Article of Association of Company is a document which is termed as the constitution of the company. The other document with the same position is Memorandum of Association.
As per Companies Act, 2013, AOA governs the running of company. Also, it governs setting out voting rights of shareholders, conduct of shareholders’ and directors’ meetings, powers of the management. The articles contain regulations for internal affairs and management of company.
The AOA defines the responsibility of directors, the type of business to be undertaken by the company, the internal rules of corporate governance of the company etc.
PROCEDURE OF AMENDMENT TO AOA
The company can amend its Article by way of addition, deletion, modification, substitution, or in any other way.
As per the procedure under section 14 of the Companies Act, 2013 the amendment can be done as follows:
(1) At the first, the company must convene a board meeting by giving notice of atleast seven days.
(2) Then, in the meeting the approval of the amendment of AOA has to be taken. Then, the date, time and venue of the general meeting are fixed. The director is also given the responsibility of sending notices to the members.
(3) Now, when the general meeting is convened a special resolution has to be passed for the alteration in the Articles of the company.
(4) Then, they have to file Form No. MGT-14 which contains filing of resolutions and agreements to Registrar under section 117 with Registrar along with filing within 30 days of passing of special resolution,
The given documents have also to be filed:-
- Certified True Copies of the Special Resolutions along with explanatory statement
- Copy of the Notice of meeting send to members along with all the annexure
- A printed copy of the amended Article of Associations.
(5) Registrar will then register the amendment and issue certificate which will act as conclusive evidence of the fact that all requirements with respect to the alteration have been duly complied with.
The alteration shall be complete and effective only on issue of certificate by Registrar.
(6) Company by its special resolution can amend its article which includes conversion of Public Company into Private Company. In order to effect such conversion application shall be filed in Form No. INC 27 with fee.
No conversion of public into private company shall take effect unless it is approved by central government.
(7) If the conversion is approved by Central Government, the printed copy of such approval shall be filed in Form No. INC 27 with Registrar of Company. This approval shall be filed within a month of date of receipt of order of approval.
JUDICIARY AND AMENDMENT
In Walker v. London Tramway Co[1], it was said that “The right to alter articles is so important that company cannot in any manner, either by express provision in articles or by any independent contract, deprive itself of powers to alter its articles.”
In All India Railway Mens Benefit Fund v. Jamadar Baheshwarnath Bali[2], the court held that the alteration must not constitute fraud on minority by a majority of shareholders. If alteration is not for benefit of company as a whole, but for majority of the shareholders, then alteration would be bad.
An alteration to articles must not discriminate between majority shareholders and the minority shareholders so as to give majority an advantage over minority.
Also, in Mathrubhumi Printing & Publishing Co. Ltd. v. Vardhaman Publishers Ltd.[3], High Court of Kerala held that no majority shareholders can, by altering article retrospectively, affect, the prejudice of consenting owners of shares, the right already existing under a contract nor take away right accrued.
References-
[1] (1879) 12 Ch. D. 705
[2] (1945) 15 Com Cases 142 (Nag.)
[3] (1992) 73 Com Cases 80 (Ker.)
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