An article of association is a document that outlines the rules and regulations that govern a company. It specifies the rights and duties of the company's shareholders, directors, and other stakeholders, and sets out the procedures for conducting the company's business. The articles of association are an important part of a company's governance structure and play a vital role in ensuring that the company is run smoothly and in accordance with the law.
Can it be amended?
Simply put, yes it can. However, to amend the articles of association, the company will need to follow the process outlined in its articles or in the relevant legislation, such as the Companies Act. This process may involve passing a resolution at a general meeting of shareholders, obtaining the consent of the company's directors, and filing the amended articles with the relevant regulatory authority.
It is important to note that the articles of association can only be amended within the limits set by the relevant legislation and the company's memorandum of association (also known as the articles of incorporation or charter). Any amendments that are not consistent with these documents may be deemed invalid.
It is also a good idea for the company to seek legal advice before making any changes to its articles of association to ensure that the amendments are valid and in the best interests of the company.
What is the difference between articles of association and a memorandum of association?
The articles of association and the memorandum of association are both important documents that govern the internal affairs of a company. However, they serve different purposes and have different legal significance.
The memorandum of association is a founding document that sets out the main objects and powers of a company. It establishes the company's legal existence and outlines the scope of its business activities. The memorandum also sets out the rights and duties of the company's shareholders, including the types of shares that can be issued and the rights associated with those shares.
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The articles of association, on the other hand, are a set of rules and regulations that govern the internal management and administration of the company amongst others as mentioned above.
In summary, the memorandum of association establishes the legal foundation and purpose of the company, while the articles of association provide guidance on how the company will be run on a day-to-day basis.
Key elements to include in your article of association
There are several key elements that are typically included in articles of association. These may include:
The company's name and registered office
The articles of association should specify the official name of the company, as well as its registered office.
The company's objects
The articles of association should outline the main purposes or objectives of the company. This may include the types of products or services that the company will offer or the markets in which it will operate.
The articles of association should specify the total number of shares that have been issued by the company, as well as the rights and privileges associated with each class of shares.
The articles of association should outline the procedures for calling and conducting shareholder meetings, including the notice periods that must be given and the quorum requirements.
Directors' duties and powers
The articles of association should outline the powers and responsibilities of the company's directors, as well as the procedures for appointing and removing directors.
The articles of association may specify the duties and responsibilities of the company secretary, who is responsible for maintaining the company's records and ensuring that it complies with its legal obligations.
The articles of association may specify the conditions under which dividends may be declared and paid to shareholders.
Alterations to the articles of association
The articles of association should outline the procedures for making changes to the document, including the notice periods that must be given and the minimum level of shareholder support required.
The articles of association should specify the procedures for dissolving the company and distributing its assets among the shareholders.
In summary, the articles of association are crucial documents that set out the rules and regulations that govern a company's operations. They help to ensure that the company is run smoothly and in accordance with the law, and play a vital role in protecting the rights and interests of the company's shareholders, directors, and other stakeholders.