UNIT 7

ARTICLES OF ASSOCIATION

The Articles of Association (AoA) is a document that, along with the Memorandum of Association (MoA), forms the company's constitution. It outlines the regulations for the company's operations and defines the company's purpose. The Articles of Association specify the company's internal management and the responsibilities of its directors and shareholders. In Nigeria, the Articles of Association are crucial for corporate governance and compliance with the Companies and Allied Matters Act (CAMA). The primary legislation governing the Articles of Association in Nigeria is the Companies and Allied Matters Act (CAMA) 2020. See section 36 to 39 which requires every company to have Articles of Association, provides the model Articles of Association which companies may adopt, allows companies to modify the model Articles of Association to suit their specific needs and also states that the Articles of Association bind the company and its members as if they had all signed a contract. The Articles of Association can be altered by a special resolution passed by the shareholders. See section 53 of CAMA which provides that any alteration must be registered with the Corporate Affairs Commission (CAC). See the case of Olalekan v. Wema Bank Plc (2011) LPELR-CA/L/1008/2008: which highlighted the binding nature of the Articles of Association on the company and its members and the case of Adeyemi v. Lan & Baker (1996) 7 NWLR (Pt. 463) 614 which dealt with the enforcement of rights under the Articles of Association.

CONTENTS OF THE ARTICLES OF ASSOCIATION

The Articles of Association typically include the following key elements:

1. Company name: this is the official name of the company.
2. Share capital: this is the information about the company's share capital, including the types and classes of shares, their values, and the rights attached to each class.
3. Directors: this is the provisions regarding the appointment, powers, duties, and removal of directors.
4. Shareholders: this is the rights and obligations of shareholders, including provisions for general meetings and voting rights.
5. Dividends: this is the policies for the distribution of profits and payment of dividends.
6. Borrowing powers: this is the extent of the company's borrowing powers.
7. Transfer of shares: this is the procedures for the transfer and transmission of shares.
8. Meetings: this is the regulations regarding the conduct of board and general meetings.
9. Accounts and audits: this is the provisions for maintaining accounts and the audit process.
10. Winding up: this is the procedures for winding up or dissolving the company.

IMPORTANCE OF ARTICLES OF ASSOCIATION

1. Governance: this is where the Articles of Association serve as a guide for the company's governance. They ensure that the company operates within a structured framework, providing clear guidelines on the roles and responsibilities of directors and shareholders.
2. Protection of shareholders rights: this is where the Articles protect the rights of shareholders by outlining their entitlements and the procedures for making decisions. This helps prevent disputes and ensures transparency in the company's operations.
3. Flexibility: While CAMA provides model Articles, this is where the companies have the flexibility to modify them to suit their specific requirements. This allows companies to create a governance structure that aligns with their unique needs and objectives.

ALTERATION OF ARTICLES OF ASSOCIATION

Altering the Articles of Association is a significant process that requires careful consideration. See the case of Onuekwusi v. RTCM (2011) LPELR-SC.107/2004 which emphasized the need for compliance with statutory requirements when altering the Articles of Association and the case of UAC of Nigeria Plc v. Global Transport S.A. (2016) LPELR-SC. 243/2013 where the court held that alterations to the Articles must not conflict with existing contractual obligations. The steps involved typically include the following:

1. Board meeting: this is where the board of directors must first discuss and approve the proposed changes.
2. Special resolution: this is where a special resolution must be passed at a general meeting of shareholders. According to Section 53 of CAMA, a special resolution requires a 75% majority vote.
3. Filing with CAC: this is where the altered Articles must be filed with the Corporate Affairs Commission within 15 days of the resolution.

ENFORCEMENT OF ARTICLES OF ASSOCIATION

The Articles of Association are enforceable against the company and its members. In the event of a breach, members can seek redress through the courts. Nigerian courts have upheld the enforceability of the Articles in several cases, affirming their contractual nature. See the case of Nzekwu v. Nzekwu (1989) 2 NWLR (Pt. 104) 373 where the court upheld the binding nature of the Articles on the company and its members and the case of Green v. Green (1987) 3 NWLR (Pt. 61) 480 which reinforced the principle that the Articles of Association form a contract between the company and its members.

CONCLUSION

The Articles of Association are a foundational document for any company, outlining the internal regulations and governance structure. In Nigeria, compliance with the Companies and Allied Matters Act (CAMA) is essential for the validity and enforceability of the Articles. By providing a clear framework for the company's operations, the Articles help ensure transparency, protect shareholders' rights, and facilitate effective corporate governance.