Context:
The Reserve Bank of India (RBI) has approved changes to Yes Bank’s Articles of Association (AoA) regarding the appointment of nominee directors following a stake acquisition by Sumitomo Mitsui Banking Corporation (SMBC), Japan.
Articles of Association (AoA)
The Articles of Association (AoA) is a legal document that defines the internal rules, regulations, and management structure of a company. It governs the relationship between the company, its shareholders, and its directors.
Key Features:
- Internal Governance:
- Specifies how the company will be managed and controlled.
- Lays down powers, duties, and responsibilities of directors and officers.
- Relationship Rules:
- Governs the relationship between shareholders and the company.
- Includes rights, privileges, and obligations of shareholders.
- Operational Provisions:
- Rules regarding share issuance, dividend distribution, meetings, voting rights, and appointment/removal of directors.
- Can include provisions for nominee directors when a company receives investment from specific investors (like in Yes Bank case with SMBC).
- Legal Requirement:
- Required under the Companies Act, 2013 in India.
- Works alongside the Memorandum of Association (MoA), which defines the company’s objectives and scope of operations.
Examples of AoA Provisions:
- Appointment and removal of directors
- Rights of shareholders in voting and dividends
- Conduct of board and general meetings
- Borrowing powers and issuance of shares
- Rules for nominee directors from investor agreements
