their control over the board of directors, and the company.
Can the articles be changed in near future?
An amendment is possible to these articles, however, this is only possible after obtaining the requisite approval of the shareholders. The Companies Act also ensures that the interest of the minority shareholders is protected, as a change in the Articles of Association cannot be brought without their prior consent as they are as much the part of the company as any other shareholder having a large stake in the company.
For your personalised Articles of Association
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