Feb Sat 2019

Team Simplebooks

How to Draft Your Company’s Articles Of Association – The Complete Guide

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When you’re registering your private limited company in Sri Lanka, one of the main tasks you will have to do is to hand in your Articles of Association. 

For most first-time entrepreneurs, this is a completely new concept – and that’s perfectly normal. 

You wouldn’t come across this term unless you’re registering your Limited Company in Sri Lanka. 

So, you might find yourself asking: What are ‘Articles of Association’ and what do they exactly do?

Well, that’s exactly what we’re here to talk about today. 

In this article, we’ll be covering all about the topic at hand so keep on reading! 

What are the Articles of Association?

Think of this as a document that tells the Registrar of Companies and everyone else what your company is all about. 

It will usually cover:

  • Objectives of the new company 
  • Rights and obligations of the shareholders 
  • The management and administration 

Sri Lankan law (specifically the Companies Act no 07 of 2007) dictates that every company has to prepare a set of Articles of Association when registering. This includes private limited companies, public limited companies, etc. 

So, once you submit your Articles, the registrar will have an idea about the structure, functions and operational methods of your newly registered company.

It’s basically your organization’s user manual if you think about it. 

Let’s now take a look at how you can create your Articles of Association. 

How do you draft your company’s Articles of Association in Sri Lanka?

Before we talk about how you can draft your articles, we first need to tell you what your articles will include.

What will your Articles of Association consist of?

Your Articles of Association will be made up of a few ‘clauses’. They’re basically a set of paragraphs that will each talk about a unique and important part of your company. 

These clauses are divided into:

  • The company name 
  • The purpose of the company 
  • The organization 
  • Shares and shareholders
  • Meetings 
  • Director/s and Secretary  
  • Accounts, audits and indemnity
  • Miscellaneous 

However you draft your articles, it should always cover all of these topics. Since these clauses have to be mentioned, they’re called “model clauses”

How-to: Draft your Articles of Association

There are two ways you can draft this:

  1. Use the standard set of Articles of Association from the Companies Act OR;
  1. Draft your own Articles of Association

If you’re planning to use the standard set of Articles of Association, you can access them here at the Companies Act.

This will give you the ‘model clauses’ we mentioned before. 

Let’s take a look at these model clauses with a little more detail, and explore what they’re all about.

Model Clauses in your Articles of Association 

As we mentioned earlier, these are mandatory topics you need to cover in your company’s articles. 

However, you don’t need to limit your articles only to these clauses. You can add what you deem necessary. 

Let’s take a look at each model clause. 

1. The Company Name

One of the main purposes of your articles is to show that your company is a legal entity with a unique name. 

You can elaborate on this on your company name clause. 

Additional resources – How to name a company the right way

2. Purpose of the company

Under this clause, you need to mention the reason as to which you created your company. It should also include its motives and what you hope to achieve with the company as time goes on.

3. The Organization

It is important to mention the legal organization of the company with details like:

  • The company address
  • Number of directors
  • Identity of the founders
  • Original shareholders etc.

Useful links –
How to register your Private Limited Company.

How to change your registered office address.

4. Shares and Shareholders 

This clause has to basically explain the issue, calls and distributions of the shares in your company. 

This means that you also have to mention the process you will follow to maintain the share register, share certificates, transfer and transmission of shares.

Remember, when you’re mentioning the shares of the company, you have to mention the meetings of the shareholders as well. This basically means that you have to explain the rules that apply when the shareholders meet, give notice of meetings, the quorum(the minimum number of people that has to attend the meetings), voting etc. 

And remember, whenever your shareholders meet – you have to maintain the minutes of that meeting. According to the Articles of Association, you have to maintain a separate book for this purpose. 

These minutes must be documented, so information regarding updating minutes should be noted.  Since the Articles of Association is a set of guidelines, it has to specifically mention how these actions will take place. 

5. Directors and Secretary

This clause has to give information about the powers and duties of the Directors and Secretaries. 

Here, you can specify your Directors into managing directors and executive directors.

You also have to mention their appointments, removals, conduct at meetings and information regarding these meetings etc.  

Additional information – How to make changes to the Directors and Secretary of your company. 

6. Accounts and Audits 

Here, all you have to do is explain how your company will maintain its accounting records and financial statements.

An important part of this clause is mentioning how you will carry out your audits. This is because conducting audits is a mandatory part of running a company.

Useful blogs – A basic guide to bookkeeping.

7. Liquidation and removal from the register 

You have to mention how you will handle the process of closing down your company if you ever have to.

Include how you will appoint a liquidator and about the process of distributing your surplus assets.

Important reading material – How to close your company.

8. Miscellaneous

There are a few things you have to mention on this clause:

  1. The documents that will be kept by the company.
  2. The rights of the directors and shareholders to the above documents
  3. Name of the company (repetition from clause 01)
  4. Information about notices, insurance and indemnity and on modifications in respect to private companies. 
Help us, help you!

Preparing an Articles Of Association can be a complicated process. Let us step in!

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Things to remember when drafting your Articles of Association in Sri Lanka  

There are a few things you probably should keep in mind when you’re drafting your articles:

  1. Every clause has to be agreed upon by the company shareholders. 
  1. Companies can choose between a set of straightforward guidelines or customize them to suit the company’s work ethic. 
  1. Even though you customize your articles, they always have to be in line with the companies act

How important are Articles of Association when registering your Company in Sri Lanka?

When we take an overall look at the company registration process, there are six important steps:

  1. Reserving a unique name for your company 
  2. Submitting company registration forms 
  3. Submitting Articles of Association 
  4. Giving public notice of incorporation 
  5. Opening a bank account for your company
  6. Applying for tax identification certificate of company 

As you can see, step three is submitting your Articles of Association.

This means that you cannot register your company without having your articles of association in order. 

This is because they’re like an internal governing document for your company. It makes up half of your company’s constitution.

Therefore, the Articles of Association coupled with resolutions and agreements affecting your company externally is your company’s constitution.

The ROC wants to see how your company will run smoothly at meetings, decision making and management etc – and they will only know by looking at these regulations.

Have Simplebooks prepare your Articles of Association!

You can technically draft your own Articles of Association when registering your company. 

However, this can at times be a complicated process. 

This is where Simplebooks can step in to help! As a registered company secretary, we’ve helped over 1,500 businesses prepare and approve their Articles of Association. 

If you ever need a professional to handle your Articles preparation process; whether it be the standard set or a custom set – we’re here to help. 

FAQs

What are the contents of Articles of Association?

Usually, your Articles of Association have to include: 

  • The company name 
  • The purpose of the company 
  • The organization 
  • Shares and shareholders
  • Meetings 
  • Director/s and Secretary  
  • Accounts, audits and indemnity
  • Miscellaneous 

You can add sections to this if you’re customizing your Articles. 

How do you write an Article of Association?

You can either use the model Articles of Association mentioned in the companies act or add custom Articles.

Are Articles of Incorporation the same as Articles of Association?

Yes, they are.

What is the importance of Articles of Association?

Your Articles tell the Registrar of Companies (ROC) a summary of what your company is about. Without this information, they won’t let you register your private limited company (or any Limited Company.)

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