Articles of Association
Articles of Association can be defines as a rule book within a company. It
contains detailed governing aspects of a company. It is subsidiary to memorandum
of association. These include shares, (issue and rights attached), details in
manner of holding the company meetings, the role and powers of the directors. It
defines the regulations and the purpose or the objective for which the company
They define the rights, duties, powers of the management of a company as between
themselves and the company at large. Further, they also prescribe the mode and
form in which changes in the internal regulation of a company may be made from
time to time. The articles of association of a company must always be in
consonance with the memorandum of that company and being subordinate to the
memorandum; they cannot extend the objects of a company as specified in the
memorandum of the company.
It has the same role of as of a partnership ship deed in a partnership. They
particularly provide for matters such as the making of calls, forfeiture of
shares, directors qualifications, and the procedure for transfer and
transmission of shares and debentures, powers, duties and appointment of
According to section 2(5) of the Companies Act, 2013 ―articles‖ means the
articles of association of a company as originally framed or as altered from
time to time or applied in pursuance of any previous company law or of this Act.
Effect of Articles of Association
According to section 10 of the Companies Act, 2013 Subject to the provisions of
this Act, the memorandum and articles shall, when registered, bind the company
and the members thereof to the same extent as if they respectively had been
signed by the company and by each member, and contained covenants on its and his
part to observe all the provisions of the memorandum and of the articles.
From the above mentioned section it can be easily concluded that the articles of
association binds the members with the company and vice-versa. It also binds the
members inter se- means with each other as the articles define rights and
liabilities of the members. As between members inter se the articles constitute
a contract between them and are also binding on each member as against the other
or others. Such contract can be enforced only through the medium of the company.
in the case of Naresh Chandra Sanyal v. Calcutta Stock Exchange Association
, the Supreme Court provided that the articles of association of a
company also establish a contract between the company and its members as well as
between the members. This contract governs the ordinary rights and obligations
incidental to the membership in the company.
Articles of association under English Law
There are enormous similarities in the concept of articles of association in
English law and Indian law. The legislation under U.K law is Companies Act, 2006
according to the act it is mandatory for every company incorporated in England
and Wales to have an articles of association. The company formed without the
articles of association will be abstained from having legal status of a company.
Just like the provisions in Indian law the English law also has provisions
regarding the alteration of articles of association. Under English Law the
articles of association may override the parent legislation which the companies
act, 2006. The articles of the company can override the company law under the
English Legal System. To vary or exclude some of the provisions are allowed
under English Law. However, under the Indian Legal System, the articles must be
in accordance with the Companies Act, 2013.
Contents of Articles of Association
Section 5 of the Companies Act, 2013 provides model article of association. The
section in a elaborate explain the contents of articles of association.
- The articles of a company shall contain the regulations for management
of the company.
- The articles shall also contain such matters, as may be prescribed:
Provided that nothing prescribed in this sub-section shall be deemed to
prevent a company from including such additional matters in its articles as
may be considered necessary for its management.
- The articles may contain provisions for entrenchment to the effect that
specified provisions of the articles may be altered only if conditions or
procedures as that are more restrictive than those applicable in the case of
a special resolution, are met or complied with.
- The provisions for entrenchment referred to in sub-section (3) shall
only be made either on formation of a company, or by an amendment in the
articles agreed to by all the members of the company in the case of a
private company and by a special resolution in the case of a public company.
- Where the articles contain provisions for entrenchment, whether made on
formation or by amendment, the company shall give notice to the Registrar of
such provisions in such form and manner as may be prescribed.
- The articles of a company shall be in respective forms specified in
Tables, F, G, H, I and J in Schedule I as may be applicable to such company.
- A company may adopt all or any of the regulations contained in the model
articles applicable to such company.
- In case of any company, which is registered after the commencement of
this Act, in so far as the registered articles of such company do not
exclude or modify the regulations contained in the model articles applicable
to such company, those regulations shall, so far as applicable, be the
regulations of that company in the same manner and to the extent as if they
were contained in the duly registered articles of the company.
