The Article of Association (AoA) were clearly defined and laid down in Ashbury Railway Carriage Co. vs. Riche
[(1875) LR 7 HL 653]. “The Article of Association are subsidiary to the Memorandum of Association(MoA). The AoA define the duties, the rights and the powers of the governing body as between themselves and the company at large, and the mode and form in which the business of the company is to be carried on, and the mode and form in which changes, from time to time, in the internal regulations of the company may be made”.
The AOA (Article of Association) of a company consists of the norms, bye-laws, rules, and regulations for the management of internal affairs and of a Company. It has rules for the proper governance of the Company. Thus they define how the Board of Directors, individual directors, employees, etc. must conduct themselves in the management of the company.
Articles of Association (AOA), are one of the mandatory documents required to be submitted to the registrar’s office during the initial steps for company registration. All types of companies require Articles of Association. Articles of association along with the Memorandum of Association, together with outline the constitution of the Company.
AOA also acts as guidelines for the directors of the Company, stating their authority and duties. They are also relevant to potential investors as they set out the rules and regulations of the Company.
The articles of association, much to the satisfaction of the shareholders, places restrictions on the company’s powers. This ensures that the directors won’t make investments without consulting the shareholders.
In Naresh Chandra Sanyal vs Calcutta Stock exchange Association Ltd (AIR 1971 SC 422), the Supreme Court said that “the articles of association also establish a contract between the company and the members and between the members inter se. This contract governs the ordinary rights and obligations incidental to membership in the company”.
The Articles of Association are very important for the functioning of various organizations. Any act or decision in conflict with the articles of association can be declared as ultra vires and hence void. Also any act or decision contrary to the Articles of association Companies Act, 2013 are automatically void.