# Understanding Articles of Association: Company Regulations and Purpose

> **Definition**
>
> Articles of Association are internal documents outlining a company's purpose and operational rules, including director appointments and management of financial records.

## What Are Articles of Association?

Articles of Association are internal documents and rules that specify the regulations for a company's operations and define the company's purpose. These documents outline the rules of corporate governance, including the process of appointing directors, handling financial records, and issuing shares.

While the specifics vary between different companies and jurisdictions, articles of incorporation are consistent as foundational corporate documents.

### Key Takeaways

*   Articles of Association are internal documents that outline a company's purpose and operational regulations.
*   These articles often detail the company name, purpose, share capital, and legal organization.  
    
*   Shareholder meetings and voting rights frequently appear in Articles of Association.  
    
*   Articles of Association can be amended with the approval of the company's directors.  
    
*   Founders, often with legal and financial advisors, create these articles to define company management and structure.

![Articles of Association](https://www.investopedia.com/thmb/mNsZ7GpPb9dSU0174WO74XajR7I=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/TermDefinitions_ArticlesofAssociation_3-2-10e5a0c7fc704412be23d75c5bff5a0e.jpg)

*— Investopedia / Crea Taylor*

## Key Components of Articles of Association

Articles of Association explain how a company issues shares, pays [dividends](https://www.investopedia.com/terms/d/dividend.asp), audits records, and handles [voting rights](https://www.investopedia.com/terms/v/votingright.asp). Think of them as a user's manual for the company. While content varies by jurisdiction, these documents typically follow a similar global format, outlining:

*   **Company Name:** A company, as a legal entity, must have a name in the articles. It usually includes a suffix like "Inc." or "Ltd." to indicate it is a company.
*   **Company Purpose:** The reason for the company must be stated. Some jurisdictions accept broad purposes like "management," while others require greater detail such as "the operation of a wholesale bakery," for example.
*   **Share Capital:** The [number and type of shares](https://www.investopedia.com/terms/g/goldenshare.asp) that make up a company's capital are detailed in the articles.  A company's capital includes at least one type of [common share](https://www.investopedia.com/terms/c/commonstock.asp). In addition, there may be several types of [preferred shares](https://www.investopedia.com/terms/p/preferredstock.asp).
*   **Legal Organization:** The legal organization of the company, including its address, the number of directors and officers, and the identity of the founders and original shareholders, are found in this section.
*   **Shareholder Meetings:** The provisions for the first general meeting of shareholders and the rules that govern subsequent [annual shareholder meetings](https://www.investopedia.com/terms/a/agm.asp)—such as notices, resolutions, and votes—are detailed in this section.

> **Important**
>
> A company may or may not issue shares, but if they are found in the articles of association, they can be issued if needed.

## Practical Example for Small Businesses

A person, or group of people, starting a business will typically refer to a lawyer, [accountant](https://www.investopedia.com/terms/a/accountant.asp), or both for advice when setting up a company. The company will choose a name and define its purpose. The company is then registered at the state or federal level.

A company may issue shares to divide the company but it doesn't need to. The articles lay out how this can be done. The lawyer or accountant will typically work with the company directors to define how they structure the company.

The articles include the company directors, along with their personal information and a business address. Changes can be made to the Articles of Association with director(s) approval.

## How Do Articles of Association Differ From Articles of Incorporation?

Articles of Association are internal documents that define a company's purpose as a business, key information such as the name, and how shares are structured. [Articles of Incorporation](https://www.investopedia.com/terms/a/articlesofincorporation.asp) are formal documents filed with a government body to form a corporation legally. Articles of incorporation include the firm’s name, street address, agent for service of process, and the amount and type of [stock to be issued](https://www.investopedia.com/terms/b/blankcheckpreferred.asp).

## What Are Articles of Organization?

Articles of Organization are legal documents used to establish a [limited liability company](https://www.investopedia.com/terms/l/llc.asp) (LLC) at the state level.

## Who Creates the Articles of Association?

A company's founders typically create its Articles of Association. Because it is an important document addressing the company's management and finances, the creators do so in consultation with lawyers, accountants, or both.

## The Bottom Line

A company's Articles of Association are the fundamental rules that state how the company is to be run. This includesthe company's name, its founders and original shareholders, the purpose driving the company, how shareholders' meetings are conducted, and how directors are hired.

The Articles of Association are typically written at the start of the new company by its founders, usually with the aid of legal counsel. In addition to outlining the purpose of the new company, they will also state how many shares can be issues, how corporate officers are to be chosen, and the rules for changing the articles themselves.

> **Article Sources**
>
> 1.  U.S. Small Business Administration. "[Register Your Business](https://www.sba.gov/business-guide/launch-your-business/register-your-business)."