What is the legal effect of articles of association?

The correct choice reflects that the articles of association are a crucial document in the corporate governance of a company, primarily serving to bind the company and its shareholders. This internal rule book outlines the rights, responsibilities, and procedures for the company's internal affairs, including shareholder rights regarding voting, dividends, and the appointment of directors.

By establishing these rules, the articles of association create a binding agreement between the company and its shareholders, setting forth the terms of their relationship. This means that both the company and the shareholders must adhere to these stipulations, providing a legal foundation for corporate conduct and shareholder actions, thereby ensuring that members of the company operate within the established legal framework.

The other options, while related to aspects of corporate law, do not accurately capture the primary legal effect of the articles of association. Delegating authority to the registrar pertains more to the company's registration and not to the binding nature of the articles themselves. The creation of obligations for external parties is not a direct effect of the articles; those obligations are typically under statutory rules or contractual agreements. Lastly, while the articles may implicitly support governance related to financial statements, they do not specifically provide a framework for annual accounts, which is usually governed by accounting standards and regulatory requirements.