ARTICLES

OF
ASSOCIATION
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
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
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

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.

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.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..

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
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
 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
 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
 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
 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

DOCTRINE OF CONSTRUCTIVE
NOTICE
A person 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

Evenif he has not inspected these documents he would be

assumed to have done so

Doctrineof constructive notice is not feasible for practical

businesspersons
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
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
 DIFFERENCES
BETWEEN
MEMORANDUM OF
ASSOCIATION(MOA) &
ARTICLES OF
ASSOCIATION(AOA)
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
AoA
 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
MoA
 Cannot be easily altered
 Acts ultra vires
Memorandum are void
 No remedy against
company for contracts
entered into ultra vires
the memorandum
AoA
 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