articles of association “ the articles of association is a document regulating the rights of...

Articles of Association

“ The articles of association is a document regulating the rights of members of the company among themselves and the manner in which the business of the company shall be conducted.”

Forms of Articles of Association

• Table A- for public Companies with share capital limited by shares.

• Table C- for companies without shares.• Table D- for companies with share capital

limited by guarantee.• Table E- for unlimited companies

The Articles of Association of a company should:

• Be printed• Be divided into paragraphs numbered

consecutively• Be signed by each subscriber of memorandum

of association in the presence of at least on witness.

Contents of Articles of Association

• The extent to which the rules of ‘table A’ Shall be applicable• Rules for adoption of ‘preliminary contracts’• Minimum subscription allowed• Lien on shares• Use of Common Seal of the company• Rights of Board of Directors• Winding up• Borrowing powers of directors• Conversion of shares into stock• Arbitration provisions

Restrictions imposed on the alteration of AOA

• Statutory Restrictions1. Alteration must be by a special resolution2. Alteration must not be inconsistent with the provisions of the Companies Act3. Alteration must not be inconsistent with the memorandum of association4. There must be the permission of Central Government to alter the articles5. There must be written consent of the members6. There must be confirmation by the Tribunal• Judicial Restrictions1 The alteration must not be illegal for business2 The alteration must be in good faith and for company’s benefit3 The alteration must not deprive any person of his right s under a contract4 The alteration should not be a fraud on the minority by the majority5 The alteration must not cause breach of contract with a third party

Company is bound to its members

Each member is bound to other members inter se

Company is not bound to outsiders

BINDING Force of Memorandum and

Articles

Doctrine of Constructive Notice

According to this Doctrine, it was assumed that any person who deals with a company has not only read the company’s memorandum and articles but has understood their contents so that he knows what are the company’s limitations and its powers , and can protect himself from any possible loss .

Doctrine of Indoor Management

• According to the Doctrine of indoor management outsiders dealing with the company are only required to be sure that the proposed dealings are apparently regular and consistent with the memorandum and articles. They need not enquire into the regularity of the internal proceedings of the company.

Exceptions to the Doctrine of Indoor Management

• Knowledge of Irregularity• Negligence on the Part of Outsiders• Forgery

Doctrine of ultra vires

• Such acts of a company which are beyond the scope of the company’s memorandum and articles are referred to as ultravires.

• This provisions of law has two main objectives:1. To protect the interest of the shareholders2. To protect the interest of third parties

Effects of Ultra vires Transaction

• Void Contract• Injunction• Personal Liability of Directors• Ultra vires Acquired Property• Breach of Warranty of Authority• Ultra vires Torts

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