Articles of Association
1. Introduction:
The articles of association is a document regulating the rights of the members of the company among themselves, and how the business of the company shall be conducted. the whole internal management of the company is dealt with in the articles. the articles are subordinate to the memorandum of association. it is a subsidiary of the memorandum of association. no rule can be framed that is against the memorandum of association.
2. Definition of articles of association:
General definition:
The articles are the rules made by the company for the internal management of its affairs for carrying out the objectives of the company.
Companies Ordinance 1984:
Articles mean the articles of association of a company as originally framed or as altered by special resolution including, so for as they apply to the company, the regulations, so for as they apply to the company, the regulations contained in table a in the first schedule annexed to companies ordinance.
3. Contents of articles of association:
- Rights regarding the different classes of shares.
- Rules regarding underwriting commission.
- Rules in respect of issue of debenture.
- Rules relating to forfeiture of shares.
- Rules regarding the length of notice, quorum etc.
- Rules regarding power, duties, and remuneration of managing agent.
- Share capital and its division into various classes.
- Calls on shares.
- Extent of borrowing powers.
- Procedure for winding up of the company.
- Transfer and transmission of shares.
- Issuance of share warrants.
- Conversion of shares into stock.
- Alteration of capital.
- Lien on shares.
- The common seal of the company.
- Limitation of nature of contract terms and conditions.
- Account and audit.
- Proceeding of disposing of resolution.
- Declaration of dividend.
- Voting rights of shareholders.
4. Registration of articles:
In the case of a company limited by shares, an article signed by the subscribers to the memorandum may be registered.
In case of non-registration:
If no articles are registered, the table in the first schedule applies.
5. Form of article of association:
Articles of association shall be
Printed,
Divided into paragraphs numbered consecutively,
Signed by each subscriber of the memorandum of association who shall add his address and description in the presence of at least one witness who must attest the signature.
6. Power to alter the articles of association:
The company has the power to alter the article of association.
7. Procedure to alter:
The company can alter the articles of association by passing a special resolution by section 278 of the Companies Ordinance 1984.
8. Limitations:
Following are the limitations of the alteration of articles of association.
Articles cannot be altered in general resolution:
Articles of association cannot be changed by general resolution.
Fraud cannot be constituted:
The alteration made in the articles of association should not constitute fraud on the minority.
Cannot conflict with the memorandum of association:
The alteration made in the articles of association should not conflict with the memorandum of association because it is always subordinate to it.
Bona-fide:
The alteration should be made bona fide for the benefit of the company as a whole so it cannot be made against the benefits of the company.
Not to contain illegal things:
The alteration cannot contain anything illegal.
Not against any provision of companies ordinance:
The alteration in the articles of association cannot contain anything that is against any provision of the Companies Ordinance 1984.
Not to commit a breach of a contract:
The alteration should not enable the company to commit a breach of a contract with an outside.
9. Articles not to be made unalterable:
A company cannot restrict or deprive of its statutory power to alter its articles of association either by a statement in the articles or by a contract that they shall not be altered. a provision depriving the company of its power to alter the article is void.
10. Legal effect of alteration in articles:
Generally, the alterations in the articles are regarded as having a retrospective effect.
11. Conclusion:
To conclude I can say that the articles of association are the regulations or (by-laws) which govern the internal organization and conduct of a company. it is a legal document. it must be printed and divided into paragraphs. this document must be signed by the shareholders. the company can alter articles of association by passing a special resolution as laid down in the company's ordinance.
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