MEMORANDUM

OF ASSOCIATION
AND ARTICLE OF
ASSOCIATION
 GROUP MEMBERS
04-RENU BALANI

22-SUYOG KARDE

23-HANISHA KATARIYA

25-SHIVDEEP KAUR

26-SNEHA LULLA

48-MANMEET SINGH TAMBER

MEANING AND DEFINITION
 S.2(56) defines Memorandum: “means the
memorandum of association of the company as
originally framed or as offered altered time to time in
pursuance of any previous company law or of this act.”
 Legal document that specifies the scope of business
activities of the company.
 States the aims, object and purpose behind formation.
 For shareholders and stakeholders.
 Determines the area of operation.
 CLAUSES OF MEMORANDUM OF
ASSOCIATION
✓ Name Clause
✓ Registered Office Clause
✓ Object Clause
✓ Liability Clause
✓ Capital Clause
✓ Association Clause
 Regist-
Name
Clause ered
Office

ALTERATIONS
OF
Object
MEMORANDUM Clause
OF
ASSOCIATION
Capit- Liabilit
al -y
Clause Clause
 OBJECT
CLAUSES AND
DOCTRINE OF
ULATRA-VIRES
 OBJECT CLAUSE
 THEOBJECT CLAUSE
DETERMINES THE PURPOSE
OF THE COMPANY.
 IT STATES WHAT THE
COMPANY CAN OR CANNOT
DO.
 DOCTRINE OF ULTRA-VIRES
 AN ACT OF THE COMPANY WHICH IS BEYOND
THE SCOPE OF OBJECT CLAUSE IS CALLED
ULTRA VIRES.
 ULTRA = BEYOND.
 VIRES = POWERS.
 ASHBURY RAILWAY CARRIAGES AND WAGONS
COMPANY V/S RICHE ( 1875 ) LR & HL 653.
EFFECTS OF ULTRA VIRES TRANSACTIONS

Contract Liability
void for torts

Directors
Property personally
acquired liable

Injunction Ultra-Vires
Borrowings
ARTICLES OF
ASSOCIATION
 MEANING AND DEFINITION
 “The article of association is a document regulating the
rights of members of the company among themselves
and how the business of the company shall be
conducted.”
 Section 2 (5) defines articles “as articles of association
of a company as originally framed or as altered from
time to time or applied in pursuance of any previous
companies law or of this act.”
 Corresponds to s.2(2) of 1956 Act.
TABLE FORM
F of a company limited by shares

of co. limited by guarantee and having a share

G capital

of a company limited by guarantee and not having a

H share capital

I of unlimited company and having a share capital

of an unlimited company and not having a shared

J capital
 AOA OF A COMPANY SHOULD

Be divided
Be into Be signed
paragraphs by each
printed numbered subscriber
consecutively
 CONTENT OF AOA
 Exclusion wholly or in part
of table F.
 Rules for the adoption of
‘preliminary contracts’.
 No. and value of shares.
 Issue & allotment of shares.
 Calls & lien of shares.
 Voting rights & proxies.
 Rights of the board of
directors.
 Use of common seal of the
company.
 Winding-up.
 Borrowing powers etc.
S.5(3) states entrenchment as: “ the articles may contain
provisions for entrenchment to the effect that specified
provisions of the articles may be altered only if the
conditions or procedures as that are more restrictive
then those applicable in case of a special resolution, are
met or complied with.”
 ALTERATION OF AOA
 Statutory rights:
1. Only by passing a special resolution.
2. Must not be inconsistent with the provisions of the Companies Act.
3. Must not be inconsistent with the memorandum of association.
4. Must not contain anything illegal.
5. Alteration should not be a fraud on the minority shareholders by the majority
shareholders.
6. There must be the permission of the central government to alter the articles.
7. Alteration must be in good faith and for the company’s benefit.

 A new copy of articles of association should be registered with the

registrar within 15 days of approval.
 DISTINGUISH
MEMORANDUM
 Consists of the fundamental
condition for the incorporation.
 Dominant instrument for the
existence of the company.
 Altered by special resolution
and with sanction of the Central
Govt.
 Acts against memorandum is
incapable and is null and void.
ARTICLES
 Internal regulation for the system
of manner.
 A subordinate for the
memorandum for internal
functioning.
 Altered simply by a special
resolution.
 Acts against articles is an
irregularity and can be rectified.
EFFECTS OF MEMORANDUM AND ARTICLES

 TheMemorandum, articles and the members are

held together respectively signed by the
company.
 Eachmember is contracted to another provided
by certain rights of Articles.
 All
outsiders are supposed to read the articles of
company and consider to be acknowledged of the
contents of memorandum and articles.
DOCTRINE OF CONSTRUCTIVE RULE
 ANAND BIHARI LAL V DINSHAW & CO. LTD.
➢ An accountant of the company entered into a contract with a
third party to sell the property of the company.
➢ It was held that the third party could not held that a accountant
can have the authority to sell the property of the company.
➢ And thus third party could not enforce such contact against the
company even the third party acted in good faith.
DOCTRINE OF TURQUAND RULE
 ROYAL BRITISH BANK vs. TURQUAND
➢ Articles of the company stated that the director’s of the company could borrow
money on behalf of the company, of they are authorized by a resolution passed by
shareholders in a General Meeting.
➢ Directors borrowed money from Mr. Turquand without obtaining any authorization
from the shareholders.
➢ Turquand had lent the money to the company assuming that the authorization from
shareholders has been taken.
➢ It was held that money borrowed by the directors without the authorization from
the shareholders amounted to mere internal irregularity and thus Mr, Turquand
could recover the loan.
 Doctrine of Turquand Management can be extended to cover forgery. As
forgery is an absence of consent.
 CONCLUSION
 The Memorandum of Association and the Article
of Association are the guiding force of the
company.
 The company has to abide by the rules before the
incorporation of the company and after the
incorporation.
 It has to update its articles as per the law.
 Proper alteration procedure should also be
followed.
Thank
You