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A document that specifies the regulations for a company's operations. The articles of association define the company's purpose and lays out how tasks are to be accomplished within the organization, including the process for appointing directors and how financial records will be handled.
CONTENT OF AOA
The amount of share capital and different classes of shares. Rights of each class of shareholders. Procedure for making allotment of shares. Procedure for issuing share certificates. Procedure for forfeiture and reissue of forfeited shares. Procedure for conducting meetings, voting, quorum and proxy. Procedure for appointment, removal and remuneration of directors. Procedure for declaration and payment of dividend. Procedure regarding alteration of share capital. Procedure regarding winding up of the company.
ALTERATION OF ARTICLES
Companies have wide powers to alter their articles. Any restriction on the exercise of their powers will be invalid. Articles of association may be altered by a company by passing a special resolution to that effect. The altered articles will bind the members in the same way as did the original articles. The company must file with the registrar a copy of the special resolution within one month from the date of its passing.
1. The alteration must not be inconsistent with or go beyond the provisions of the memorandum. 2. The alteration must not provide for anything which is opposed to the provisions of the act; for example, articles cannot authorize a company to purchase its own shares. 3. The alteration of articles must be made in good faith for the benefit of the company as a whole. 4. The alteration of articles must not constitute a fraud on minority. 5. An alteration in the articles which causes a breach of contract with an outsider will be inoperative. 6. The alteration must not sanction anything which is illegal.
DOCTRINE OF CONSTRUCTIVE NOTICE
The doctrine of constructive notice is a legal idea which means has the person been notified, whether they know it or not. Notification doesn't necessarily mean that this person has been specifically notified, only that this information is available, in a recognized way, such that the doctrine of constructive notice requirements are met in your legal system, and therefore it is assumed that this person knows this information.
DOCTRINE OF INDOOR MANAGEMENT
The Doctrine of indoor management is a presumption on the part of the people dealing with the company such as the shareholders that the internal requirements with regard to the articles of association and memorandum of association have been complied with. The doctrine helps in protection of external members from the company and states that the people are entitled to presume that the internal proceedings are as per the documents submitted with the registrar of companies. They are not allowed to go into the procedural aspect, such as the fact that the internal proceedings might not happen regularly, or what are the proceedings before the directors, in an extraordinary general meeting.
Royal british bank v/s Turquand
FACTS:Mr Turquand was the official manager (liquidator) of the insolvent ‘Cameron’s Coalbrook Steam, Coal, and Swansea and London Railway Company’. It was incorporated under the Joint Stock Companies Act 1844. The company had given a bond for £2000 to the Royal British Bank, which secured the company’s drawings on its current account. The bond was under the company’s seal, signed by two directors and the secretary. When the company was sued, it alleged that under its registered deed of settlement (the articles of association), directors only had power to borrow what had been authorised by a company resolution. A resolution had been passed but not specifying how much the directors could borrow.
JUDGEMENT:Sir John Jervis CJ, for the Court of Exchequer Chamber affirmed the Queen’s Bench and said that it was valid, so the Royal British Bank could enforce the terms of the bond. He said the bank was deemed to be aware that the directors could borrow only up to the amount...