Question

Mr. Zaheer has been longing to make his dream of starting a company a reality. For the purpose of floating a company it’s very much necessary to have an Articles of Association. Articles of Association is usually termed as the backbone of an organization. Think for instance you are Mr. Zaheer, in this situation how would you frame the Articles of Association for your company

Answer 1

The points to remeber while drafting a Article of Assocaition can be:

1) Company name
The name of a company should be stated in AOA as per the law inforce. If the company intends to use its company name in two or more languages, the names in other languages must be stated in the articles of association.

2) The Company’s place of business
A company may have its activities in several places and also abroad, but its registered place of business can only be in at one place. The company’s registered place of business is of significance, as the general meetings of shareholders generally need to be held in the registered place of business and any legal actions against the company need to be brought to the court's juridiction of registered place of business.

3) The Company's Object
The term "Object" refers to the fields in which the company carries on its business activity. Any activity, which may be pursued legally in the form of a company, can constitute the Company’s Object. A company can have several object, but they must all be registered. The definition of the object has legal significance when assessing the competence of the company’s organs to take care of company matters. Moreover, the object is of importance when evaluating the use of company assets. Definitions of the object, which are too narrow, can cause extra costs and inconvenience, as the expansion of the company’s activity requires for the articles of association to be amended correspondingly and for the changes to be registered with the Registrar of Company.

4) Share capital
The minimum amount of a company's share capital is in law, which shall be complied.

5) Nominal value and number of shares
If the nominal value is defined in the articles of association, all shares must have the same nominal value.

6) Number of members of the board of directors and auditors, or the minimum and maximum number thereof and their term of office may be stated in the articles of association. The number of the members may also be stated as a minimum or maximum amount. In genral, legally incompetent or bankrupt natural persons or a legal person cannot be members of the board of directors. In addition, the articles of association may include special provisions concerning the eligibility of a board member and a deputy member.

7) Other provisions
In addition to mandatory provisions, the shareholders may also quite freely include other provisions in the articles of association. The other provisions may not, however, contradict the mandatory principles provided by the law, e.g. by limiting the transferability of the shares in another way than by way as provided by law. These voluntary provisions may concern following matters:

• appointment of a managing director.
• the manner of calling the general meeting.
• nomination of the chairman of the general meeting or election of a director of the board.
• expansion of the scope of the tasks of the general meeting to cover e.g. decisions on transfers of or mortgage on fixed assets, or on floating charges.
• determination of the majority required for resolutions adopted by the general meeting above the ordinary.
• withdrawal of the decision power of the chairman in the event of equal votes so that the outcome may be determined.