Professional Documents
Culture Documents
Chapter 18
Memorandum & Articles of Association
1. Name Clause
2. Registered office (Domicile) Clause
3. Objects Clause
4. Liability Clause
5. Capital Clause
6. Subscription Clause
Capital clause states the amount of share capital with which the
company is to be registered
Through the said declaration they also agree to take the shares
placed against their respective names.
The Articles of Association or say just ‘Articles’ is the chief instrument which contains
the rules and regulations for the internal administration of the company.
Articles govern the conduct of a company’s business by specifying the rights and
duties of its members and directors.
Contents: The items usually covered by the ‘Articles’ include/concern the following:
1. Powers, duties, rights & liabilities of directors 8. Calls on shares
2. Rights, duties, & liabilities of members 9. Transfer/Transmission of shares
3. Rules for meetings of the company 10. Forfeiture of shares
4. Dividends and reserves 11. Surrender of shares
5. Borrowing powers of the company 12. Voting powers of members
6. Share warrants; 13. Accounts and Audit
7. Alteration of capital 14. Winding up, etc.
However, a company may adopt any one of the model forms of articles, with or
without modifications, specified in Tables F, G, H, I and J of Schedule I to the Act,
as applicable.
If a company limited by shares does not have its own articles, the model set of
99 articles given in Table F can be adopted.
Table G is applicable to the companies limited by guarantee and not having a
share capital, and
Table H gives model form of articles to a company limited by guarantee and
having a share capital.
Table I is applicable to unlimited company hare capital and Table J shall be
applicable to an unlimited company and not having share capital.
A company can alter or amend any of the provisions of its articles subject to
provisions of the Act and subject to the conditions contained in its
Memorandum.
A company by special resolution can alter its articles provided the said
resolution is passed bona fide for the benefit of the company.
An alteration of articles can be effected by a 3/4th majority of the shareholders
but can be challenged on the ground that the alteration was not in the interest
of the company.
However, such alteration should not have the effect of converting a public co.
into a private one without approval of Central Government.
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Doctrine of Ultra-Vires
The Latin term ultra-vires means to describe an act which is beyond the
powers.
Any transaction, which is not set out in the object clause of the
company’s memorandum and is not necessarily or reasonably incidental to the
attainment of the object(s), is ultra-vires the company and therefore void (i.e.,
of no legal effect).
Consequences of an ultra-vires Act
As stated earlier since an ultra-vires act is devoid of any legal effect:
The company cannot sue any person for enforcement of any of its rights and
vice versa.
The directors of the company may be held personally liable to outsiders for an
ultra-vires act.