Memorandum and Article of Association


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Memorandum and Article of Association

  1. 1. MEMORANDUM AND ARTICLE OF ASSOCIATION GLUL3033 - memorandum & Article 1
  2. 2. THE COMPANY’S CONSTITUTION GLUL3033 - memorandum & Article 2
  3. 3. Memorandum: Objects and powers Object clause contains the objectives or purpose of the incorporation of the company. Object clause identifies the activities in which the company wishes to engage in. Object v powers? Anything outside the objects and powers of a company is ultra vires. The effect of ultra vires differs under the common law and Companies Act 1965 GLUL3033 - memorandum & Article 3
  4. 4. Memorandum: Objects and powers Public Bank Bhd v Metro Construction Sdn Bhd [1991] 3 MLJ 56 3 main types of provisions in object clause: Main or independent objects; dependent objects; Bell Houses Ltd v City Wall Properties Ltd [1996] 2 QB 656 powers Attorney-General v Great Eastern Railway Co (1880) 5 App Cas 473 Arab-Malaysia Finance Bhd v Meridien International Credit Corp ltd London [1993] 3 MLJ 193 GLUL3033 - memorandum & Article 4
  5. 5. Doctrine of ultra vires under the Common Law Any ultra vires act by a company is void ◦ Ashbury Railway Carriage & Iron Co. lwn Riche (1875) LR 7 HL 653 A company may not enforce an ultra vires contract ◦ Re Jon Beauforte (London) Ltd [1953] Ch 131 A company may not sue the parties under an ultra vires contract  A third party acting bona fide cannot rely on the ground that he has no notice of the company having no power to act.  A company acts within its object but power had been illegally exercised. Re Introduction Ltd [1970] Ch 199 GLUL3033 - memorandum & Article 5
  6. 6. Lessening the strictness of the doctrine of ultra vires Cotman v Brougham [1918] AC 514 Bell Houses ltd v City Wall Properties ltd [1966] 2 QB 656 HA Stephenson & Son Ltd v Gillanders Artbuthnot & Co (1931) 45 CLR 476 GLUL3033 - memorandum & Article 6
  7. 7. The doctrine of ultra vires under the Companies Act 1965 The doctrine has been modified by S 20(1) – If a transaction is valid, it is immaterial if the company did not have the capacity to enter into it. S.20(1): “No act or purported act of a company…. and no conveyance or transfer of property.. to or by a company shall be invalid by reason only of the fact that the company was without capacity or power to do the act or to execute or take the conveyance or transfer”. S 20(1) strikes down the effect of ultra vires doctrine. GLUL3033 - memorandum & Article 7
  8. 8. The doctrine of ultra vires under the Companies Act 1965  Exceptions: The ultra vires doctrine is however applicable under these 3 circumstances –  S.20(2)(a) ◦ “.. In proceedings against the company by any member, holder of debentures secured by floating charge or the trustee of those debentures to restrain the doing of any act or acts or the conveyance or transfer of any property to or by the company; ◦ Hawkesbury Development ◦ Pamaron Holdings Sdn Bhd lwn Ganda Holdings Bhd S.20(2)(b) ◦ “.. In proceedings by the company or by any member of the company against present or former officers of the company”; and SS.20(2)( c) ◦ “.. Any petition by the Minister to wind up the company”. GLUL3033 - memorandum & Article 8
  9. 9. Alteration of object clause GLUL3033 - memorandum & Article 9
  10. 10. Alteration of the memorandum S.21(1) – the memorandum may be altered only in accordance with the Act Alteration of name[s.23] Alteration of capital [s.62 & 64] GLUL3033 - memorandum & Article 10
  11. 11. Article of Association GLUL3033 - memorandum & Article 11
  12. 12. Article of Association  1. ◦ ◦ ◦ ◦ ◦ Contract between company and members Beh Chun Chuan v Paloh Medical Centre Sdn Bhd [1999] 3 MLJ 262 Wong Kim Fatt v Leong & Co. Sdn. Bhd [1976] 1 MLJ 140 Hickmen v Kent [1915] 1 Ch 881 Pender v Lushington (1877) 6 Ch D 70 Eley lwn Positive Government Security Life Assurance (1875) 1 Ex D 20  2. Contract among members inter se  3. No contract between company and outsiders ◦ Rayfield v Hands [1960] Ch 1 ◦ Re Carrati Holding Co. Pty. Ltd ◦ Raffles Hotel Ltd v Malayan Banking Bhd. ◦ Forbes v NSW Trotting Club Ltd ◦ Southern Foundries v Shirlaw [1940] 2 AllER 445 GLUL3033 - memorandum & Article 12
  13. 13. Alteration of Articles S.31 – a company may by special resolution alter or add to its article S.31(2) – any alteration or addition to the articles is as valid as if originally contained in the articles Limitations on alteration of articles: ◦ ◦ ◦ ◦ S. 33(3) S. 181(4) S.65 Prinsip ‘majority rule’ GLUL3033 - memorandum & Article 13
  14. 14. Doctrine of constructive notice The company’s constitution (memorandum & articles) is available for inspection at CCM. Thus under constructive notice, the law will deem that an outsider dealing with the company has the knowledge of any limitation on authority of the company’s organs, officers or agents as provided for by the constitution. GLUL3033 - memorandum & Article 14
  15. 15. Exceptions to the rule in Turquand’s case The outsider has actual knowledge of the irregularity or is put upon inquiry by the circumstances of the case and fails to make inquiries; The outsider knew or ought to have known of the limitation; thus they could not rely on the rule as an outsider; If the outsider dealing with the company is put on inquiry and fails to inquire, the rule has no application. GLUL3033 - memorandum & Article 15
  16. 16. Indoor management rule Also known as the rule in Turquand’s case (Royal British Bank v Turquand (1856 6E & B327) – a person dealing with a company is taken to have constructive notice of the contents of the company’s public documents, they need not go further to ensure that the internal proceedings of the company have been properly carried out. Aik Ming (M) Sdn Bhd v Chang Ching Chuen [1995] 2 MLJ 770 Pekan Nenas Industries Sdn Bhd v Chang Ching Chuen [1998] 1 MLJ 465 GLUL3033 - memorandum & Article 16