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Articles of association

From Wikipedia, the free encyclopedia

For the articles adopted by the First Continental Congress in 1774, see Continental Association. The term articles of association of a company, or articles of incorporation, of an American or Canadian Company, are often simply referred to as articles (and are often capitalized as an abbreviation for the full term). The Articles are a requirement for the establishment of a company under the law of India, the United Kingdom and many other countries. Together with the memorandum of association, they constitute the constitution of a company. The equivalent term for LLC is Articles of Organization. Roughly equivalent terms operate in other countries, such as Gesellschaftsvertrag in Germany, statuts in France, statut in Poland,[1] Jeong-gwan in South Korea. The following is largely based on British Company Law, references which are made at the end of this Article. The Articles can cover a medley of topics, not all of which is required in a country's law. Although all terms are not discussed, they may cover:

the issuing of shares (also called stock), different voting rights attached to different classes of shares

valuation of intellectual rights, say, the valuations of the IPR of one partner and, in a similar way as how we value real estate of another partner

the appointments of directors - which shows whether a shareholder dominates or shares equality with all contributors

directors meetings - the quorum and percentage of vote management decisions - whether the board manages or a founder transferability of shares - assignment rights of the founders or other members of the company do

special voting rights of a Chairman,and his/her mode of election the dividend policy - a percentage of profits to be declared when there is profit or otherwise winding up - the conditions, notice to members confidentiality of know-how and the founders' agreement and penalties for disclosure first right of refusal - purchase rights and counter-bid by a founder.

A Company is essentially run by the shareholders, but for convenience, and day-to-day working, by the elected Directors. Usually, the shareholders elect a Board of Directors (BOD) at the Annual General Meeting (AGM), which may be statutory (e.g. India). The number of Directors depends on the size of the Company and statutory requirements. The Chairperson is generally a well-known outsider but he /she may be a working Executive of the

company, typically of an American Company. The Directors may, or may not, be employees of the Company. In the emerging countries there are usually some major shareholders who come together to form the company. Each usually has the right to nominate, without objection of the other, a certain number of Directors who become nominees for the election by the shareholder body at the AGM. The Treasurer and Chairperson is usually the privilege of one of the JV partners (which nomination can be shared). Shareholders may also elect Independent Directors (from the public). The Chair would be a person not associated with the promoters of the company, a person is generally a well-known outsider. Once elected, the BOD manages the Company. The shareholders play no part till the next AGM/EGM. The Objectives and the purpose of the Company are determined in advance by the shareholders and the Memorandum of Association (MOA),if separate, which denotes the name of the Company, its Head- Office, street address, and (founding)Directors and the main purposes of the Company - for public access. It cannot be changed except at an AGM or Extraordinary General Meeting (EGM) and statutory allowance. The MOA is generally filed with a 'Registrar of Companies' who is an appointee of the Government the country. For their assurance, the shareholders are permitted to elect an Auditor at each AGM. There can be Internal Auditors (employees)as well as an External Auditor. The Board meets several times each year. At each meeting there is an 'agenda' before it. A minimum number of Directors (a quorum) is required to meet. This is either determined by the 'by-laws' or is a statutory requirement. It is presided over by the Chairperson, or in his absence, by the Vice-Chair. The Directors survey their area of responsibility. They may determine to make a 'Resolution' at the next AGM or if it is an urgent matter, at an EGM. The Directors who are the electives of one major shareholder, may present his/her view but this is not necessarily so - they may have to view the Objectives of the Company and competitive position. The Chair may have to 'break' the vote if there is a 'tie'. At the AGM, the various Resolutions are put to vote. The AGM is called with a notice sent to all shareholders with a clear interval. A certain quorum of shareholders are required to meet. If the quorum requirement is not met , it is canceled and another Meeting called. If it at that too a quorum is not met, a Third Meeting may be called and the members present, unlimited by the quorum, take all decisions. There are variations to this among companies and countries. Decisions are taken by a show of hands; the Chair is always present. Where decisions are made by a show of hands is challenged, it is met by a count of votes. Voting can be taken in person or by marking the paper sent by the Company. A person who is not a shareholder of the Company can vote if he/she has the 'proxy', an authorization from the shareholder. Each share carries the number of votes attached to it. Some votes maybe for the decision, others not. Two types of decision known as the Ordinary Resolution and a Special Resolution.

