Role Of AOA In Corporate Governance

Simran Gandhi, IIM Rohtak

A corporation is governed by a set of policies, procedures, and guidelines known as corporate governance1. The main entity influencing corporate governance is the board of directors. Corporate governance is based on four core principles: accounting, transparency, fairness, and responsibility. Since the influence of businesses on society has expanded and institutional investors' power has grown, corporate governance has become an issue of general public attention. However, opinions on the best ways to govern corporations are very different. For instance, there is disagreement about fundamental issues like the corporation's mission, the function of its board of directors, shareholder rights, and the appropriate methodology for gauging the success of the company.

The articles of association constitute a set of guidelines that companies and their staff members, from the board of directors to executives, need to obey.

An AOA ought to be available for every organization to use as a reference before making any kind of decision, no matter how big or small2. Going through this document helps organizations go through the process in a sequential manner, whether they want to know how to nominate an executive or director or decide how many shares to issue.

Businesses might incorporate for a variety of reasons. To make sure businesses are following the law, authorities frequently demand the filing of numerous documents. The fundamental source that authorities use to evaluate and provide a corporation with a distinct legal personality from its stakeholders is its articles of organization.

“The Articles” is the popular term for the entire document. The name, legal structure, goal, capital structure, corporate governance, record-keeping procedures, and other aspects of the company's existence may all be covered in detail in this document.