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ARTICLES OF ASSOCIATION
 INTRODUCTION
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 A company must have articles of association

(hereinafter referred to as articles) which are its
internal regulations and are the most important
component of its constitution [Note 1] as they state
what a company can and cannot do. The articles
form a contract between the company and its
shareholders. They ensure that the company is run
efficiently and smoothly. The articles are legally
binding on the company and all its shareholders.
 Definition of AOA
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 The Articles of association of a company, often

simply called the Articles is the document that
governs the relationship between the company and
its employees
 Articles of Association is a statutory document which
effectively governs company's relations with the
insiders.
 Features of AoA
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 Contains rules and regulations or by law of the

company.
 Articles should be originally framed or altered.
 It is a Subsidiary to the memorandum of the
company.
 It regulates the memorandum of internals affairs.
 Defines the mode and manner.
 Define the power and duties.
 Create a basis for a contract.
 It is a public document.
 Cntd...
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 Alterable document
 Printed document
 Model articles as prescribed in Tables F to J
 Private companies need to frame its own articles
 Importance of AOA
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 Constitution of the company

 The incorporation of the company, is infact the registration of
its Memorandum, and its Articles and the certificate of
incorporation is granted on the basis of these two documents.
 Main document which is required for forming a company.
 Nature of a contract between the company and its employees.
 CONTENTS/CLAUSES OF MOA
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The articles of Association of a company sets out the regulations of the

company, therefore it may adopt all or any of the regulations contained
in Table A of the First Schedule.
The Table A of the first schedule has the regulations covering the following
areas:
1. Business clause as to when the business is going to start,
2. The transfer of shares,
3. Alteration in share capital
4. Rules regarding General meetings
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6. Procedure for voting

7. Powers and duties of directors
8. Proceedings of directors
9. The qualification and dis-qualification of directors
10. Accounts
11. Winding up
 Registration of AOA
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 Procedure provided for the registration of AOA in

Companies Ordinance 1984.
 If the Company is limited by shares, there may be
along with the MOA Articles must be signed and got
registered by the Company.
 In case of Company Limited by shares and by
guarantee, it is mandatory requirement that AOA is
registered along with MOA.
 OTHER REQUIRMENTS
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 The AOA shall be:

 Printed

 Divided into paragraphs,

 It must be numbered

 Signed by each subscriber

 Effects of AOA
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The AOA have certain legal effects to the member and

the company:
 Binding on members in relation to the company.

 Binding on company in relation to members.

 Binding on members inter se(in their relation to one

another).
 Not binding on company in relation to outsider.
 Alteration of AOA
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 The AOA of a company may be altered but subject

to the provisions of:
 Companies Ordinance
 Conditions contained in the MOA
 Procedure of Alteration
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 Step 1.the alteration is to be discussed in BOD and approved

through a resolution.
 Step 2.days notice along with the copy of proposed special
resolution is to be sent to the members.
 Step 3. resolution is passed in general meeting supported by
¾ majority.
 Step 4. copy of the resolution is to be filled with the registrar
within 15 days.
 Step 5. Approval is accorded from the registrar. And
thereafter the registrar concern issues filing certificate.
 Approval of alteration
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 According to Ordinance it is necessary to obtain

approval of the Commission of any alteration made
in the AOA.
 Upon receiving an application for confirmation the
commission will send a notice to;
 Every class of members who are effected by such alteration.
 Prospectus
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 Definition
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 Prospectus is a document, containing the

advertisement for invitation of subscription from the
public.
 It is a legal document that institution and business
use to describe the securities they are offering for
participants and buyers.
 Importance of Prospectus
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 It provides the investor with material information

about mutual funds, stocks of the company, bond
issued by the company and other investments made
by the company.
 It also tells the investor about the financial position
of the company, the biography of the officers,
directors, the CEO and other key information which
an investor required before making the investment.
 Matters to be stated in Prospectus
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 Following matters and reports are to be set out in a

prospectus:-
 The contents of MOA and AOA
 The name, addresses, description and occupation of the
signatories to the MOA and number of shares
subscribed by them.
 The number and values of shares.

 Description of business to be undertaken.

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 Any provision in the AOA as to remuneration of

directors.
 The names, occupation and description of directors.

 The time and date of the opening of subscription.

 The financial statement of the company.

 The profit and loss statement of the company.

 Approval, issue and registration of
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Prospectus
 The prospectus of every company shall not be
issued, circulated, or published unless prior
approval of SECP, and for the purposes of
obtaining permission from SECP the company must
required to submit the prospectus sixty days prior to
subscription.
 Penalty for wrongly issuance of
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Prospectus
 If a prospectus is issued in contravention of the
Ordinance, the company and every person, shall be
punishable with fine which may be extended to five
thousand rupees.
 Terms in prospectus cannot be changed
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 A company shall not, very the terms of the contract

specified in the prospectus, except prior approval
form the SECP.
 Civil Liability for mis-statement in
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prospectus
 If a prospectus invites persons to subscribe for shares
or debentures of a company, and the persons
purchase such shares or debentures while relying on
the faith of the prospectus, thereafter he sustain loss
or damage then following persons are liable for the
loss:
 Every person who is director of the company when the
prospectus was issued
 Every person who is named in the prospectus
 Every person who is a promoter of the company
 Every person who has given consent in the issuance of the
prospectus
 Exemption from civil-liability
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 Following persons are exempted from the Civil

Liability:-
 Any person who is a director and he withdrew his consent
before the issue of the prospectus,
 The prospectus was issued without his authority and consent

 The prospectus was issued without his knowledge and

consent
 That after the issue of prospectus, but before the allotment
he withdrew his consent.
 Criminal liability for misstatement
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 If a prospectus includes any untrue statement every

person who signed or authorized the issue of the
prospectus shall be punishable:
 With imprisonment for a term of two years
 With fine which may extent to ten thousand

 With both
 Newspaper advertisement of
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Prospectus
 Every prospectus for the public subscription shall be
published in the newspaper advertisement.
 Contents of Prospectus
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 Name of the company

 Address of Registered office
 Main business
 Capital of the company
 Existing paid up share capital
 New paid up share capital
 Capital to be raised
 Sponsors and directors
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 Associate and Subsidiary/ Holding Companies

 Financial information and operational results
 Management i.e. Chief Executive, Directors,
Company Secretary, Chief Accountant etc.
 Feasibility Report
 Plans and Future prospects.
 Detailed process of Public Subscription
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 Approval by BOD
 Application for obtaining permission for Public Subscription
from SECP.
 When the permission is granted by the SECP the stock
exchange concerned is contacted for providing the date for
subscription and the bankers are contracted for the purpose.
 The approval remain valid for 60 days.
 After the above process the Prospectus is published in at least
two dailies one English and other Urdu newspaper, circulated
in the province in which the stock exchange is listed, exists.