Presented by:-

Prince kumar(49)
Shikha bhatia(16)
Sarita(28)
Important document prepared by promoters and
filled with the registrar of companies along with
other documents.

It is mandatory under the provisions of the Indian
Companies Act 1956.

Contains rules that govern the management of
the internal affairs of the company.
AOA Defines :-
the procedure for achieving the objects.

the limitations within which the company must
function.

rights of various parties

It cannot violate its Memorandum Of
Association(MOA)
According to Justice Charlesworth

The Articles of association is a document
regulating the rights of a members of the
company among themselves and the manner in
which the business of the company shall be
conducted.
Define the rules and sub-rules

Establish relation between the company and its
shareholders

Helps in dealing

Limit the companys action
Registration is not necessary in case of public
company limited by shares:-
Necessary to write on MOA that the registered
without the Articles
Table A


Completely
applicable
Silent
issues
Registered
Private company limited by shares:
Provisions under sec (b) and sec (c)

Restrict the right to transfer the company shares
Limit the members to 50
Prohibit any invitation to the public

A company limited by guarantee

Mandatory to get AOA, it should also state the
members with which the company is to be
registered.

An unlimited company

Table D: for company with share capital limited
by guaranteed

Table E: for unlimited companies.
Applicability of table A
Rules for contracts
Rights of the holders of shares
Issue of share capital and its allotment
Minimum subscription allowed
Procedure for issuing share certificate
Forfeiture of share, and re issue
Reorganisation and consolidation of share capital
Time lag in between calls and shares

Payment of commission of shares
Lien on shares
Conversion of shares into stock
Rules governing the proxy voting in the company
meetings
Payment of dividend and creation of reserves
Powers, duties, remuneration of directors
Borrowing powers of directors
Use of common seal of the company


Keeping of books and audit
Powers, duties, remuneration of auditors
Capitalization of profits
Board meetings and proceedings
Rights of BODs
Rules governing reserves and funds
Arbitration provisions
Winding up.

Every company has the right to alter its articles of
association
There is no bar to the alteration of the articles of
association
According to section 31(1), a company may
subject to the provisions of the act and to the
conditions contained in its memorandum, alter its
articles by a special resolution.
Under special circumstances, some
restriction have been imposed on the
alteration of articles. These are-

1. Statutory Restrictions

2. Judicial Restrictions

3. Procedural restrictions
a) Alteration must be by a special resolution
according to section 31 no alteration can be made by an
ordinary resolution

b) Alteration must not be inconsistent with the
provisions of the companies act- section 31

c) Alteration must not be inconsistent with the
memorandum of association




d) There must be the permission of central
government to alter the articles in situations-
when the articles are amended to convert a
public company into private company- section
31
To increase the number of directors of
company- section 259
Alteration relates to managing whole-time or
non-rotational directors of company- section
268
Alteration is for increase in remuneration of
directors section 310
e) There must be written consent of the
members( section 268)
f) There must be confirmation by the tribunal
where an order makes any alteration in the articles
of company, the company does not have the power
to make any alteration which is inconsistent with
the order except with the permission of tribunal-
section 404

(a) The alteration must not be illegal for
business

(b) The alteration must be in good faith and
for company's benefit
Case of Side bottom vs. Kershaw leese and
co.
(c) The alteration must not deprive any person
of his rights under a contract
Case of Allen vs. The Gold Reefs of West
Africa Ltd.
in case a person makes a contract purely on
the terms of articles, the alteration shall be
valid
Case of C.Chettier vs. Krishna Aiyangar

(d) The alteration should not be fraud on the
minority by the majority
Case of Menier vs. Hoopers Telegraph Works

(e) The alteration must not cause breach of
contract with a third party
(a) Copy of special resolution must sent to
registrar of companies with in 30 days
after passing resolution- section 192(1)
(b) Within one month of obtaining the
approval of central government , a printed
copy of altered articles must sent to
registrar. In case of default fine of Rs.500
for each offence- section 39
(c) If a member of company makes an
application and deposits re 1 for each
copy, company must provide such member
copy of altered articles with in seven days

(d) All alterations must be included in the
copy of articles of association. if a
company issues any copy of articles which
are not in accordance with the alteration
defaulter shall be punishable with a fine
of Rs 100 for each copy so issued
- section 40
1. Each member is bound to the company-
Case of Boreland Trustees vs. Steel Brothers
and Co. Ltd
2. Company is bound to its members- if the
companys act damages the interests of
any of its members, he can sue the
company
Case of Johnson vs. Lyttles Iron Agency

3. Each member is bound to other members
inter se-
No express agreement between members
of the company inter se because no
member is allowed to sue another directly
for any wrong done to company, can only
do through the company
If company refuses to permit such action,
the member can initiate the proceedings
in his personal capacity
CASE- Dhakeshwari Cotton Mills vs.
Nilkamal
4. Company is not bound to outsiders-
The memorandum and articles of association
do not create any contractual relation with
outsiders unless a contract is made by the
company
CASE- Eley vs. Positive Government
Assurance Co.
According to section 610 of the companies
act, the MOA and AOA after they have been
registered by the registerar of companies, are
deemed to be public documents. A public
document is one which is open to inspection by the
public. Whether the person studies AOA or not, it
is assumed that he has read and understand the
contents of the companys AOA, and is deemed to
have dealt with the company at his own risk. This
assumption is called The Constructive Notice.
It is the legitimate right of an outsider to
assume that the company has correctly carried
out the internal procedure that will have a
direct bearing on any transaction he does with
the company, and he need not enquire or
investigate if it has been done.
The assumption or belief on the part of
an outsider dealing with a company is
referred to as the Doctrine Of Indoor
Management.

ROYAL BRITISH BANK V/S TURQUAND

Directors had authority to issue bond against a loan if
resolution was passed

The directors issued a bond to the Turquand, but no
resolution was passed.

Turquand can sue the co, in case of bond because he
can assume that the co. must have passed this
resolution.


The company internally must act according to the
provisions of its articles.
The outsider need not investigate if the meeting that
passed the required quorum.
The outsider also need not investigate if the board of
directors has acted within its powers when it look its
decision, and whether the decision conforms to the
companys internal procedure.

Knowledge Of Irregularity

Negligence On Part Of Outsiders

Forgery

Such acts of a company which are
beyond the scope of the companys
memorandum and articles are referred to as
ultra-vires. Such an act , which is beyond the
company rights defined in its memorandum,
is void and the law does not recognize it.
Even if all the members of the
company agreed to support the companys
action ,it is not legally valid or acceptable.


To protect the interest of the shareholders.

To protect the interest of third parties.

Void contract

Injunction

Personal liability of Directors

Ultra-vires acquired property

Breach of warranty of authority

Ultra-vires torts