2. INTRODUCTION TO ARTICLES OF
ASSOCIATION
Contain the rules relating to the management of
internal affairs of a company & are basically for the
benefit of the shareholders
Play a part subsidiary to the memorandum of
association(MOA)
Cannot extend the objects as defined in the
memorandum
3. OBLIGATION TO REGISTER
ARTICLES
PUBLIC COMPANY LIMITED BY SHARES- may
register articles (in case does not, TABLE “A” shall
apply)
COMPANY LIMITED BY GUARANTEE/
UNLIMITED COMPANY/PRIVATE COMPANY
LIMITED BY SHARES-must register articles along
with the memorandum at the time of registration
4. FORMALITIES
Articles of association shall be:
Printed
Divided into paragraphs numbered consecutively
Signed by each signatory of the memorandum in the
presence of atleast one attesting witness
5. Also articles should not contain anything which is
against:
LAW OF THE LAND
THE COMPANIES ACT
THE PUBLIC POLICY
ULTRAVIRES THE MEMORANDUM
Any such clauses shall be inoperative and void.
6. CONTENTS OF ARTICLES
Articles usually deal with the rules & bye-laws on
matters like:
1.Extent to which “TABLE A” is applicable
2.Different classes of shares & their rights
3.Procedure of issuing share certificates & share
warrants
4.Alteration of share capital
5.Borrowing powers of directors
6.Voting rights of members
7. 7.Payment of dividends & creation of reserves
8.Use of common seal of the company
9.Board meetings & proceedings thereof
10.Rules as to resolutions
11.Arbitration provision,if any
12.Winding up, ETC..
8. ALTERATION OF ARTICLES
Right to alter or add to articles-expressly conferred
by SECTION 31
Statutory power & cannot be negatived in any way
Done by passing a SPECIAL RESOLUTION
Copy must be filed with Registrar within 30 days of
passing the said resolution
Copy of altered articles also be filed with Registrar
within 3 months of passing the resolution
9. Limitations Regarding Alteration of
Articles
The alteration must not be inconsistent with the
provisions of the companies act or any other statue
- The alteration cannot be made so as to increase the
liability of any member without his written
consent
- However, the articles may impose on company
conditions stricter than those provided under the law
10. The articles must not be inconsistent with the conditions
contained in the memorandum
The alteration must not be inconsistent with the alteration
ordered by the company law board
- Permission of company law board is required to make
alterations to articles of association
11. Approval of Central Government is also required in
certain cases
- Conversion of public company into a private
company
- Appointment or re-appointment of a director
- Increase in remuneration of a director
12. The alteration must not deprive any person of his rights
under a contract
The alteration must not constitute a fraud on the
minority
The alteration must be a bona fide for the benefit of the
company as a whole
13. BINDING FORCE OF
MEMORANDUM AND ARTICLES
Company is bound to its members
Each member is bound to the company
Each member is bound to other members in exceptional case
only
Neither the company nor the members are bound to outsiders
14. DOCTRINE OF CONSTRUCTIVE
NOTICE
Aperson is expected to inspect the basic public document of
the company (memorandum and articles) available at roc
office before any transaction with the company
He should have knowledge what action is not authorized to
director or the agent of the company
Even if he has not inspected these documents he would be
assumed to have done so
Doctrine of constructive notice is not feasible for practical
businesspersons
15. DOCTRINE OF INDOOR
MANAGEMENT
An exception to doctrine of constructive notice
Offers protection to outsider dealing with a company
Gives outsider confidence in dealing with company with limited liability
Doctrine has been applied to make companies liable in case where deals
were made by the directors:
1. Whose appointment was defective
2. Who were appointed properly but were yet to be delegated necessary
authority
3. Who had not yet been appointed as director
4. Who have been delegated authority in a meeting which had lacked
quorum
16. EXCEPTIONS TO THE DOCTRINE
OF INDOOR MANAGEMENT
Though the doctrine provides outsiders, protection while dealing
with registerd companies,court did not find it proper to apply the
doctrine in following cases and protection was denied:
Knowledge of irregularity
Sufficient ground for suspicion
Forgery
Acts outside apparent authority
Non existence of agency
Acts ultra vires the company
18. MoA
Defines the limits and
objects of the company
Subordinate to the act
only
Must be filed with
registrar by all companies
Defines the relation
between the company
and outsiders
Internal regulations of the
company; subsidiary to
memorandum
Subordinate to the Act
and to the Memorandum
A public company limited
by shares need not file a
separate set of articles
Govern internal
relationship between the
company and members
AoA
19. MoA
Cannot be easily altered
Acts ultra vires
Memorandum are void
No remedy against
company for contracts
entered into ultra vires
the memorandum
Easily alterable by
passing a special
resolution only
Acts ultra vires Articles
are simply irregular and
not void
Outsiders can enforce
contract even if its ultra
vires articles
AoA
20. COMPANY SECRETARY’S DUTIES
FOR ALTERATION OF AOA
BOARD MEETING – The company secretary will convene
meeting of the BOD to consider to approve the proposed
alterations.
CONSENT OF MEMBERS- Where the alteration involves an
increase in pecuniary liability of a member , the member should
agree in writing.
GENERAL MEETING – Convene a general meeting and pass a
special resolution altering the articles.
VALIDITY OF ORDINARY RESOLUTION- It is worth noting ,an
article providing for amendment of articles by ordinary resolution
is invalid .
21. SPECIAL RESOLUTION- It may be noted that except where
a provision as covered by memorandum, any provision of
articles may be amended by a special resolution.
CHANGES IN ARTICLES MUST BE GIVEN IN
EXPLANATORY STATEMENT-Where a new set of articles is
being adopted , it is necessary to give details of changes
regarding important articles in the explanatory statement.
ALTERATION REGARDING DIRECTORS-Where the
alteration results of amendment of any provision relating to
managing director or non-rotational director , file an
application with the Central Government.
COPY OF ARTICLES-File a printed copy of the articles as
altered with the registrar within one month of the approval.
NOTING OF ALTERATION-Note the alteration in every copy
of the article issued after the date of alteration.
