What is meant by “Articles of Association”? What is their nature? Explain.
Ans. The next step in the formation of a company is the preparation of the Articles of Association, ‘ Articles’ are defined in Section 2 (5) of the Act:
“Articles” means the Articles of Association of a company as originally framed or as altered from time to time in pursuance of any previous Companies Law or of this including, so far as they apply to the company, the regulations, contained as the case may be, in Table B in the Schedule annexed to Act No. XIX of 1857 or in Table A in the First Schedule annexed to the Indian Companies Act, 1882 (VI of 1882), or in Table A in the First Schedule annexed to the Indian Companies Act, 1913 (VII of 1913), or in Table A in Schedule I annexed to this Act.”
The articles are the internal regulations of the company, and play a part subsidiary to memorandum, and should not be inconsistent with or override or control the memorandum. It is not necessary for a company to have a separate set of Articles of its own, and it can take and adopt the regulations of Table A in Schedule I of the Act for its Articles. The Articles of Association of a company are the rules and regulations of a company framed for “the purpose of managing its affairs. “They are the internal regulations of the company”. They generally provide for all matters of its internal administration, e.g., the amount of capital to be issued, the classes, into which it is divided, the rights of each of the respective classes, rules as to the making of calls, the company’s lien, forfeiture of shares, transfer of shares, holding of meeting, quorum, voting at meetings, the appointment of directors, etc.
The Companies which must have articles of association are
(i) companies with unlimited liability,
(ii) companies limited by guarantee, and
(iii) private companies limited by shares. For other kinds of companies articles are not compulsory.
Form and Signatures of Articles.- Article shall-
(a) be printed;
(b) be divided into paragraphs and numbered consecutively; and
(c) be signed by each subscriber of the Memorandum of Association (who shall add his address, description and occupation, if any in the presence of at least one witness who shall attest the signature and shall likewise add his address, description and occupation. Form and signature of the “Article” are to be made in the same manner as in the case of Memorandum of Association. There is no difference in the form of these two documents.