Articles of Association

Articles of Association

What are the statutes?

The statutes are a document which specifies the operating rules of a company and defines the object of the company. The document describes how tasks are to be accomplished within the organization, including the process for appointing directors and handling financial records.

Key points to remember

  • The statutes can be considered as a user manual for a company, defining its object and describing the methodology for accomplishing the necessary daily tasks.
  • Although the content and conditions may vary depending on the jurisdiction, the articles of association generally contain provisions on the name of the company, its object, the share capital, the organization of the company and the provisions relating to shareholders’ meetings.

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Articles

Understanding the statutes

Bylaws often identify how a company will issue shares, pay dividends and control financial records and the power to vote. This set of rules can be thought of as a user manual for the business as it describes the methodology for accomplishing the daily tasks that need to be accomplished. Although the content of the articles of association and the exact terms used vary from one jurisdiction to another, the document is quite similar everywhere and generally contains provisions on the name of the company, the object of the company, the share capital, the organization of the company and the provisions concerning the shareholder meetings.

Company Name

As a legal entity, the company must have a name which can be found in the articles. All jurisdictions will have rules regarding company names. Usually, a suffix such as “Inc” or “Ltd” should be used to show that the entity is a business. In addition, certain words that could confuse the public, such as “government” or “church”, cannot be used or should be used only for specific types of entities. Offensive or obnoxious words are also generally prohibited.

Object of the company

The reason for the creation of the company must also be mentioned in the statutes. Some jurisdictions accept very broad objectives – “management”, for example, while others require more detail – for example, “the operation of a wholesale bakery”.

Share capital

The number and type of shares making up the capital of a company are mentioned in the articles of association. There will always be at least one form of common stock that constitutes the capital of a business. In addition, there may be several types of preferred shares. The company may or may not issue the shares, but if they appear in the articles of association, they can be issued if and when the need arises.

A business may or may not issue shares, but if they are listed in the articles, shares may be issued if and when necessary.

Business organization

The legal organization of the company, including its address, the number of directors and officers, as well as the identity of the original founders and shareholders, can be found in this section. Depending on the jurisdiction and type of business, auditors and legal counsel for the business may also be included in this section.

Shareholder meetings

The provisions relating to the first general meeting of shareholders and the rules which will govern subsequent annual meetings of shareholders, such as notices, resolutions and votes, are detailed in this section.

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