Articles of association are internal rules for businesses or non-profit organizations, covering tasks, positions, processes, and operational issues such as meetings, directors, stock, dividends, and audits. They must address minimum legal requirements and can be flexible in structure. Non-profit organizations must also prepare them.
Every organization has articles of association, whether they realize it or not. They are simply the basic internal rules of operation for a business or not-for-profit organization that govern what tasks need to be performed, what positions are required to perform the required functions, and how the implemented processes must be performed.
Bylaws often deal with operational issues, such as the convening of general meetings and the process of nominating and selecting directors and managers within the organizational structure. These rules also address how the company will issue stock, pay dividends to investors, and how and when audits of financial records will be performed.
One of the strengths of statutes is that the focus is on content rather than form. They might include organizational charts, escalation procedures to handle the hiring process for top-level executives, organizational charts showing the orderly process of providing goods and services, and a simple flowchart for basic accounting procedures such as accounts payable and receivable. There is usually a great deal of flexibility in how the information contained in these rules can be structured. However, it is important to remember that in order to register the company to do business in one or more countries, there must be formal articles of association, and they must address at least the minimum issues required by the applicable laws of the country. .
One of the easiest ways to prepare membership articles is to simply think in terms of the day-to-day operations of the company, defining what must happen and which positions are responsible for keeping the process going. Using this information as a basis, it’s easy to think in terms of what process needs to be in place to provide adequate communication to the company’s stakeholders and how to replace senior executives and managers should a required change occur. What will typically come up is a document that is somewhat detailed, but also a common sense presentation of the company’s business objective.
Non-profit organizations can also benefit from preparing membership articles. Many countries around the world require non-profit entities to provide these articles before registering to operate in the country. This is true even in the case of not-for-profit organizations such as religious organizations. In real practice, the preparation of such guidelines simply makes sense, as the documents help ensure the efficient functioning of non-profit organizations, making it easier for the organization to accomplish more with available resources.
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