Articles of Association Second document to be registered along with Memorandum of

Association Companies which must compulsorily have Articles of Association

are Unlimited companies Companies limited by guarantee Private companies limited by shares

Contains rules, regulations and by-laws for administration of the Company

Schedule I contains various formats and tables

FORM AND SIGNATURE OF ARTICLES (Section 30) Divided into paragraphs each for one regulation Signed by each subscriber in the presence of attesting witness

CONTENTS OF ARTICLES All regulations

Eg. Relations of members inter se Freedom to put any stipulation but according to Companies Act

but otherwise void

ARTICLES IN RELATION TO MEMORANDUM Articles subordinate to Memorandum of Association In case of inconsistency the Articles must give way

MEMORANDUM OF ASSOCIATION

ARTICLES OF ASSOCIATION

Nature States the purposes of the Company

The manner in which the Company is to be carried on

Alteration Altered with sanction of the Company Law Board

Altered by Special Resolution

Ultra Vires Beyond its scope is Ultra Vires

Beyond its scope is merely irregular

Articles of Association can be used to explain Memorandum of Association

BINDING FORCE OR ARTICLES OF ASSOCIATION AND MEMORANDUM OF ASSOCIATION(Section 36)

Once Company is registered Memorandum of Association and Articles of Association have the binding force of Contractsa) Binding on members in their relation to Company

Members bound to Company by Articles of Associationb) Binding on Company in relation to members

Company is bound to its members by Articles of Association

c) Not binding in relation to outsiders Articles of Association constitute contract between

Company and a third personBrowne vs. La Trinidad – director not removable till 1888

Who is an outsider? Outsider means who is not a member Member as well as outsider in individual capacity

d) How far binding between members Moot point

ALTERNATION OF ARTICLES Section 31 -> by special resolution No clause saying Articles of Association cannot be changed Alteration subject to

a) Memorandum of Associationb) Companies Act

No retrospective effect

Alteration against Memorandum of Association Is not valid

Alteration in Breach of Contract Valid unless there is independent Contract, liable in

damages

Increasing liability of members Eg. Members not to buy more shares

Fraud on Minority Shareholders

CONSTRUCTIVE NOTICE OF MEMORANDUM OF ASSOCIATION AND ARTICLES OF ASSOCIATION Memorandum of Association and Articles of Association

registered with the Registrar of Companies -> Public Office, therefore, become Public Documents

Therefore presumed to know, that is, constructive notice And presumed to have understood Disclosure philosophy

Statutory Reform of Constructive Notice Europe and England – this provision is abrogated

DOCTRINE OF INDOOR MANAGEMENT – TURQUAND RULE Scope of Operation

Opposed to the rule of Constructive Notice Above protects Company against outsiders and latter

protects outsiders against Company

Exceptions1. Knowledge of Irregularity

Knowledge may arise from the fact that the person was a party to inside procedure

2. Suspicion of Irregularity Suspicious circumstances would invite enquiry

3. Forgery4. Representation through Articles

When Articles confer Power of Delegation it can be assumed delegation has taken place

Duties consistent with that of a Director Ostensible authorities Within scope of authority

5. Acts outside Apparent Authority Not binding