Scribd
Upload
13 views

BL Assignment 2

The document defines articles of association and memorandum of association. Articles of association form the rules and regulations that govern a company's internal operations, such as appointing directors and handling finances. It also explains the contents of articles of association, which typically include provisions regarding directors, general meetings, accounting, shareholders, and more. The memorandum of association establishes the company's purpose and objectives, while the articles of association defines how those objectives will be achieved. The key differences between the two documents are that the memorandum of association is mandatory for registration while the articles are not, and the memorandum takes precedence over the articles in cases of contradiction.

Uploaded by

Sheiry
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
13 views

BL Assignment 2

The document defines articles of association and memorandum of association. Articles of association form the rules and regulations that govern a company's internal operations, such as appointing directors and handling finances. It also explains the contents of articles of association, which typically include provisions regarding directors, general meetings, accounting, shareholders, and more. The memorandum of association establishes the company's purpose and objectives, while the articles of association defines how those objectives will be achieved. The key differences between the two documents are that the memorandum of association is mandatory for registration while the articles are not, and the memorandum takes precedence over the articles in cases of contradiction.

Uploaded by

Sheiry
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 16

Department of Management Sciences, National University of Modern

Languages

Assignment
Submitted by:
Shahraz Mushadi
Roll NO: 31466
Subject: BL
Submitted to: Sir Bilal
Class: MBA (3.5)4th Evening
Date: 10-07-2020
Content
 Define and explain articles of association also explain the
content of articles of association.
 Differentiate between articles of association and memorandum
of association.
Define and explain articles of association also explain the content of
articles of association.
Article of Association
Articles of association form a document that specifies the regulations for a
company's operations and defines the company's purpose. The document lays out
how tasks are to be accomplished within the organization, including the process
for appointing directors and the handling of financial records.
Articles of Association (AOA) is the Company’s essential Rule Book which contains
the set of guidelines and regulations necessary for every Company to function. The
document is set to define the Company’s purpose as an organization and the tasks
it is supposed to accomplish internally; i.e. handling official financial records;
handling company meetings along with defining the role and the powers of the
Directors of the Company. The Articles also manage and maintain the rights of the
shareholders as well as their relationship with the Directors. Companies who need
mandatory Articles of Association are Unlimited Companies, Companies Limited
by Guarantee and Private Companies Limited by Shares.
Contents of Articles of Association
It is important to pay extra attention to the Contents of the Articles of Association
(AOA) at the initial phase since they are important for the ability of the Company
to make profits and keep their shareholders satisfied. It is also important to make
sure that they are as per the Company's interests because amending the Articles
later require a two-thirds majority of the votes at the general meeting of
shareholders.

The following are the contents that a Company's Articles of Association (AOA)
usually possesses:

1. Directors
2. General Meeting
3. Accounting and Auditing
4. Shareholders
5. Lien of shares
6. Transfer and Transmission of Shares
7. Forfeiture and Surrender of Shares
8. Conversion of Shares in Stock
9. Issuing Share Warrant
10.Alteration of Capital
11.Voting Rights
12.Dividends and Reserves
13.Winding Up
1. Directors
The AOA defines the guidelines of the Directors' appointment; their qualifications
for appointment; their remuneration once appointed and the powers of the Board
of Directors in the Company meetings.
2. General Meetings
The AOA provides the basic framework of all the General Meetings to be
conducted as well as all the provisions that are related to the functioning of the
General Meetings in any manner.

3. Accounting and Auditing


The provisions in AOA will define the guidelines subjected to the Auditing of
the accounting of the Company.
4. Shareholders
The AOA streamlines the sub-division of the Share capital of the Company
including the rights of the Shareholders and the relationship of these rights with
other elements of the Company. The shareholders have to pay the whole or part
of the remaining unpaid amount on each share purchased on the Company's
demand; i.e. Call on Shares.

