Meaning, Contents, Forms and Alteration of Articles of Association

• Lien on Shares

The AoA includes provisions regarding a company’s right of lien, which means the company can retain possession of shares belonging to a shareholder who owes money to the company. This right remains effective until the debt is cleared. It details the procedure for enforcing the lien, selling such shares, and notifying the concerned shareholder. This clause protects the company’s financial interest by providing a legal mechanism to recover unpaid dues from shareholders, particularly when shares have not been fully paid up and liabilities are pending.

• Transfer and Transmission of Shares

This part outlines the rules and procedures for transfer and transmission of shares. Transfer refers to a voluntary act by the shareholder, while transmission occurs due to death, insolvency, or legal incapacity. The AoA may impose certain restrictions on transferability in case of private companies. It ensures that shares are transferred legally and appropriately, protecting both the company and shareholders. This clause is particularly crucial in private companies where ownership is closely held, and unrestricted transfer could disturb the control structure.

• Alteration of Capital

This section contains provisions that allow the company to increase, consolidate, subdivide, convert, or cancel its share capital in accordance with the Companies Act, 2013. It provides flexibility for the company to reorganize its capital structure based on its financial needs and strategic goals. The AoA also details the procedure and approval requirements, such as board or shareholder resolutions, for capital alteration. These alterations must comply with the company’s authorized capital and require appropriate filings with the Registrar of Companies (ROC).

• General Meetings and Voting Rights

The AoA includes provisions related to the conduct of general meetings—Annual General Meetings (AGMs) and Extraordinary General Meetings (EGMs). It specifies the procedure for convening meetings, quorum requirements, notice period, and voting methods (show of hands, proxies, or polls). It also outlines voting rights of different classes of shareholders and how resolutions (ordinary or special) are passed. These provisions ensure orderly decision-making in the company and uphold the principles of corporate democracy by giving all shareholders a fair voice in important matters.

• Appointment and Powers of Directors

This part outlines the number, appointment, qualification, disqualification, and removal of directors. It defines the powers delegated to the Board, their responsibilities, and decision-making authority. It may include details on managing director roles, board meetings, and committee formations. By clearly defining directors’ powers and responsibilities, the AoA helps establish a governance framework that supports efficient company management and accountability. It also ensures that directors act in the best interest of the company and its stakeholders, within the legal boundaries of the Act.

Forms of Articles of Association:

• Table F – For Companies Limited by Shares

Table F is the model form of Articles of Association applicable to companies limited by shares. It contains provisions on share capital, calls on shares, transfer and transmission, meetings, voting rights, accounts, and winding up. A company may adopt it wholly or with modifications. If a company limited by shares does not register its own AoA during incorporation, Table F is deemed to be its AoA by default. It serves as a ready-made governance framework ensuring compliance with statutory norms and simplifying the incorporation process.

• Table G – For Companies Limited by Guarantee and Having Share Capital

Table G applies to companies limited by guarantee that also have share capital. This form contains rules concerning the management of guarantee members, issuance of shares, conduct of meetings, voting rights, and dissolution of the company. It combines features of both guarantee and share capital structures. Such companies are typically formed for non-profit purposes but may also require capital to carry out their objectives. Table G provides an ideal legal structure for such hybrid entities by balancing the rights of both members and shareholders.

• Table H – For Companies Limited by Guarantee Without Share Capital

Table H is applicable to companies limited by guarantee without any share capital. These are often non-profit organizations like clubs, charitable institutions, and professional associations. This form focuses on members’ guarantee obligations, governance procedures, meetings, and dissolution processes. Since such companies do not issue shares, the emphasis is on member duties and limited liabilities. Table H offers a simplified model for such entities, ensuring clarity in operations while aligning with the not-for-profit ethos and providing necessary legal and governance safeguards.

• Table I – For Unlimited Companies Having Share Capital

Table I serves as the model AoA for unlimited companies with share capital. It includes clauses related to share capital, dividend distribution, director appointment, and general meetings. Unlike limited companies, the members of an unlimited company have unlimited liability, meaning they are personally liable for the company’s debts. Table I provides a structured framework for such companies to conduct their operations while managing risk internally. It is suitable for businesses where close control and mutual trust among members reduce the need for limited liability protection.

• Table J – For Unlimited Companies Without Share Capital

Table J applies to unlimited companies that do not have share capital, such as professional firms or co-operative associations where members do not hold shares. It contains rules about membership, meetings, governance, and winding up. Since there is no capital involved, the emphasis is on mutual responsibilities, dispute resolution, and contribution obligations. Table J is suitable for private associations where members are personally committed to the organization’s goals and are willing to undertake full liability for its obligations, offering a simple operational structure.

• Customized Articles (Modified Forms)

Besides Tables F to J, companies may adopt customized Articles of Association to suit their specific business models. These articles can include unique clauses related to director rights, shareholding restrictions, dividend policies, and internal governance. The customized AoA must comply with the Companies Act and cannot override mandatory legal provisions. Such tailored AoAs are often used by startups, joint ventures, or closely-held companies to reflect agreed-upon shareholder arrangements. The Registrar of Companies (RoC) must approve the customized articles at the time of incorporation.

Alteration of Articles of Association:

1. Meaning of Alteration of Articles

Alteration of Articles of Association means making changes to the rules and regulations that govern the internal management of a company. These changes can include modifying, adding, or deleting any provision in the Articles. Such alterations must comply with the Companies Act, 2013, and must not contradict the Memorandum of Association (MoA). Alteration allows companies to adapt to changes in law, business environment, or ownership structure. It is a key aspect of corporate flexibility and enables companies to evolve with changing circumstances and strategic goals.