articles of association

Related Terms
British The internal rule book that every incorporated organization must have and work by. It forms a part of the constitution of an organization.

The articles of association are a contract (1) between the members (stockholders, subscribers) and the organization and (2) among the members themselves. It sets out the rights and duties of directors and stockholders individually and in meetings. Certain statutory clauses (such as those dealing with allotment, transfer, and forfeiture of shares) must be included; the other clauses are chosen by the stockholders to make up the bylaws of the organization.

A court, however, may declare a clause ultra vires if it is deemed unfair, unlawful, or unreasonable. A copy of the articles is lodged with the appropriate authority such as the registrar of companies. Articles are public documents and may be inspected by anyone (usually on payment of a fee) either at the premises of the organization and/or at the registrar's office. Lenders to the organization take special interest in its provisions that impose a ceiling on the borrowings beyond which the organization's management must get shareholders' approval before taking on more debt. The usual American term is articles of incorporation.

Email Print Embed