Incorporation of a Private Company
Articles of Association
Meaning and purpose of Articles Articles of Association of the company contain rules, regulation and bye-laws for the general management of the company .It is compulsory to get the articles of associations registered along with the memorandum of association in case of a private company.
The articles of association constitute a contract between the company and its members and the members inter se. The Articles are subordinate to the Memorandum of Association. Therefore, the Articles should not contain any regulation, which is contrary to provisions of the Memorandum or the Companies Act. The Articles are binding on the members in relation to the company as well as on the company in its relation to members. However, this does not constitute a contract between the company and a third person
The articles of private company having share capital must specify the following conditions:
- The right to transfer shares shall be restricted according to Articles
- The maximum number of members shall be 50;
- The invitation to public to subscribe shares and debentures shall be prohibited.
In the case of a private company not having share capital the articles should contains provisions relating to matters specified in (b) and (c) above only.
Like the Memorandum of Association, the Articles should also be:
- Divided into paragraphs numbered consecutively
- Witnessed, and
Further, following points should be kept in view while drafting the Articles of Association of a Private Company---
- A private company, which is not, a subsidiary of a public company can provide for disqualification of directors on any grounds in addition to those, specified Section 274(1).
- A private company cannot issue share warrants to the bearer.
- A private company which is not a subsidiary of a public company may (notwithstanding the provision of Section 171) by its Articles provide-
- Its own regulation as regards the length of period of notice for calling meetings
- What the notice should contain and to whom it should be given;
- Its own rules as to quorum chairman, proxies, method of voting on demand for poll, right to poll etc.
- For computer printed Articles of Association, refer to para ‘ format and printing’ under heading Memorandum of Association.
Obtain Guidance of the Registrar
Before the Articles are presented to the Registrar for registration it is advisable to submit the draft memorandum and articles of the proposed company to the Registrar for his scrutiny and approval.
Execution of Articles of Association
The subscribers of the Memorandum of Association should also execute the Articles of Association giving the following particulars, namely
- Father’s /Husband Name
- Description including occupation
Witnesses The execution of the Articles of Association is required to be witnessed. One person can witness the signatures of all the subscribers. None of the subscriber can be a witness. The witnesses is/are required to give the following particulars in his/their own hand:
- Father’s /Husband Name
- Descriptions indicating occupation
The date of signing should be the date on which the Articles is stamped or any date after that. It should not be any date prior to stamping.
The date of signing should not be a date prior to the date of stamping