Internal rules and regulations that govern the company’s operations and relationship between shareholders are defined by Article of Association. These consist of guidelines for directorship, general meeting, management of share capital and rights and responsibilities of members.
Key Components of Articles of Association
- Incorporate clauses covering voting entitlements, decision authorities, dividends, capital management and share transfer policies
- Delineate matters like board composition, quorum rules, winding-up contingencies and amendments procedures
- Incorporate optional provisions depending on organization type (e.g. private versus public company articles)
- Require unanimous shareholder consent for most substantive constitutional alterations
Example Usage of Articles
When a startup encountered intra-shareholder disputes amid expansion plans, counsel reviewed the articles of association to verify respective parties’ decision rights and mediation avenues under the governing charter.
Key Takeaways
As the primary governing document for incorporated businesses, comprehensive and prudently drafted articles establish an effective constitutional framework balancing operational dexterity with adequate shareholder protections.