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Just like the MOA, the Articles of Association is also equally important. As the provisions of section 2 clause (2) defines an AOA means the by-laws and the statute of the company that administers the internal affairs and conduct of the company.
The companies which should have their own AOA are:
Private companies limited by shares
Companies limited by guarantee
Companies with unlimited liabilities of its members
Points to be taken care of while drafting an AOA
Companies who are required to have registered articles may or may not adopt all the regulations mentioned in table A of the first schedule of the act and those who fail to do the same the provisions of the table will be applicable to them.
The companies who fall under the category of the limited by guarantee or unlimited liability will adopt the regulations of the table C, D, E of the schedule 1.
Contents to be included in AOA are as follows:
Exclusion wholly or in part of Table A
Adoption of preliminary contracts
Definitions
Capital – Authorized / paid-up
Allotment of shares, calls on shares, lien on shares
Specific provisions pertaining to Preference shares, Debentures
Transfer and transmission of shares, nomination, forfeiture of shares
Share certificates, De-materialization
Conversion of shares into stocks
Voting rights and proxies
Meetings and rule regarding Committee
First Directors, Appointment of Managing Directors, Additional Directors, Secretaries and Managers
Delegation of Powers to directors, remuneration to directors
Meetings of Board, Committees of Board
General Meetings
Accounts, Audit, Borrowing powers, dividend and reserves
Indemnity
Winding up
Alteration in articles of association- any company can amend the AOA according to the company’s memorandum but these amendments are subjected to certain limitations. These are:
The alteration of any clause by the company should not lead to exceeding in the power set by the MOA and should not be inconsistent with the provisions of company’s act
Any activity which is illegal or is opposing any public policy should not be included in the article.
The alterations which are fraudulent in nature is liable to be challenged.