Q.Define the Articles of Association of a company. What role do they play in its internal management?

The Articles of Association are the document that lays down the rules for a company's internal management, distinct from the Memorandum, which defines the company's powers towards the outside world.

They must always remain consistent with the Memorandum and the Act, and, under Section 10, bind the company and every member as if separately signed and covenanted.

Meaning. The Articles of Association (AOA) are the second charter document of a company, coming after the Memorandum of Association in the hierarchy of a company's constitutional documents. Section 2(5) of the Companies Act, 2013 defines "articles" as 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 — a definition that deliberately allows for change over the company's life.

Role in internal management. Where the Memorandum fixes the company's name, objects, and its dealings with the outside world, the Articles govern how the company conducts its own affairs internally — the allotment and transfer of shares, the conduct of general meetings and Board meetings, the appointment and removal of directors, and the declaration of dividends. A company limited by shares is free to draft an original set of Articles, or to adopt Table F, the model articles prescribed under Section 5 and Schedule I, either wholly or with modifications.

Binding effect. Section 10 of the Act provides that the registered Articles bind the company and every member to the same extent as if each member had separately signed them and covenanted to observe their provisions — a statutory contract, though one that remains subordinate to the Memorandum and to the Act, so that any provision of the Articles that conflicts with either is void to that extent.

A student answering this question in a Gujarat board Std 11 Secretarial Practice examination should anchor the definition in Section 2(5) and go on to explain the subordinate relationship the Articles bear to the Memorandum.

Students often describe the Articles as 'the same as the Memorandum' or reverse the two — remember Memorandum = powers to the outside world, Articles = internal rulebook.