When every company is established, it is necessary to have articles of association. Articles of association for a company is very important, it is one of the company's required written documents. It is necessary to understand the basic content of the articles of association. Then, what is the articles of association? What does it do?
What is The Articles of Association?
The articles of association is an open legal document that records the basic standards of a company's organizations and activities. It is generally formulated by the shareholders of the company in accordance with the relevant regulations of the "Company Law" of the current country. It is a normative document concerning the company's name, residence, registered capital, business scope, as well as operation and management system. Therefore, the shareholders shall sign and stamp the articles of association. The articles of association shall be binding on the company, shareholders, directors, supervisors and senior managers.
Categories of Articles of Association's Content
The content of the articles of association is divided into two categories, which are Essential Items and Optional Items. Stipulated by law, essential items are the items that must be recorded in the articles of association. Optional items are items that are recorded according to the discretion of the company, including the itmes that the company has its self-determinaiton power.
The Importance of the Articles of Association
1. The only and the most important evidence to solve the equity dispute
The most favorable evidence for disputes between shareholders is the articles of association.
2. The most important conditions and documents for the establishment of the company
The establishment procedure of a company begins with the establishment of articles of association and ends with the establishment registration. China's company law clearly stipulates that the establishment of articles of association is one of the conditions for the establishment of a company. The examining and approving authority and the registration authority shall examine the articles of association to decide whether to grant approval or grant registration. A company without articles of association cannot obtain approval; the company has no articles of association cannot be registered either.
3. Define the basic basis of rights and obligations between shareholders
The articles of association of the company can constrain the rights and obligations between the shareholders, so during the establishment of the company, the shareholders of the company must write the rights and obligations in the articles of association clearly, write in detail, in order to ensure the disputes can be solved smoothly.
4. Balance the interests of all parties related to the company
The articles of association of the company must balance the interests of all parties of the company to achieve the harmonious unity of the company's internal and external. The contents of the articles of association which violate the law shall not be permitted or protected by law.
5. The basic legal basis of the company's external business transactions
As the articles of association of the company stipulates the organization and activity principles of the company, including business purpose, property, rights and obligations etc, it provides conditions and credit basis for economic trade betweem investors, creditors,third parties and the company.
6. Basic legal documents to determine the rights and obligations of the company
Once the articles of association are approved by the relevant department and approved by the company registration authority, they shall have legal effect externally.In accordance with its articles of association, the company shall enjoy various rights and assume various obligations,also it shall be protected by national laws as long as it obey its articles of association. Relevant authorities shall have the right to punish those who violate the articles of association.
7. Make up for the deficiencies of the Company Law and realize the innovation requirements of the company system
If there are no specific regulations or prohibitions in the Company Law, they can be stipulated in the articles of association.
In view of the above functions of the articles of association, the legal effect of the articles of association must be strengthened. This is not only the needs of the company's activities, but also the needs of the healthy development of market economy.
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