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Thread: Q. What are the articles of association of a limited public company can they altered?

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    Word Icon 35px Jpg.ashx Q. What are the articles of association of a limited public company can they altered?

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    Q. What are the articles of association of a limited public company can they altered? Discuss fully. (2003, 2004)
    1. Introduction:

    The articles of association is a document regulating the rights of the members of the company among themselves, and the manner in which the business of the company shall be conducted. the whole internal management of the company is dealt with in the articles. the articles are subordinate to the memorandum of association. it is subsidiary to the memorandum of association. no rule can be framed which is against the memorandum of association.
    2. Definition of articles of association:
    (i) General definition:

    The articles are the rules made by the company for the internal management of its affairs for carrying out the objects of the company.
    (ii) Companies ordinance 1948:
    Articles means the articles of association of a company as originally framed or as altered by special resolution including, so for as they apply to the company, the regulations, so for as they apply to the company, the regulations contained in table a in the first schedule annexed to companies ordinance.
    3. Contents of articles of association:
    (i) Share capital and its division into various classes.
    (ii) Rights regarding the different classes of shares.
    (iii) Calls on shares.
    (iv) Lien on shares.
    (v) Issuance of share warrants.
    (vi) Rules regarding underwriting commission.
    (vii) Transfer and transmission of shares.
    (viii) Procedure for winding up of the company.
    (ix) Rules in respect of issue of debenture.
    (x) Limitation of nature of contract terms and conditions.
    (xi) Convertion of shares into stock.
    (xii) Extent of borrowing powers.
    (xiii) Proceeding of disposing of resolution.
    (xiv) Rules relating to forfeiture of shares.
    (xv) Alteration of capital.
    (xvi) Declaration of divident.
    (xvii) Common seal of the company.
    (xviii) Account and audit.
    (xix) Rules regarding length of notice, quorum etc.
    (xx) Rules regarding power, duties, remuneration of managing agent.
    (xxi) Voting rights of share holder.
    4. Registration of articles:
    It the case of company limited by shares, article signed by the subscribers to the memorandum may be registered.
    (i) In case of non-registration:
    If no articles are registered, table a in the first schedule applies.
    5. Form of article of association:
    Articles of association shall be
    (a) Printed,
    (b) Divided into paragraphs numbered consecutively,
    (c) Signed by each subscriber of the memorandum of association who shall add his address and description in the presence of at least one witness who must attest the signature.
    6. Power to alter the articles of association:
    Company has power to alter the article of association.
    7. Procedure to alter:
    Company can alter the articles of association by passing a special resolution in accordance with section 278 of the companies ordinance 1984.
    8. Limitations:
    Following are the limitations of alteration of articles of association.
    (i) Articles cannot be altered in general resolution:
    Articles of association can not be changed by general resolution.
    (ii) Fraud can not be constituted:
    The alteration made in the articles of association should not constitute a fraud on minority.
    (iii) Cannot conflict with the memorandum of association:
    The alteration made in the articles of association should not conflict with the memorandum of association because it is always subordinate to it.
    (iv) Bona-fide:
    The alteration should be made bona fide for benefit of the company as a whole so it cannot be made against the benefits of the company.
    (v) Not to contain illegal thing:
    The alteration can not contain any thing illegal.
    (vi) Not against any provision of companies ordinance:
    The alteration in the articles of association cannot contain any thing which is against any provision of the companies ordinance 1984.
    (vii) Not to commit a breach of a contract:
    The alteration should not enable the company to commit a breach of a contract with an outside.
    9. Articles not to be made unalterable:
    A company cannot restrict or deprive of its statuary power to alter its articles of association either by a statement in the articles or by a contract that they shall not be altered. a provision depriving the company of its power to alter the article is void.
    10. Legal effect of alteration in articles:
    Generally, the alteration in the articles are regarded as having retrospective effect.
    11. Conclusion:
    To conclude i can say that the articles of association are the regulation or (by-Laws) which govern the internal organization and conduct of a company. it is a legal document. it must be printed and divided into paragraphs. this document must be signed by the share holders. the company can alter articles of association by passing a special resolution as laid down in the companies ordinance.

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