Articles of Association: Know It All in 3 Minutes
The Articles of Association is a document that defines the company’s purpose and identifies the regulations for a company’s operations. The document lays out how tasks should be achieved in an organization, how directors are appointed, and how to handle the financial records of the company.
The Articles of Association is seen as the constitution that guides a company, the rules and regulations that direct the internal affairs of a company. It also states the purpose of a company and how it aims to achieve its short and long-term objectives.
The articles is created by the founders or directors when they incorporate their business; however, some companies choose to use standard templates for this purpose.
The Articles of Association is a legal document; therefore, it is advised that business owners interact with or employ the service of a lawyer or an accountant when setting up a company.
The Preamble to the Articles of Association
The preamble is a general statement of the objects of the company. It usually contains a summary of the main provisions of the articles and may also refer to previous dealings with shareholders or members. The preamble is not legally binding and does not form part of an article but it is used by companies as an aid to understanding their purpose and by courts when deciding whether they can be held liable for any breach of duty under common law or statutory law.
Title of the Company
A company is a legal entity; therefore, it must adopt a name that must be indicated in the Article of Association. Generally, suffixes such as “Inc.” or “Ltd.” are used to indicate that a particular entity is a company.
Additionally, there are words that cannot be included by certain companies, words as “government” or “church,” so as not to be misleading. Those words can also be found offensive.
Organization of the company
This part of the Articles of Association contains the legal information about the company, its registration address, the number of directors and officers, and the identity of the founders and the original shareholders. The legal advisors and auditors may also be included in this section depending on the type of business.
Purpose of the Company
The purpose of your company must be clearly stated in the Articles of Association. Although the primary purpose of a company is profit-making, companies usually have a broad purpose but it is important that the Article contain a detailed purpose of the company.
Corporate Business Objects
A company’s business objects are the things it can do as a legal entity. These can be divided into two categories: activities and objectives.
Activities are what you do with your company, like selling products or providing services. Objectives are what you want to accomplish with your business, such as making money or improving society in some way.
The first thing to note about the content of the articles of association is that it must include both activities and objectives—and they must be separated by commas (or periods). For example, “To carry on its business as a company under the name ABC Inc.” would not be acceptable because there was no comma after “business” in its last sentence; while “to provide goods and services” might be fine if followed by commas instead of periods—but again, only if there were no other commas around those words elsewhere in this document!
Powers and Business of the Company
- The powers of the company are defined in its articles of association. The powers and business of a company can be further defined by special resolutions passed by its members at an annual general meeting (AGM).
- A company can be dissolved if all its shares have been transferred to another person or persons, or if any rights attached to those shares have ceased.
- A company may also be wound up voluntarily, by agreement between its directors and shareholders after a resolution has been passed at an AGM for this purpose.
Share capital is the amount of money that a company needs to raise from its shareholders in order to set up and start trading. It’s divided into shares and used to pay for the costs of starting and running a business.
The articles of association list the number and type of shares that encompass a company’s capital.
There are various types of shares that are contained in the Articles of association; it must contain at least one form of a common share and several types of preferred shares. The company can choose if and when the shares will be issued once the share capital is contained in the articles of association.
This section outlines the first general shareholder meeting provision. It details Notices, resolutions, and votes; also the rules governing subsequent annual shareholder meetings.
Also read: The Contents of a Memorandum of Association (MOA)
Directors & Officers’ Liability
- Directors and Officers’ Liability
- Directors and officers of a company are liable for the debts of that company. They are also liable to the extent of their personal liabilities in case they have acted negligently or carelessly, as well as in cases where they have acted fraudulently. However, directors and officers cannot be held responsible for any loss arising out of a breach by third parties (such as customers) of any contract entered into with them by virtue of their office unless they knew or ought reasonably to have known that such loss would result from such breach.
Register of Members
The register of members is a list of all the shareholders in a company, maintained by the company secretary. It contains information such as name, address and contact details.
The register is open to inspection by any member or their authorised representative at any time during normal business hours (see section 5 for more information).
The issue and transfer of shares are one of the most important activities in an organization. It is also a very common process, which means that it will help you to understand how companies are formed and operate.
The issuing process refers to the creation of new shares by selling them in order to raise money for your company’s operations (or expansion).
The transfer process refers to selling old shares already owned by shareholders so they can use those funds elsewhere – either on their own behalf or as gifts for others who need help with financial issues such as paying off debts from lawsuits or medical expenses incurred due to illness or accident-related injuries suffered during work hours when using tools such as saws etc.
Dividends are the profits of a company and can be paid out to shareholders.
- A dividend is a distribution of a portion of the company’s earnings to its shareholders, typically in proportion to their ownership interest in the firm. The main advantage of dividends is that they’re not taxed until you receive them, so they’ll reduce your taxable income more than if you had earned that money yourself on paper. However, since they’re considered “ordinary income” (and thus subject to higher rates), they may increase your federal tax bill over time.
- If you own shares in any U.S.-based companies listed on exchanges such as NASDAQ or NYSE who pay dividends annually like Apple Inc., you should know this important fact: Those companies report their profits quarterly rather than annually; therefore every three months instead of once per year – when all other publicly traded corporations report their earnings-related information!
Annual General Meetings, Specific Business and Extra-Ordinary General Meetings (EGMs) etc.
An annual general meeting (AGM) is a meeting of shareholders that can be held once every twelve months. AGMs are usually held at the same time as the Extraordinary General Meeting and will be notified in advance. The notice must be given at least 14 days before the date of your AGM unless otherwise stated in your Articles of Association or by law.
If you want to hold an Extraordinary General Meeting, you should notify us about this within one month of notifying us about your Annual General Meeting. We will then submit an application for approval from Companies House which takes between four weeks and two months depending on how busy they are at any given time during this period.
Articles of association is not only required to start a Company but also to maintain its existence. Once you have formed a company, it can be registered with the Registrar of Companies and they will provide all the necessary documents in order to register your company.