Home > Topics > Business Organisation and Management > Articles of Association (AoA) – Meaning & Contents

Articles of Association – The Operating Manual! 📖⚙️

Imagine: You bought a new smartphone.

Box contains:

  1. Phone (the company itself)
  2. Warranty card (MOA - what it CAN do)
  3. USER MANUAL (AOA - HOW to use it!)

AOA = User Manual for Companies!

What is AOA?

Articles of Association (AOA) = Company's internal rulebook defining:

  • How to conduct meetings?
  • How to elect directors?
  • How to issue/transfer shares?
  • How to distribute dividends?
  • Basically, HOW the company operates day-to-day!

Legal definition: "Regulations for the internal management of the company's affairs."

Simple version: "The family's house rules!" 🏠

MOA vs AOA - The Dynamic Duo!

Think of starting a restaurant:

MOA = "We will run a restaurant serving Indian cuisine in Mumbai"

  • WHAT you'll do
  • WHERE you'll do it
  • Your PERMISSION slip

AOA = "Kitchen opens 10 AM, chef reports to manager, bills paid every Friday"

  • HOW you'll operate
  • INTERNAL procedures
  • Daily workflow

Another analogy:

  • MOA = Marriage certificate (defines the relationship!)
  • AOA = Household rules (who does dishes, who pays bills!) 😄

Is AOA Compulsory?

Answer: Depends!

Public Company: YES! Mandatory! ✅

Must file AOA with MCA during incorporation.

Private Company: Can adopt "Table F" (standard format)

Table F = Ready-made AOA provided by Companies Act, 2013

Like: Government gives you a template, just fill in blanks!

Or: Draft your own custom AOA (most companies do this for flexibility)

What's Inside AOA? (Main Contents)

1. Share Capital & Shares 📊

Rules about:

  • Different classes of shares (Equity, Preference)
  • Rights attached to each class
  • Issue procedure (how to offer new shares)
  • Transfer procedure (how shareholders sell shares)
  • Forfeiture (when company takes back shares for non-payment)

Real Example - Reliance:

AOA might say:

  • "Equity shares have voting rights (1 share = 1 vote)"
  • "Preference shares get fixed 8% dividend yearly"
  • "Share transfer needs Board approval" (for Pvt Ltd)

Cool fact: Alphabet Inc. (Google's parent) has Class A, Class B, Class C shares!

  • Class A: 1 vote per share (public holds these)
  • Class B: 10 votes per share (founders hold these!)
  • Class C: 0 votes!

(Founders maintain control with fewer shares! Smart! 🧠)

2. Directors 👨‍💼

Rules about:

  • How many directors? (Min-Max)
  • How to appoint/remove directors?
  • Directors' powers
  • Directors' meetings frequency

Example AOA clause:

"Minimum 3, Maximum 15 directors. Board meetings every quarter. Quorum: 1/3rd of directors or 2, whichever is higher."

TCS example:

  • Has 10-12 directors typically
  • Mix of executive + independent directors
  • Board meets every quarter

3. Meetings 🪑

Types of meetings:

Board Meetings: Directors meet

  • AOA specifies: Frequency (quarterly?), Quorum, Voting procedure

General Meetings: Shareholders meet

  • AGM (Annual General Meeting) - Compulsory yearly
  • EGM (Extraordinary General Meeting) - When needed urgently

Real drama - Tata Sons vs Cyrus Mistry (2016):

What happened:

  • Tata Sons wanted to remove Cyrus Mistry as Chairman
  • Called EGM (as per AOA procedure!)
  • Voted him out!

Mistry fought: "Removal was wrong!"

Courts checked: Was AOA followed properly? YES! So removal valid! ⚖️

Lesson: AOA rules are LAW inside the company!

4. Dividends 💵

Rules about:

  • How to declare dividends?
  • Who approves? (Board recommends, shareholders approve)
  • Interim vs Final dividends
  • Unclaimed dividends

Example:

"Company may declare dividends from profits. Interim dividends may be declared by Board. Final dividends need shareholder approval at AGM."

