Articles of Association are nothing but the rules based on which the internal management of the company is governed. It is mandatory for the directors and all the members of the company to carry out their functions in accordance with the AOA.
Contents of Articles of Association (AOA)
The articles of association must have the following contents according to Section 5 of the Companies Act, 2013
Regulations
The AOA must mention the regulations that need to be followed during the management of the company.
Inclusion of matters
The AOA must contain all matters in compliance with the rules of the company. Additional matters can also be included while drafting an AOA which may be of importance for the management of the company.
Provision for entrenchment
What is entrenchment?
Entrenchment simply means fortification or protection
The AOA contains provisions for entrenchment for specific provisions. The alterations for specified provisions can be made only if certain procedures are complied with. These conditions hold more restrictions than those applying for a special resolution.
The inclusion of the provision of entrenchment is applicable only:
• During the formation of the company
• Amendment of the articles has to be done with the approval of all members of the company. In case of a public limited company, special resolution needs to be passed.
A notice to the Registrar of companies has to be given by the company regardless of whether the provision of entrenchment was made during the formation of the company or after amendment.
Forms for AOA
Forms for AOA have been provided in tables F,G,H,I and J depending on the different types of companies by the Schedule I of the Companies Act, 2013. The articles must be in the respective forms.
Conclusion
An AOA is needed by every company as it is a set of rules and regulations underlining the internal management of every company. The Articles of Association need to be drafted carefully considering the fact these are rules that govern the management of the company and need to be followed by all its members.
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