Section 5 of the Companies Act, 2013
Section 5 of the Companies Act, 2013 deals with the Articles of Association of a company.
Here is the complete text and explanation:
Section 5 – Articles
(1) The articles of a company shall contain the regulations for the management of the company.
(2) The articles shall also contain such matters, as may be prescribed:
Provided that nothing prescribed in this sub-section shall be deemed to prevent a company from including such additional matters in its articles as may be considered necessary for its management.
(3) The articles may contain provisions for entrenchment to the effect that specified provisions of the articles may be altered only if conditions or procedures as that are more restrictive than those applicable in the case of a special resolution are met or complied with.
(4) The provisions for entrenchment referred to in sub-section (3) shall only be made—
(a) in the articles of a company on formation; or
(b) by an amendment in the articles agreed to by all the members in the case of a private company and by a special resolution in the case of a public company.
(5) Where the articles contain provisions for entrenchment, whether made on formation or by amendment, the company shall give notice to the Registrar in such manner as may be prescribed.
🔍 Explanation:
Articles of Association (AOA) are the internal rules and regulations governing a company’s operations.
The Act allows a company to make its own rules within the scope of the law and to include additional rules if necessary.
Entrenchment means adding provisions that are harder to change than regular rules—adding protection to critical provisions.
Private companies need consent of all members to add entrenchment provisions.
Public companies need a special resolution (i.e., at least 75% of shareholders' approval).
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