The company under section 5(3) of the legislation has the discretion to
include entrenchment in articles of association. However, the concept of
entrenchment was not present under the previous act which is companies Act,
1956. The format for the articles of association of a company must be in the
manner prescribed by the form provided in Schedule I of the Companies Act, 2013.
Alteration of Articles
Section 14 of the Companies Act, 2013 lays down the provisions for the
alteration of articles of association. The alterations made under this section
is subject to the provisions of this act.
Under this section there can be conversions of:
- A Private company into public company or,
- A Public company into private company
The proviso of subsection 1 of section 14 puts on a restriction on the
alteration of articles of association of private companies in such a manner
where it no longer includes the limitations which are required to be included
for private company under this act, after such alteration from the same date
onwards will cease to be a private company under this act.
Company can alter its Article by:
- By adopting a new set of articles;
- By the way of addition or insertion of new clause/s;
- By removing clause/s;
- By amending particular clause/s;
- By substitution of particular clause/s;
Restrictions on alteration of articles
Alteration in cross purposes with memorandum of association
- The alteration must be subject to the provisions of Companies Act, 2013.
- Powers provided under memorandum association shall not be exceeded by
the alteration. In case of conflict the memorandum of association shall
- The alteration must be bonafide in nature. Anything illegal or opposing
public policy must not be included.
- No alteration can conclude fraud by the majority on minority.
- The provisions for retrenchment can be inserted only when agreed by all
the members in the case of a private company and in case of a public company
by special resolution.
- No retrospective effect shall take place by alteration of articles.
Articles come into operation only from the date of the amendment.
When there are alteration in articles of associations it clearly effects the
memorandum of association. In the case of Hutton vs. Scarborough Cliff Hotel
., in the general meeting a resolution was passed by providing the
power to issue new shares with preferential dividend but no such power was
provided by the memorandum.
This alteration was declared inoperative as the issuing of new shares with the
preferential dividend was considered as a variation of the constitution of the
company fixed by the memorandum. Memorandum was silent as it neither authorize
nor did it prohibit the issue of preference shares. The court said that either
expressly or impliedly the power of alteration of the articles is only subject
to what is clearly prohibited by the memorandum.
In Chithambaram Chettiar vs. Krishna Aiyangar
 a company secretary
accepted the job on the remuneration of Rs. 50 per month. This provision was
provided in the articles of association. After the alteration, the monthly
remuneration reduces to Rs. 25 per month. The court held that if the contract
totally depends upon the provision of the articles of association then the
alteration will naturally be operative but if the company has entered into an
independent agreement than the company may repudiate it by changing articles but
will be answerable in damages for breach.
The amended articles have same effect as that of the original articles of
association. The articles shall have a binding effect on both the company and
its member articles shall have a binding effect on both the company and its
members to the same extent as if it was signed by the company and by each
Relation between Articles of Association and Memorandum of Association
Articles of association is a subsidiary of memorandum of association. Memorandum
of association is the supreme document while Articles of association is
subordinate document. The articles must be in consonance with the memorandum of
association. This is because the object of the memorandum is to provide the
purpose for which the company is established whereas the articles provide the
manner in which the conduct of the company has to be carried out.
If the company does something that is beyond the memorandum than it is
completely void and incapable of ratification whereas if a company does anything
in contravention of the articles of association then such provision will be held
irregular and can always be confirmed by the shareholders.
The concept of articles of association is found in every company. It is a
document which contains rules, regulations, and procedures for the smooth and
efficient working of the company. The procedures regarding articles of
association varies in both the act (Companies Act, 1956 & Companies Act, 2013)
for e.g. earlier the alteration cannot led to the conversion of company from
public to private and vice- versa.
Similarly there was no provision regarding entrenchment in the prior
legislation. The article of association holds a very pivotal position in any
company and all the major aspects of a company's management are dealt with the
articles of association. However, it must be in consonance with the memorandum
of association as well the companies act, 2013 or any other company law in force
at that time.
- A.K. Majumdar and DR. G.K Kapoor, Taxman company law and practice, 12th
Ed., Taxman Allied services Pvt. Ltd.
- Dr. Avatar Singh, Company Law, 14th Ed., Eastern Book Company, 2005
-  62 ER 717
- ILR 33 MAD 36
- AIR 1971 SC 422
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