The articles of association are the rules and regulations of a Company framed for the purpose of managing its affairs. They are distinguished from Memorandum in this that whereas the latter defines and formulates the fundamental conditions of the Companies Incorporation including the object or objects for which the Company is formed, the former merely lay down the various means and methods which the Company desires to adopt for fulfilling those conditions and for achieving those objects. As Browen, L.J. put in Guiness v. Land Corporation of the Ireland, “the memorandum contains the fundamental conditions upon which alone the Company is allowed to be incorporated.
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The articles are the internal regulations of the Company”. The articles generally provide for all matters of internal administration of the Company , e.g. the business of the company, the amount of the capital issued, the classes of shares into which it is divided and the rights of each of the respective classes rules as to making of calls as to the Companies lien , as to forfeiture of share, transfer of shares, alternation of capital, holding of meetings, voting at meetings, quorum, rules as to the numbers and appointment of directors and their powers as to declaration of dividends ,as to keeping of registered of members, as to accounts and audit etc.
ADVERTISEMENTS:
Some articles contain provisions as to the increase and reduction of share capital and also lay down the borrowing powers of the Company articles may authorize the issue of redeemable preference share, to consolidate shares into shares of larger amount to convert paid-up shares into stock and to reconvert stock into paid-up shares, to sub-divide shares into shares of small amount, to cancel shares not taken up or agreed to be taken up, to reduce its share capital, to keep share premium account and capital reserve fund. The articles may also authorize the Company to alter its Memo. so as to impose unlimited liability on directors and officers. When share or stock warrants are intended to be issued, power to do so must be reserved in the articles.