Articles of Association

The Articles of Association (AOA), dealt with in Section 5 of the Companies Act, 2013, are the company's internal rule-book. Where the Memorandum fixes what the company may do and defines its relationship with outsiders, the Articles lay down how the company conducts its day-to-day affairs and regulate the relationship between the company and its own members, and among the members themselves. The Articles typically cover matters such as the issue and transfer of shares, calls and forfeiture of shares, the appointment and remuneration of directors, the conduct of meetings and voting, the declaration of dividends, accounts and audit, and the procedure for winding up.

The Articles are always subordinate — both to the mandatory provisions of the Companies Act, 2013 and to the company's own Memorandum of Association. Any article that conflicts with either is invalid to that extent. This subordination also affects what happens when the company acts beyond its Articles but still within its Memorandum: such an act is merely irregular, and — unlike an act that is ultra vires the Memorandum itself — it can be ratified by the members, because it has not exceeded the company's actual legal capacity, only departed from its own internal procedure.

Memorandum of Association vs. Articles of Association — at a glance