What is Articles of Association?

The Articles of Association definition refers to the written document which clarifies the guidelines on the operations of an organization as well as the purpose of the company. The document tells the purpose of the organization with a detailed explanation of how the goals are to be achieved. Whether it is the procedure for hiring directors or managing the financial record, articles of association give every instruction you must follow when working on the organizational objectives and management functions.

It is the Articles of Association that gives us the details of the manner in which the company’s operations are to be executed. The document contains every piece of information about the issuing of shares, managing voting rights, auditing financial documents, and paying dividends. The document is often considered as the business manual, after all, it specifies every step you must follow in order to accomplish your everyday projects in a timely and efficient manner.

The components included in different articles of association may not match always, but the generic clauses and other terms are the same. For example, each article of association, no matter how small or large the company is, will have the same clause for the company’s name, purpose, share Capital, provisions, and more.

Clauses in Article of Association

In Canada and America, people Call articles of association “articles” in short. While there are many clauses in the articles of association, the most popular ones are:

Company Name

Each company must be treated as an entity that has a unique name and is followed by a suffix that could be Ltd or Inc. The rules regarding the company’s name could vary depending on the state you are in. Words that might confuse people must be avoided. For example, temple, government, and other such formal words must not be included in the name of the company. Other than that, the jurisdiction could prohibit people from using other impolite words that could hurt the sentiment of people.

Purpose of the Organization

Articles of Association has a special section where the purpose of launching the organization is mentioned. Your state may accept the small-term for purpose, such as “management” or require you to provide the details clearly. You may have to mention the detailed purpose, such as “the management of corporate and informal events”.

Share Capital

The document also contains information about the total shares included in the company’s capital. It must also list different types of shares the company has issued. This may include the preferred shares, common shares, and more. There is a chance the company may never have to issue the shares at all, but if the need ever arises, they may issue the shares.

Organization of the Company

This section comprises the legal details of the company, including the board of directors, officers, location of the business, and so on. Your state may also make it mandatory for your business to have the details of the legal advisors and auditors mentioned in this part.