Drafting of Articles of Association.

Articles, as a public document of the company, have evidentiary value in matters which involve dealing of the company with its own members or third parties. Any person outsider has constructive notice of the contents of Articles and expected to inspect before entering into any transaction with the company. Articles must be signed by the subscribers of the Memorandum and be registered along with the Memorandum. In case of drafting the articles for a public limited company limited by shares, the draftsman can follow the following alternatives: Adopt Table A in full; or Exclude Table A wholly and register own Articles suiting its requirements; or Register own articles and in addition thereto allow Table A to apply so far as it is not modified or excluded by the articles. Articles shall be divided into paragraphs numbered consecutively. This will help the company to alter the articles conveniently. Some important points which a draftsman should bear in mind while drafting the Articles are as follows: Share capital, its kinds, rights attached to different kinds of shares or any special privileges attached thereto should be considered and incorporated in Articles. Directors - appointment of directors, their noting rights, resignations, termination etc. should be given due consideration and their rights, powers and privileges should be incorporated in Articles. Proportional representations may also be looked into. In Government Companies, Joint Sector Companies, Joint Ventures with foreign companies, joint venture with Government Companies, the main terms of their partnership in share capital as well as the management of the affairs of the company with power and authority delegation are relevantly discussed in the Articles with scope and limitations thereto to avoid any misinterpretation. As far as possible, regulation given in Table A may be borrowed, even if it is not made applicable; so that Article may conform to the intent and spirit of law. Efforts should be made to make each article self-explanatory and self-interpretative to avoid misleading conclusions. Coherence and sequence of the contents should be maintained at any costs. Any items which are already mentioned in Memorandum and is to be mentioned in Articles, it is better that it is put in words such as 'as mentioned in Memorandum of Association' which will skip the requirement of altering Articles when Memorandum is altered. No provision which a company cannot do either as per Memorandum or Companies Act or any other law, should find a place in articles: e.g. expulsion of members. This is opposed to Company Jurisprudence and is ultra vires of the Act. Where the company would require assistance from financial Institutions, provisions is made for appointment of nominee directors, conversion of loans from financial institutions into equity etc. After drafting AoA a proper balancing should be done with Memorandum's contents, as to coverage, in consistencies with it, contradictions occurred etc. to enable proper modification in time. It is better to have an Article of an existing company in the same field of activity, either to modify it or at least to know the relevant matters which can be included in the Draft. Before printing it is better be shown to ROC and seek his informal approval.