Articles of Association

Articles of Association

Articles of Association are an internal corporate document that defines a company’s purpose, governance rules, and operational procedures. They function as the company’s rulebook, covering how the business is managed, how decisions are made, and how ownership is structured.

Key takeaways

• Define the company’s name, purpose, and legal form.
• Specify share capital, types of shares, and how shares may be issued.
• Set out corporate governance: directors, officers, and their appointment/removal.
• Describe shareholder rights, meetings, voting procedures, and dividend policy.
• Can be amended according to the procedures set out in the articles.

Core components

Articles of Association typically include the following sections:

• Company name
• The legally registered name, often with a suffix that indicates its form (e.g., Ltd., Inc.).
• Company purpose
• A statement of the business activity or a broader description of permitted activities.
• Share capital and share types
• Number and classes of shares (common and any preferred classes), and rules for issuing or transferring shares.
• Legal and governance structure
• Registered address, number and roles of directors and officers, and founder/original shareholder details.
• Shareholder meetings and voting
• Procedures for convening initial and annual general meetings, notice periods, quorum, resolutions, and voting rights.
• Financial records and audits
• Requirements for maintaining accounts, auditing, and reporting.
• Amendments and procedural rules
• How the articles themselves can be changed and what approvals are required.

Practical example for small businesses

When forming a small company, founders typically:
1. Choose a company name and define the business purpose.
2. Consult legal and financial advisers to draft the Articles of Association.
3. Register the company with the appropriate state or national authority.
4. Decide whether to issue shares and, if so, define share structure in the articles.
5. Record directors’ details and the initial governance arrangements.
Changes to the articles are made following the amendment procedures specified within the document.

How Articles of Association differ from related documents

• Articles of Incorporation (or Certificate of Incorporation): A formal document filed with a government authority to create a corporation legally. It typically contains the company’s name, registered address, agent for service, and basic stock information.
• Articles of Organization: The state-level filing used to form a limited liability company (LLC).
  In short, Articles of Association govern internal rules and corporate governance; Articles of Incorporation/Organization create the legal entity with the state.

Who prepares the Articles

Founders prepare the Articles of Association, usually with help from lawyers, accountants, or other advisers to ensure compliance with applicable laws and to align governance with business objectives.

Bottom line

Articles of Association are the foundational internal rules for how a company operates. They define the company’s purpose, ownership structure, governance procedures, and the mechanics of shareholder decision-making. Drafted at formation and amended as the business evolves, they provide the legal and practical framework for corporate management.