The rules and regulations which are framed for the internal management of a company are set out in a document known as the Articles of Association. The articles are framed to enable the company to carry out the aims and objects of the company set out in the Memorandum of Association.
Contents of Articles of Association
The regulations and bylaws laid down in the Articles relate to the following:
- Share capital and its subdivision into different classes of shares, rights of shareholders and their variation;
- The procedure for making allotment, calls on shares and transfer, transmission, forfeiture and surrender of shares, including lien on shares;
- Alteration and reduction of capital;
- Borrowing powers;
- Appointment of Manager, Managing Director, Secretary;
- Declaration of dividend;
- Procedure for convening, holding and conducting different kinds of meetings, voting rights and methods;
- Maintenance of books of account and their audit;
- Share Certificates and Share Warrants, conversion of shares into stock;
- Seal of the company;
- Winding up.
Alteration of Articles of Association
The Articles of Association can be altered or added to by passing a special resolution in the extraordinary general meeting, provided:
- the alteration is not contrary to the provision of the Act;
- it is not inconsistent with or beyond the provisions of the Memorandum; and
- it does not increase the liability of a member without his written consent by compelling him to take more shares than he had held prior to the alteration.
Any alteration made in the Articles should be in the interest of the company as a whole, should not be such as to cause a breach of contract and should not be such as to constitute a fraud by the majority on the minority shareholders.