Companies Act Section 2(5) Articles

Understanding Articles of Association under Companies Act, 2013

Articles Section 2(5)

The term "Articles" refers to the Articles of Association of a company. These are a set of regulations or rules that govern the internal management, administration, and operations of a company. The Articles of Association are a vital document that, along with the Memorandum of Association, forms the constitution of a company.

Key Features and Contents of Articles:

1. Internal Regulations: The Articles define the rules and regulations for the internal affairs of the company, including:

Powers, duties, and responsibilities of directors and officers.

Conduct of meetings of directors and shareholders.

Issuance and transfer of shares.

Distribution of dividends and reserves.

Procedures for appointment and removal of directors.

Borrowing powers and financial management.

2. Flexibility: Companies have the flexibility to customize their Articles based on their specific needs and requirements. 

They can adopt Model Articles provided in the Companies Act or draft their own Articles, tailored to their business model and governance structure.

3. Amendment: The Articles can be amended through a special resolution passed by the shareholders of the company. 

Any alteration to the Articles must be filed with the Registrar of Companies (RoC) and becomes effective upon registration.

4. Public Access: The Articles, along with the Memorandum of Association, are publicly accessible documents. 

They provide transparency to shareholders, creditors, and other stakeholders about the internal rules and governance framework of the company.

Importance of Articles:

Governance: They establish a clear framework for the management and administration of the company, ensuring orderly conduct of business operations.  

Protection of Stakeholders: They safeguard the interests of shareholders, directors, and other stakeholders by delineating their rights, responsibilities, and obligations.

Legal Compliance: They ensure compliance with statutory requirements and provide a basis for resolving internal disputes and conflicts.