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Articles of Association

The articles of association of a company are its bye- laws or rules and regulations that govern the management of its internal affairs and the conduct of its business. The articles regulate the internal management of the company. Articles are like the partnership deed in a partnership.

Contents of Articles
Calls on shares Lien on shares Forfeiture of shares Alteration of capital Number and value of shares Allotment of shares Share certificate Meetings

Borrowing powers Dividends and reserves Winding up Accounts and audit Voting rights and proxies Directors, their appointment, etc Transfer and transmission of shares Conversion of shares into stock Adoption of preliminary contracts.

Form of Articles
Company Limited by shares (sec.28) Adopt Table A of Schedule 1 in full, Own Articles to the exclusion of Table A, Own Articles and adopt Table A in part. Company Limited by guarantee and not having share capital(sec.29) Own Articles in a form as in Table C.

Company Limited by guarantee and having share capital (sec.29) Own Articles in a form as in Table D. Company with unlimited liability (sec.29)Own Articles in a form as in Table E.

Alteration of Articles
Power to alter the articles is vested with the Company Sec.31. A company cannot divest itself of the power to alter articles. Alteration is to be effected by special resolution passed by the shareholders.

Limitation on power to alter articles

Must not increase the liability of members. Must not result in expulsion of a member. Must not be illegal or against public policy. Irregular alteration acted upon for many years is binding on the company. Must not conflict with the Memorandum and must not exceed the power given by it.

Approval of central government is to be obtained if alteration has the effect of converting a public company into a private company. Alteration may be made with retrospective effect so long as it does not alter things already done by the company. Must not be inconsistent with the act or with an order of the court.

Difference Between
Memorandum of Association It is a primary document. It is subordinate to the Act. It is the Charter of the Company and defines the fundamental conditions and objects. For alteration, in certain cases, NCLT approval is required. Articles of Association It is a secondary document. It is subordinate to Memorandum and the Act. It contains the rules & regulations. For alteration, the approval of the members is required.

It defines the relation between the company and outsiders. Acts which are ultravires the Memorandum cannot be ratified by the members. Every company must have its own Memorandum.

It defines the relation between the Company and members. Acts ultravires the Articles can be ratified by the members. A public Company limited by shares need not have articles of its own. In such a case, Table A applies.