The articles of association might sound like something out of a history or high school civics class, and in a way they are.
For companies, they act almost like a constitution or user’s manual, and they help to show off the company’s regulation and purpose for itself.
It lays out how tasks are done, how people get appointed, and how everything gets handled.
But there’s really no one size fits all answer to the ‘what are articles of association’ question, as each set of articles tends to be different depending on the business that they were written for.
However, despite those differences, there are some similarities that can be picked out to give us a clearer answer.
Every single company has things that they need to do each day, as well as a mission that they need to follow.
Some of these tasks include giving out shares and dividends, auditing financial records, and conducting shareholder meetings.
The articles are what tell the company how to do those things and act as a guidebook.
Additionally, the articles of association restate the company’s purpose, name, the organization of the company, and the amount of share capital that it possesses.
Both of these are the two simplest things that can be found in the articles of association.
The company name must be written out clearly, and follow all the rules of the jurisdiction that the company finds itself in.
Additionally, the purpose of the company, or the reason it was created, will need to be shared as well.
Once again, depending on the jurisdiction, the company’s purpose can either be vague or will need to be very specific.
However, it will have to be in there and stated clearly.
The amount and types of share capital that is inside the company’s capital always must be inside the articles of association.
Typically this includes common shares and preferred shares, and while they cannot be issued regularly, they can be issued during times of need whenever that need arises.
But they can only be issued if the need presents itself, and they must be listed in the articles of association.
Speaking of shares, the rules and provisions for the annual shareholder meetings that the company creates will be listed here in detail.
Everything about notices, votes, resolutions, and how the meeting should be conducted will end up here.
Finally, the way that the company is organized will be listed here.
Some of the information provided will include the address of the company, the number of officers and directors, the names of the company’s founders and shareholders, and even the names of legal advisors and auditors.
Whenever a company is ready to be formed, then the person or people in charge will pick a name and say what the purpose of their company is.
Once it is registered, then they will typically refer to an accountant, lawyer, or perhaps both to make sure that they understand how the company will grow and what it might look like in the future.
Once everything is finalized, the personal information of the directors and the address of the business are placed down.
Then things can stay as they are until changes need to be made.
Perhaps the company is moving to a new address, or the structure of the business has changed.
If that happens, then the directors can show their approval and of the change, and they will need to hold a board meeting and a meeting with the shareholders to get the proposed changes approved.
This typically means a 75% vote for the new changes, and then the new articles get sent to the companies house.
Aside from showing off all the rules that a company needs to abide by, it’s also a contract membership between the shareholders of the company and the company itself.
The shareholders can elect a board of directors and must meet at annual general meetings to go over decisions and proposed changes to the company.
The Articles of Association show off the rules and regulations for these meetings.
They are especially useful if a director suddenly leaves their position, and someone new has to take the reins and handle the company.
Certain companies must file their own articles of association, with their own restrictions.
These include unlimited companies, companies limited by guarantee, and private companies limited by shares.
Unlimited companies must have the number of their employees and the share capital they have in their document, companies that are limited by guarantee must have the number of members they will register the company too, and private companies need to have a law against transferring shares, only 50 members, and give no share purchases to the public.
But every company should have articles of association, even if it is nothing more than a glorified manual.
Simply having the purpose of your company, the number of shares you have, and how everything is organized written down can be a benefit if things start to go astray.
There are two places where your business will need to keep its articles of association.
The first is at the Companies House, where it can be viewed by the public.
Anytime you make any changes to the articles of association, you will need to send a revised copy to the Companies house so both versions can be up to date.
Additionally, you are required to keep a copy of your business address on hand.
The Articles of Association might seem like a big and confusing mess, but they are an important part of your business and you will need to create them as soon as you can.
Then, you’ll have everything you need in one place, and when someone asks you ‘what are articles of association’ then you can just take yours out and show them.
Need guidance and professional help both forming and handling your company’s articles of association?
Register your business in Hong Kong with Air Corporate and our experts in company formation and registration will straight out your articles of association as well as the plentiful other documents you need.
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