Articles of Association (2)

8/2/2019 Articles of Association (2)

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ARTICLE OFARTICLE OF

ASSOCIATIONASSOCIATION


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MeaningMeaning

Articles are the rules, regulations,Articles are the rules, regulations,

and bye laws for the internaland bye laws for the internal

management of the affairs of amanagement of the affairs of a

company.company.

They are framed with the object ofThey are framed with the object of

carrying out the aims & objects ascarrying out the aims & objects as

set out in the MOA.set out in the MOA.

It must be signed by the subscribersIt must be signed by the subscribers

of the MOA & registered along withof the MOA & registered along with

MOA.MOA.


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Contents Of ArticlesContents Of Articles

Share capital, rights of shareholders,Share capital, rights of shareholders,

payment of commission, share certificates,payment of commission, share certificates,

Calls on shares, Transfer & TransmissionCalls on shares, Transfer & Transmission

of shares, Forfeiture of shares, Number &of shares, Forfeiture of shares, Number &

value of shares, Share warrants, Generalvalue of shares, Share warrants, General

meetings & proceedings, Voting rights ofmeetings & proceedings, Voting rights of

member, proxies, Directors, theirmember, proxies, Directors, theirappointment, remuneration, qualification,appointment, remuneration, qualification,

power & proceeding of BOD, Dividends &power & proceeding of BOD, Dividends &

reserves, Accounts, audit & borrowingreserves, Accounts, audit & borrowing

powers, Winding up.powers, Winding up.


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Alteration of AOAAlteration of AOA

A co. by passing a special resolution,A co. by passing a special resolution,

alter its AOA.alter its AOA.

A copy of every special resolutionA copy of every special resolutionshall be filed with the registrar withinshall be filed with the registrar within

30 days of its passing.30 days of its passing.


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Limitations to alterationLimitations to alteration

The alteration must not go beyondThe alteration must not go beyondthe provisions of companies act.the provisions of companies act.

Must not conflict with MOAMust not conflict with MOA

Must not sanction anything illegalMust not sanction anything illegal

Must be for the benefit of theMust be for the benefit of thecompanycompany

Must not increase the liability ofMust not increase the liability ofmembersmembers

Alteration by special resolution only.Alteration by special resolution only.

Should not cause breach of contract :Should not cause breach of contract :


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British Murac Rubber Syndicate Ltd v.British Murac Rubber Syn

dicate Ltd v.

Alperton Rubber Co LtdAlp

erton Rubber Co Ltd

Company A entered into a contractCompany A entered into a contract

with company B whereby it waswith company B whereby it wasagreed that as long as company Aagreed that as long as company A

held 5,000 shares of company B,held 5,000 shares of company B,

company A should have right tocompany A should have right to

nominate 2 directors in company B. Itnominate 2 directors in company B. It

was also agreed that company Bwas also agreed that company B

cant alter this right of company A.cant alter this right of company A.


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company B gave a notice of meetingcompany B gave a notice of meeting

at which it was proposed to pass aat which it was proposed to pass aresolution to alter the articles &resolution to alter the articles &

depriving company A of the right todepriving company A of the right to

nominate.nominate.The court issued an injunctionThe court issued an injunction

restraining company B from alteringrestraining company B from altering

the Articlesthe Articles


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Distinction between AOA &Distinction between AOA &

MOAMOA

MOA is the charter of the company. ItMOA is the charter of the company. Itdefines companies relation withdefines companies relation withoutside world. AOA are theoutside world. AOA are the

regulations for the internalregulations for the internalmanagement.management.

MOA defines the scope of theMOA defines the scope of the

activities of the co. AOA are the rulesactivities of the co. AOA are the rulesfor carrying out objects of thefor carrying out objects of thecompany as set out in MOAcompany as set out in MOA

MOA is the supreme document &MOA is the supreme document &

AOA is subordinate to MOA.AOA is subordinate to MOA.


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Every company must have its MOAEvery company must have its MOA

but a company limited by sharesbut a company limited by shares

need not have articles of its own.need not have articles of its own. Any act of the company which isAny act of the company which is

ultra vires the MOA cannot be ratifiedultra vires the MOA cannot be ratified

by the shareholder. Any act of theby the shareholder. Any act of thecompany which is ultra vires the AOAcompany which is ultra vires the AOA

( but intra vires the MOA) can be( but intra vires the MOA) can be

confirmed by the shareholders.confirmed by the shareholders.


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Constructive notice of MOAConstructive notice of MOA

& AOA& AOA

Every outsider dealing with theEvery outsider dealing with the

company is deemed to have notice ofcompany is deemed to have notice of

the contents of MOA & AOA.the contents of MOA & AOA.

These documents on registrationThese documents on registration

become the public documents this isbecome the public documents this is

known as constructive notice of MOAknown as constructive notice of MOA

& AOA.& AOA.


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Office of registrar is a public officeOffice of registrar is a public office

MOA & AOA are open & assessableMOA & AOA are open & assessable

to all. It is the duty of every personto all. It is the duty of every person

dealing with the company to inspectdealing with the company to inspect

these documents & see that it is inthese documents & see that it is inpowers of the co. to enter into thepowers of the co. to enter into the

proposed contract.proposed contract.


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Doctrine of indoorDoctrine of indoor

managementmanagementThere is one limitation to the doctrineThere is one limitation to the doctrine

of constructive notice of MOA & AOA.of constructive notice of MOA & AOA.

The outsiders are entitled to assumeThe outsiders are entitled to assume

that the internal proceedings of thethat the internal proceedings of theco. have been regularly done. Theyco. have been regularly done. They

are presumed to have read theseare presumed to have read these

documents & to see that thedocuments & to see that theproposed dealing is not inconsistentproposed dealing is not inconsistent


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Royal British bank Vs.Royal British bank Vs.

TurquandTurquandThe directors of the co. had issued aThe directors of the co. had issued a

bond to T. they had the power underbond to T. they had the power under

the article to issue such bondthe article to issue such bond

provided a resolution is passed byprovided a resolution is passed bythe shareholders in general meeting.the shareholders in general meeting.

No such special resolution is passedNo such special resolution is passed

by the co. Held T could recover theby the co. Held T could recover theamt on the ground that he wasamt on the ground that he was

entitled to assume that resolutionentitled to assume that resolution

has been passed.has been passed.


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Exception to doctrine ofException to doctrine of

indoor managementindoor management

Knowledge of irregularityKnowledge of irregularity:- If a:- If a

person dealing with the co. knows ofperson dealing with the co. knows of

the irregularity in its internalthe irregularity in its internalmanagement in connection of hismanagement in connection of his

dealings, he cannot claim the benefitdealings, he cannot claim the benefit

NegligenceNegligence:- A person cannot claim:- A person cannot claimbenefit on the basis of beingbenefit on the basis of being

negligent if he has made all enquiriesnegligent if he has made all enquiries


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ForgeryForgery:- The doctrine of indoor:- The doctrine of indoor

management will not apply where amanagement will not apply where a

document on which the person seeksdocument on which the person seeks

to rely is a forgery.to rely is a forgery.

Acts outside the apparent authorityActs outside the apparent authority:-:-this rule doesnt apply where athis rule doesnt apply where a

person acting on behalf of co.person acting on behalf of co.

exceeds any actual authority givenexceeds any actual authority givento him.to him.

Articles of Association (2)

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Transcript of Articles of Association (2)