Company Articles of Association

Company Articles of Association

The Articles of Association are the principal constitutional document of joint-stock companies and serve as the identity document for commercial companies. They define the relationships among shareholders, the scope of authority of the general meetings and the board of directors, and the company’s internal governance framework. In this text, we address the Articles of Association, explain how they are drafted, and clarify the difference between the Articles of Association and the Articles of Partnership.

The Most Important Legal Points in Drafting the Articles of Association

The Articles of Association are the most important document of a joint stock company. All joint stock companies, whether public or private, are required to have Articles of Association. This document determines the powers of the general meetings and the board of directors, regulates the relationships among shareholders, and specifies matters such as allocation of profit and loss and the rules relevant to dissolution.

The Articles of Association reflect the intentions of the founders and the majority of shareholders, while the law also requires certain mandatory provisions. In practice, the Articles of Association are the document that gives the company legal credibility and structure. Matters typically addressed in the Articles include:

• The purpose of incorporation.
• The method of operation and the duties of members, the board of directors, the general meetings, and the statutory auditors.
• The number of directors, the method of election, the term of office, and the method of appointing replacements for directors who resign, die, become legally incapacitated, or are removed.
• The binding nature of the Articles on all members.
• The role of the Articles is to establish and confirm the company’s legal personality and identity, as well as to set the conditions and rules governing the company’s formation.

Difference Between the Articles of Association and the Articles of Partnership

The Articles of Association constitute the company’s identity document. They define the company’s core particulars, including name, subject matter, capital, purpose, directors, election procedures, duties, scope of authority, and replacement procedures in the event of death, incapacity, resignation, or removal. More generally, the Articles set out the company’s policies and operational framework, and all shareholders are bound to comply with them.

All companies must have Articles of Association, as explained in the relevant discussions on joint stock companies. By contrast, the Articles of Partnership are specific to limited liability companies, general partnerships, and proportionate partnerships. Joint stock and cooperative companies do not require Articles of Partnership.

The Articles of Partnership are a formal document prepared by two or more partners to form a commercial company. Under the Commercial Code, including Article 197, after formation of the company, a summary of the Articles of Partnership and its annexes must be submitted to the Ministry of Justice on the first day. This document is considered valid, and its contents are deemed to form part of the company’s constitutional documentation. It is printed by the Judiciary and made available to the Companies Registration Office and the organization responsible for registering deeds and properties. The founders are responsible for its preparation.

How to Draft a Company’s Articles of Association?

Drafting the Articles of Association requires familiarity with the document’s distinct parts. The following section outlines the key components.

Key Components of the Articles of Association

Pursuant to Article 8 of the Amendment Bill, the Articles of Association must include the following items:

• The company name.
• The company’s object or subject matter is explicitly and definitively stated.
• The company term.
• The registered head office and branch locations.
• The amount of capital, specifying cash and non-cash contributions.
• The number and characteristics of shares.
• The paid-up amount of each share and the method for calling the remaining nominal value, including the period within which it may be called, which must not exceed five years.
• The method of transferring registered shares.
• The method of converting registered shares into bearer shares and vice versa.
• The terms and procedure for bonds, if issuance is permitted.
• The terms and procedures for capital reduction and capital increase.
• The circumstances and procedure for convening general meetings.
• Rules on quorum requirements for general meetings and the manner in which they are administered.
• The number of directors, election method, term of office, and the method of appointing replacements in the event of death or resignation, or where directors become incapacitated, removed, or disqualified by law.
• The duties and scope of authority of directors.
• The number of qualifying shares required as security.
• The number of statutory auditors, the method of election, and their term of office.
• The beginning and end of the financial year.
• The deadline for preparing the balance sheet.
• Preparation of profit and loss accounts and submission to the annual general meeting and statutory auditors.
• The method of dissolution and the procedure for liquidation.
• The process for amendment of the Articles of Association.

Frequently Asked Questions About Company Articles of Association