A Special Resolution can be tabled at a Director's Meeting. The Ordinary Resolution requires the endorsement by a majority vote, sometimes easily met by partners' vote. The Special Resolution requires a 60,70 or 80% of the vote as stipulated by the 'constitution' of the Company. Shareholders other than partners may vote. The matters which require the Ordinary and Special Resolution to be passed are enumerated in Company or Corporate Law. Special Resolutions covering some topics may be a statutory requirement. Some of the articles are shown in the Nestle S.A. or Nestle Ltd or a Nestle AG.[2] In the United Kingdom, model articles of association, known as Table A have been published since 1865.[3] The articles of association of most companies incorporated prior to 1 October 2009 particularly small companies are Table A, or closely derived from it. However, a company is free to incorporate under different articles of association, or to amend its articles of association at any time by a special resolution of its shareholders, provided that they meet the requirements and restrictions of the Companies Acts. Such requirements tend to be more onerous for public companies than for private ones. The Companies Act 2006 received Royal Assent on 8 November 2006 and was fully implemented on 1 October 2009. It provides for a new form of Model Articles for companies incorporated in the United Kingdom. Under the new legislation, the articles of association will become the single constitutional document for a UK company, and will subsume the majority of the role previously filled by the separate memorandum of association.[4]

[edit]Notes

Memorandum of association
From Wikipedia, the free encyclopedia

The examples and perspective in this article deal primarily with the United Kingdom and do not represent a worldwide viewof the subject. Please improve this article and discuss the issue on the talk page. (December 2010) This article needs additional citations for verification. Please help improve this article by adding citations to reliable sources. Unsourced material may be challenged and removed. (December 2010)
The memorandum of association of a company, often simply called the memorandum (and then often capitalised as an abbreviation for the official name, which is a proper noun and usually includes other words), is the document that governs the relationship between the company and the outside. It is one of the documents required to incorporate a company in the United Kingdom, Ireland, India, Bangladesh, Pakistan and Sri Lanka, and is also used in many of the common law jurisdictions of the Commonwealth.

Contents
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1 Requirements 2 Capacities 3 Purpose 4 See also 5 References

[edit]Requirements
While it is still necessary to file a memorandum of association to incorporate a new company, it no longer forms part of the companys constitution and it contains limited information compared to the memorandum that was required prior to 1 October 2009. The Companies (Registration) Regulation 2008 in fact included pro-forma Memoranda. It is basically a statement that the subscribers wish to form a company under the 2006 Act, have agreed to become members and, in the case of a company that is to have a share capital, to take at least one share each. It is no longer required to state the name of the company, the type of company (such as public limited company or private company limited by shares), the location of its registered office, the objects of the company, and its authorized share capital.[1] Companies incorporated prior to 1 October 2009 are not required to amend their memorandum. Those details which are now required to appear in the Articles, such as the objects clause and details of the share capital, are deemed to form part of the Articles.

[edit]Capacities
The memorandum no longer restricts what a company is permitted to do. Since 1 October 2009, if a company's constitution contains any restrictions on the objects at all, those restrictions will form part of the articles of association. Historically, a company's memorandum of association contained an objects clause, which limited its capacity to act. When the first limited companies were incorporated, the objects clause had to be widely drafted so as not to restrict the board of directors in their day to day trading. In the Companies Act 1989 the term "General Commercial Company" was introduced which meant that companies could undertake "any lawful or legal trade or business."

[edit]Purpose
The memorandum of association records the agreement of the first subscribers to form a company under the 2006 Act, to become members and, in the case of a company that is to have a share capital, to take at least one share each.

[edit]See

also

Difference Between Memorandum of Association and Articles of Association


May 10th, 2011 | By olivia
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Memorandum of Association vs Articles of Association Memorandum of Association and Articles of Association are documents that are very important to know about a company in detail, and together they form the constitution of a company. Though there are some similarities, both serve different functions and purposes and are important for different class of people having interest in the companys performance. This article attempts to find out these differences for the benefit of the readers. Articles of Association Articles of Association is an internal document of a company and people commonly refer to it as just articles. These are rules governing an organization and are normally filed with the Registrar of Companies. The major features of articles of association are as follows. Structure of the organization along with control mechanism Voting pattern and rights of the employees Mode of conduct of directors meetings Mode of conduct of AGM of shareholders Difference in rights of different kinds of shares Memorandum of Association Memorandum of Association is a binding document for any organization that must be filed with the Registrar of Companies and it reflects the relationship of the company with the outside world. The major features of a Memorandum of Association are as follows. The name, address and the office of the company that has been registered with the Registrar The way the share capital of the company is structured Aims and objectives of the company What is the difference between Memorandum of Association and Articles of Association? Memorandum of Association is also called the charter of an organization and is a useful document for the investors to know how there money is being invested and utilized by the company. On the other hand, Articles of Association is also important as it lets one get a look into the internal structuring of the company and how the power flows down. It tells about the laws governing internal management of the company. It also reflects the roles, responsibilities and functions of various people in the management of the company.

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