Infosys policy (from AOA):

  • Quarterly interim dividends allowed
  • Final dividend at year-end
  • Unclaimed dividends transferred to govt after 7 years!

5. Accounts & Audit 📒

Rules about:

  • Financial year (April-March in India usually)
  • Auditor appointment procedure
  • Books of accounts maintenance

Example:

"Financial year: 1st April to 31st March. Auditors appointed at AGM for 5-year term."

6. Borrowing Powers 💳

How much can company borrow?

AOA might say:

"Board can borrow up to 2x of paid-up capital without shareholder approval. Beyond that, need special resolution."

Example:

  • TCS paid-up capital: ₹25,000 crores
  • Can borrow up to ₹50,000 crores without asking shareholders!
  • More than that? Call shareholder meeting!

Why this rule? Prevents directors from taking CRAZY loans! 🛡️

7. Winding Up (Closure) 🚪

How to close the company?

Voluntary winding up procedure:

  • Special resolution (75% votes)
  • Appoint liquidator
  • Settle debts
  • Distribute remaining assets to shareholders

Remember Kingfisher Airlines?

  • Stopped flying in 2012
  • Officially wound up following AOA procedures
  • Creditors first, shareholders got... nothing! 😢

Table A to Table F - The Ready-Made AOAs

Companies Act provides standard formats:

TableFor Which Company Type?
Table FCompany Limited by Shares (Most common!)
Table GCompany Limited by Guarantee (NGOs)
Table HUnlimited Company
Table IPrivate Company
Table JOne Person Company (OPC)

Most startups: Use Table F as base, customize as needed!

Like: Government gives you a recipe, you add your own spices! 🌶️

Altering AOA - Much Easier Than MOA!

How to change AOA?

Simple!

  1. Pass special resolution (75% votes)
  2. File Form MGT-14 with MCA within 30 days
  3. Pay fees
  4. Done! ✅

Example - Flipkart:

  • Started as Pvt Ltd (max 200 shareholders in AOA)
  • Before Walmart acquisition, amended AOA multiple times
  • Changed dividend policies, director powers, etc.

No court approval needed! (Unlike MOA)

Why easier? AOA = Internal rules. As long as shareholders agree, you can change!

MOA vs AOA - Final Comparison

AspectMOAAOA
NatureCharter/ConstitutionBylaws/Rules
ScopeExternal (company vs world)Internal (company's operations)
PurposeDefines powers & objectivesDefines procedures & rules
Compulsory?YES for allYes for Public, Optional for Private
ChangingVery difficult (court approval often needed)Easier (just special resolution)
DoctrineUltra Vires appliesNo Ultra Vires
RelationshipDominant (boss!)Subordinate (must follow MOA)

Conflict rule: If MOA & AOA clash → MOA wins!

Example:

  • MOA says: "Can't borrow more than ₹100 crores"
  • AOA says: "Can borrow ₹200 crores"
  • Who wins? MOA! AOA's clause is VOID!

Real-Life Drama: When AOA Saved the Day!

Case: Automatic Self-Cleansing Filter Syndicate Company

Background: Company's AOA said directors can sell assets with shareholder approval

What happened:

  • Directors wanted to sell company's main asset
  • Shareholders at general meeting rejected!
  • Directors sold anyway! 😱

Shareholders sued: "AOA says we must approve! Sale is illegal!"

Court verdict:

  • Checked AOA → YES, sale needs shareholder approval
  • Directors violated AOA
  • Sale declared VOID!

Lesson: AOA protects shareholders from rogue directors! 🛡️

Quiz Time! 🎯

Test Your Knowledge

Question 1 of 6

1. AOA stands for:

Association of Accounts
Articles of Association
Annual Organization Audit
Authorized Official Accounts

💡 Final Wisdom: "MOA tells you WHAT game you're playing (cricket/football). AOA tells you the RULES of that game (Leg Before Wicket, Offside, etc.). Can't play without knowing both!" 🏏⚽📖

Next up: Prospectus - The corporate world's biggest advertisement! When companies say "Buy our shares, we're awesome!" 📣💰

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