Articles of association (AoA), also sometimes called articles of incorporation (AoI) in some regions, are like a company's rulebook. It's a legal document that outlines the core aspects of how the company operates.
When forming a company, the founders choose a name, define the company’s purpose, and draft the AoA with the help of professionals. Any changes to the AoA require approval from the board and shareholders, typically through a 75% vote.
Beyond establishing operational rules, the AoA serves as a contract between the company and its shareholders. It governs the relationship between them, especially during board meetings, changes in leadership, or when disputes arise.
All companies incorporated under Hong Kong's Companies Ordinance are required to have AoA. This includes private and public companies, companies limited by shares, and companies limited by guarantee. The AoA must cover the company’s name, purpose, capital structure, and governance procedures.
The articles of association might sound like something out of a history or high school civics class, and in a way, they are.
For a private company, they act almost like a constitution or user's manual, and they help to show off the company's regulations and purpose for itself.
These articles are often based on a standardized format known as "model articles."
It outlines 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 question of what articles of association are, as each set of articles tends to be different depending on the business for which they were written.
However, despite those differences, there are some similarities that can be picked out to give us a clearer answer.
What Is in the Articles of Association?
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.
The Name and Purpose
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.
Once again, depending on the jurisdiction, the company's purpose can be vague or very specific.
However, it will have to be in there and stated clearly.
Share Capital
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.
Shareholder Meetings
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.
The Company's Organization
Finally, the way that the company is organized will be listed here.
This section outlines the company's management and administrative structure, which includes details like:
- Registered office address
- Number of officers and company directors
- Names of the company's founders (if publicly available)
- Names of the company's shareholders (if publicly available)
- Names of legal advisors and auditors (if publicly available)
Forming the Articles Of Association
Whenever a company is ready to be formed, the person or people in charge will pick a name and say what the purpose of their company is.
Once registered, they will typically consult an accountant, lawyer, or perhaps a company secretary 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 business address are recorded.
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 of the change, and they will need to hold a board meeting and a general meeting with the shareholders to get the proposed changes approved.
This typically means a 75% vote for the new changes, and any legal statement signed to reflect these changes is also filed with the Companies House.
What Do the Articles of Association Do?
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.
What Companies Must File Articles of Association?
In Hong Kong, all companies incorporated under the Companies Ordinance are required to have Articles of Association.
This requirement applies to all types of companies, including private companies, public companies, companies limited by shares, and companies limited by guarantee.
While there are no longer separate filing requirements based on company type, the Articles of Association should still specify the following:
- The company's name and purpose
- The company's capital structure, including the types and amounts of shares it can issue
- Internal governance procedures, such as rules for conducting shareholders' meetings and appointing directors
While having Articles of Association is not mandatory, it is a highly recommended practice for any company.
They serve as a comprehensive and documented guide for the company's purpose, structure, and operation, which can prove invaluable in times of disagreements or unforeseen circumstances.
In such situations, the Articles of Association act as a binding legal document, providing a clear reference point to resolve disputes.
Where Do We Find the Articles of Association?
There are two places where your business will need to keep its articles of association.
These Articles of Association and other essential documents should be kept safe and up-to-date.
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.
Understanding the Articles
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 possible.
With Air Corporate, you'll have the convenience of having all your necessary documents in one place. So, when someone asks you, “What are articles of association?” You can simply take yours out and show them without the hassle of searching through multiple files.
Need guidance and professional help forming and handling your company's articles of association?
Register your business in Hong Kong with Air Corporate, and our company formation and registration experts will straight out your articles of association and the many other documents you need.
