Contents of the Articles of Association
The Articles contain rules and regulations regarding:
1. Adoption of preliminary contracts.
2. Number and value of shares.
3. Allotment of shares.
4. Calls on shares.
5. Share certificates and rights of different types of shareholders.
6. Transfer and transmission of shares.
7. Forfeiture of shares.
8. Lien on shares.
9. Alteration of capital.
10. Conversion of shares into stock.
11. Borrowing powers.
12. Alteration of the Memorandum.
13. General meetings, voting rights of the members, and proxies.
14. Number of Directors, their qualifications, and remuneration.
16. Accounts and audit.
17. Issue of bonus shares.
18. Appropriations to various reserves.
19. Winding up.
According to Sec. 26 of the Companies Act 1956, a public company is not required to file its own Articles. If so, all the provisions in Table A of the Schedule I shall apply to them.
In case of companies limited by guarantee, unlimited companies and private companies limited by shares, the Act makes the preparation and registration of the Articles obligatory. In the case of a company limited by guarantee or an unlimited company, the Act provides that if the company has a share capital, it should state the amount of authorized share capital in the Articles. If it has no share capital, the Articles should state the number of members with which the company proposed is to be registered.
Articles of a private company having share capital must contain the provisions as to the
- restrictions on the transfer of shares,
- limitation as to the number of members, and
- prohibition as to the invitation to the public subscription.
Alteration of the Articles of Association
A company can alter its Articles at any time. Any provisions making the unalterable are treated as bad in law. The following points must be noted while altering the Articles:
1. A special resolution must be passed. The Articles can never be altered by a general resolution.
2. A certified copy of the resolution must be filed with the Registrar within 30 days of the passing of it.
3. If the alteration is for converting a public company into a private company, or if it is related to the Managing Director or the Manager, the approval of the Central Government is also necessary. If the alteration is approved by the Central Government, a printed copy of the altered Articles must be filed with the Registrar within one month of the receipt of the order of the Central Government.
4. The alteration should be made in all the Articles issued thereafter.
5. The alteration must not be against the provisions of the Companies Act.
6. The alteration should not be against the provisions of the Memorandum If it happens the act is ultra vires the Memorandum and so void.
7. The alteration must not be illegal or against the public policy.
8. The alteration should not affect the rights of an outsider.
9. The alteration should not cause a breach of contract.
10. The alteration should not oppress or constitute a fraud on the minority.
11. The alteration must be made bona fide for the benefit of the company as a whole.
12. The alteration should not increase the liability of members unless they agree to it in writing.
13. The alteration should not force the members to take more shares or to pay more money for the shares already purchased by them.
14. If the Court alters the Articles of Association of a company, the articles should not contain anything against the provisions of the order of the Court.
15. The alteration in the Articles, which has the effect of converting a public company into a private company, can be made only if it is approved by the Central Government. Where this alteration has been approved by the Central Government, the company shall file a printed copy of the Articles as altered with the Registrar within I month of the date of receipt of order of the approval.
16. The National Company Law Tribunal has no power to amend or rectify the Articles even where there is a mistake, which the National Company Law Tribunal would rectify in the case of any other contract.
Subject to the above limitations, the powers of the company to alter its articles are extensive and large.