Articles of AssociationDefined with Examples & More

Written By:
Lisa Borga

What are Articles of Association?

Articles of association, also known as a certificate of incorporation in some areas, make up a document that details the purpose of the company, as well as how the company will operate.

This includes the process for choosing directors, how the business will be run on a daily basis, and how the business will prepare its financial records.

Understanding the Certificate of Incorporation

The articles of association generally specify the way that a company will be issuing its shares, paying out dividends, assigning voting rights, as well as auditing its financial statements.

This document provides guidelines the owners can use to guide their actions as they run the business on a daily basis as it details the way in which the shareholders want the business to be operated.

The terminology used in the articles of association as well as the specific content will vary depending on the jurisdiction the company is being formed in, but the content is quite similar across the world. Most certificates of incorporation will contain the name of the business, its purpose, its share capital, the organization of the business, and provisions concerning meetings of the shareholders.

The Name of the Company

Since the company will be a legal entity, it must have an official name which it is required to list in the articles of association.

Different jurisdictions will have their own rules detailing any restrictions on a company’s name.

However, most areas will require that “Inc.,” “Ltd.,” or a variation on these terms be included in the name in order to indicate the company’s status.

Additionally, using words such as church, government, or other similar words that might mislead people as to what the business is are generally not permitted in the business’s name.

Offensive words are often not allowed to be used in business names as well.

The Company’s Purpose

Businesses are required to include the reason they are forming their company in their articles of incorporation as well.

This reason could be very broad in some jurisdictions, such as “management.”

Whereas other jurisdictions may mandate a more detailed description, such as “operating a coffee shop.”

Share Capital

The articles will include the number of shares that make up the capital for the company as well as what type of shares they are.

All companies will have common shares as part of their capital.

However, companies can have different categories of preferred stock in addition to their common stock.

Companies do not always choose to issue these shares, but it is an option if they are included in the certificate of incorporation.

Organization of the Company

When the owners are legally forming their company, it is necessary to include certain information, such as the number of employees and directors, the company’s address, and the identity of the original shareholders and founders.

Legal advisors and auditors may also be included in this section, although this is based on the jurisdiction in which the company is being formed as well as the type of business.

Meetings of the Shareholders

The arrangements for the initial general meeting for the shareholders, along with the rules for subsequent annual meetings for shareholders, will be included in this section.

Details as to what will be included in these meetings will be placed in this section, such as votes, notices, and resolutions.

Example of Articles of Association for a Small Business

Generally, if one or more people choose to form a company, they choose to consult with an accountant or lawyer, or possibly both.

It is also common for business owners to work with a business formation service to form their small business. 

After this, they typically choose a name for their company and decide on the general purpose of their company.

At this point, most owners will want to register the name of their company in their jurisdiction to make it official.

The company may then choose to issue shares of the company.

Although, this is not required.

The company’s directors will need to decide the structure of their company and what their plans are for its future, such as whether they intend to eventually expand the business.

When the company’s articles of association are prepared, the names and personal information of the directors will be included along with the address of the company.

The articles of association can be changed later if the directors approve the changes.

Key Takeaways

• The articles of association work as a guide for a business which can define the purpose of the business along with how it will carry out its day-to-day business activities.
• The content of the articles may vary based on where the business is being formed. However, the certificate of incorporation will generally contain the name of the company, the company’s share capital, the purpose of the company, the arrangements for shareholder meetings, and the organization of the company.
• The articles of association frequently are referred to as simply the “articles” in Canada and the United States.