Articles of Association
Contents of Article of Association and Its Alternation
Company Law Notes for B.Com, BBA and MBA
Articles of Association
The
Articles contain rules and regulations for the internal management of the
company. They are framed with the object of carrying out the aims and object of
the memorandum of association and also to monitor that the same are carried as
prescribed.
Section 2 (5) of the Companies Act, 2013 defines articles as
“Articles means Articles of Association of a company as originally framed or
altered from time to time in pursuance of any previous law or of this act
including so far as they apply to the company the regulations contain as the
case may be in Table A to Schedule I of this act”
The Model contents of the Article of association are as under:
a)
the business of the company;
b)
the amount of capital issued and the classes of shares into which
the capital is divided; the increase and reduction of the share capital;
c)
the rights of each class of shareholders and the procedure for
variation of their rights;
d)
the execution or adoption of a preliminary agreement, if any;
e)
the allotment of share; calls and forfeiture of shares for non –
payment of calls;
f)
transfer and transmission of shares;
g)
company’s lien on shares;
h)
exercise of borrowing powers including issues of debentures;
i)
general meeting, notices, quorum, proxy, poll, voting, resolution,
minutes; etc.
Alteration
of Articles of Association (Sec. 14 of the Companies Act, 2013) - Any of the
clause of Articles of Association can be changed simply by a special
resolution. [Section 14(1)]. According to this section, ‘alteration' includes
making any addition and omissions. Thus, scope is available for making
alterations to Articles. The restrictions are as follows:
a)
Such alteration cannot be with retrospective effect. Retrospective
amendments be permissible as long as vested rights are not adversely affected.
b)
It should not be against provisions of Memorandum of Association
or Comp Act.
c)
The alteration must be bona fide for the benefit of company as a
whole
d)
Altered article cannot include anything which is illegal or
opposed to public.
e)
Company cannot justify breach of contract by altering the
articles.
f)
Amendment cannot increase liability of a member, unless his
written consent is obtained. However, in case of club or association where
member has to recurring periodical or recurring subscription or charges, a
member is liable! if he does not agree in writing to the increase.
g)
The amendment must not constitute a fraud on minority. It cannot
be oppression of minority.
h)
Articles cannot change a public company to a private company
without approval of Central Government – sec. 2(68).
i)
Statutory powers of company to amend the Articles cannot be
curtailed.
j)
Every alteration of articles which is registered by the registrar,
shall be as valid as if is were originally contained in the articles. [Sec.
14(3)].
Procedure for Alteration of Articles of Association
a)
A decision in the meeting of the board must be taken to change all
or any of the regulations of the existing articles and day, time place and
agenda for the general meeting.
b)
It should be seen that the proposed alteration conforms to the
provisions of the Act and the Memorandum.
c)
If the shares are listed then notice sent to the shareholders must
be sent to such stock exchange.
d)
A special resolution should be passed by shareholders in the
general meeting.
e)
After the articles have been altered, then six copies of such
amendments (one copy must be a certified copy) should be filed with the stock
exchange.
f)
Form No.23 must be filed with the Registrar.
g)
Necessary change must be made in all the copes of Articles.
h)
If the effect of alteration is to convert a public company into a
private company, the approval of the central Government is necessary.
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