5. Lien of Shares
The Company is eligible to retain the Shares of any member of the Company in
case they fail to pay the debt to the Company. The member will not be allowed to
transfer their shares unless they pay their debt.
6. Transfer and Transmission of Shares
The AOA defines the procedure during the process of transfer of shares between
the transferee and the shareholders. Transmission of shares comes into effect
with death, insolvency, marriage, succession, etc. It is also a part of AOA despite
being involuntary.
7. Forfeiture and Surrender of Shares
The AOA provides for the rules of forfeiture of shares if the member is not able to
meet the purchase payments like paying call money or any allotment on the
Shares. Shareholders may choose to surrender or voluntary return their shares to
the Company pertaining to the guidelines of the AOA.

8. Conversion of Shares in Stock


The Company can pass an ordinary resolution in a General Meeting to convert
their shares into stock. The management of the decision and resolution passed
should be in accordance with the AOA.
9. Issuing share Warrant
Public Limited Companies are eligible to issue a share warrant staying within the
provisions mentioned in AOA. A share warrant is a bearer document which is
related to the title of shares issued by the Company.
10. Alteration of Capital
Similar to the conversion of Shares into Stock, AOA provides the rules of the
procedure to alter capital as per the Company's interests. The Company can
decide to increase, decrease or rearrange the Capital.

11. Voting Rights


The AOA notes down the specific Company matters which calls for voting by
members as well as the procedure of voting whether by a poll or through proxies.
12. Dividends and Reserves
The AOA also provides the distribution of dividends among the Shareholders of the
Company.

13. Winding Up
Winding up of the Company means the liquidation of all the assets of the
Company to pay its debt. The remaining monies left after the payment of all debt
and expenses are distributed among the shareholders of the Company. The AOA
also provides the provisions and procedure related to the Winding Up of the
company and has to proceed in accordance with the AOA.
Differentiate between articles of association and memorandum of
association.
Article of association
A company's articles of association (AoA, called articles of incorporation in some
jurisdictions) is a document which, along with the memorandum of association (in
cases where the memorandum exists) form the company's constitution, defines
the responsibilities of the directors, the kind of business to be undertaken, and the
means by which the shareholders exert control over the board of directors.

Memorandum of Association
The memorandum of association of a company is an important corporate
document in certain jurisdictions. It is often simply referred to as the
memorandum. In the UK, it has to be filed with the Registrar of Companies during
the process of incorporating a company.
Differentiate between AOA & MOA

The major differences between memorandum of association and articles of


association are given as under:
1. Memorandum of Association is a document that consists of all the data
essential for the incorporation of the Company. On the contrary, the
Articles of Association are provisions and rules set up the regulate and
govern the Company. The Company has to register the MOA at the time of
the incorporation of the Company. The Company is not bound to register
the AOA during the time of incorporation.

2. Memorandum of Association is defined in section 2 (56) while the Articles


of Association is defined in section 2 (5) of the Indian Companies Act 1956.

3. The Memorandum of Association restraints the powers of the organization


while the Articles of Association only demonstrate the rights, obligations
that the members of the organization are responsible to follow and adhere.

4. The Articles of Association is subordinate to the Memorandum which holds


the Supreme status in the hierarchy of the documents of the Company while
the Memorandum of Association must contain six clauses in total but the
Articles of Association can have clauses according to the decision of the
Company, given it does not go against the Companies Act, 2013.

5. The Memorandum specifies the objectives of the Company while the


Articles of Association specifies the rules through which the objectives are
to be fulfilled by the Company.

6. In any contradiction between the Memorandum and Articles regarding any


clause, Memorandum of Association will prevail over the Articles of
Association.

7. Any provisions of the AOA that goes against the Memorandum is rendered
invalid and the Memorandum of Association controls the Articles.

8. Memorandum of Association is obligatory to be registered with the ROC at


the time of registration of Company. As opposed to Articles of Association,
is not required to be filed with the registrar, although the company may file
it voluntarily.

9. Memorandum of association defines the relationship between company


and external party. On the contrary, Articles of association govern the
relationship between the company and its members and also between the
members themselves.

10. When it comes to scope, the acts performed beyond the scope of
memorandum are absolutely null and void. In contrast, the acts done
beyond the scope of articles can be ratified by unanimous voting of all
shareholders.

You might also like