How to draft AOA for a company

Just like the MOA, the Articles of Association is also equally important. As the provisions of section 2 clause (2) defines an AOA means the by-laws and the statute of the company that administers the internal affairs and conduct of the company.

The companies which should have their own AOA are:

• Private companies limited by shares
• Companies limited by guarantee
• Companies with unlimited liabilities of its members

Points to be taken care of while drafting an AOA

• Companies who are required to have registered articles may or may not adopt all the regulations mentioned in table A of the first schedule of the act and those who fail to do the same the provisions of the table will be applicable to them.
• The companies who fall under the category of the limited by guarantee or unlimited liability will adopt the regulations of the table C, D, E of the schedule 1.
• Contents to be included in AOA are as follows:
  1. Exclusion wholly or in part of Table A
  2. Adoption of preliminary contracts
  3. Definitions
  4. Capital – Authorized / paid-up
  5. Allotment of shares, calls on shares, lien on shares
  6. Specific provisions pertaining to Preference shares, Debentures
  7. Transfer and transmission of shares, nomination, forfeiture of shares
  8. Share certificates, De-materialization
  9. Conversion of shares into stocks
  10. Voting rights and proxies
  11. Meetings and rule regarding Committee
  12. First Directors, Appointment of Managing Directors, Additional Directors, Secretaries and Managers
  13. Delegation of Powers to directors, remuneration to directors
  14. Meetings of Board, Committees of Board
  15. General Meetings
  16. Accounts, Audit, Borrowing powers, dividend and reserves
  17. Indemnity
  18. Winding up

• Alteration in articles of association- any company can amend the AOA according to the company’s memorandum but these amendments are subjected to certain limitations. These are:
  1. The alteration of any clause by the company should not lead to exceeding in the power set by the MOA and should not be inconsistent with the provisions of company’s act
  2. Any activity which is illegal or is opposing any public policy should not be included in the article.
  3. The alterations which are fraudulent in nature is liable to be challenged.