What is Articles of Association? Discuss the significance of Articles of Association in a Company? Or What do you mean by Articles of Association? State its important Contents?



Meaning of Articles of Association:-The word “Articles” means the Articles of Association of a company which is framed to applied in pursuance of a company. In others word it is a written document which prescribes the regulation for the company.
Section 2(5) of the Companies Act 2013:-Section 2(5) of the Companies Act 2013 says that Articles of Association of a company is a written document, these are the internal regulation of a company as originally framed to applied in regulation of a company. Articles of Association contain rules, regulation to administered the company. A private company have an articles of association but private company may or may not have an articles of association it is not necessary. Public  company can adopt articles from Table ‘A’ in Schedule I of the Act.


Contents of Articles of Association:-
The following are the content of an Articles of Association:
        I.            Scope and nature of the company.
      II.            Various types of numbers and its value of share and different classes of shareholder.
    III.            Rules relating to various types of right and duties of different classes of shareholders.
    IV.            Various procedure for making calls.
      V.            Various types of rules relating to appointment, remuneration, power and duties of the director and its officers of the company.
    VI.            Rules regarding to appointment of manager.
  VII.            Rules regarding to appointment of secretary.
VIII.            Various types of rules relating to notice of the meeting, voting right, poll, proxy etc, of the shareholder.
    IX.            Various types of rules relating to transfer to the reserves, declaration, audit of account of dividend etc.
      X.            The borrowing power and the modes of a borrowing power of a rule of a company.


Restriction:-
1.       Special resolution:-The special resolution helps to made an alteration and special resolution to form clerical error in the Articles.
2.       Must not be against the provision of the Act:-The alteration should not be or against the statute which is described the Indian Companies Act.
3.       No liability of the members:-Section 38 says that without the written consent of the members no alteration of members liability is increased.
4.       Approval of Central Government:-The approval of Central Government is important for alteration before approval from Central Government a printed of copy of the Articles should be filed by the company to the register with in one month of the date of approval.
5.       Breach of Contract:-If there is breach of contract to the alteration, the company would change its articles. In Chittabaram Chettiar v. Krishna Ayyangar case it is clearly observed that the contract should not be depend on company articles if these thing happened then company will not responsible for the damages but the company changes it articles commits breach of contract. But the company is liable only for those damages which are independent contract it commit breach by changing articles.


Southern Foundries Limited v. Shirlaw
In the years 1933, the plaintiff was appointed as managing director of the  company of a defendant for a term of 10 years after few years in 1935 the company was amalgamated with another company a new articles was adopted in this articles it was plan to dismiss the plaintiff and was sued for wrongful repudiation of the contract.
The Court held that the agreement was an unqualified with regard to 10 years. Further the Court observed that and restrain the alteration the damages cannot be adequately compensated in term of money and further held that the alteration should not be fraud.

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