ARTICLES OF ASSOCIATION
MEANING
According to section 2(5) of the Companies Act 2013 ‘articles’
means:
The articles of association of a company as originally framed or as
altered from time to time in pursuance of any previous companies
law of this Act. The articles of association contains the rules &
regulations of a company framed for the purpose of management of
its internal affairs. They define the powers of its officers. The
articles are framed for carrying out the aims & objects of the
memorandum of association. The articles of association of a
company are subordinate to & are controlled by the memorandum
of association. The memorandum of association contains only the
fundamental conditions upon which alone the company is allowed
to be incorporated.
Compulsory to have articles. u/s 5(1) & 7(1)(a) of 2013 Act, it is
compulsory for every company to have its own articles & file the
same with ROC for registration.
MODEL FORM OF ARTICLES
Schedule 1 to the Act gives various model forms of
Memorandum of association & articles of association
for various types of companies. The schedule is
divided in to tables which serve as a model for
various companies.
Articles of a public company limited by shares:
section 5(7) provides that a company may adopt all
or any of the regulations contained in the model
articles applicable to such company. Therefore, a
company may either:-
1.
2.
3.
Formulate & register articles of its won within the
provisions of the Act & the memorandum of
association; or
Adopt all or any of the regulations contained in the
model articles (table F); or
Partially adopt table F & also have its own articles.
Articles of a private company: a private company
must have articles of its own which must contain the
restrictions as provided in section 2(68) of the
Companies Act, 2013. therefore , without following
these restrictions in its articles it can’t have the
status of a private company. The company shall have
a minimum paid up capital as may be prescribed
from time to time under the Companies Act, 2013.
It further1) Restricts the right to transfer its shares;
2) Except in case of one person company, limits the
number of its members to 200:
provided that where two or more persons hold one or
more shares in a company jointly, they shall, for the
purposes of this clause, be treated as a single member.
Following shall not be included in the number of
members:
a) Persons who are in the employment of the company; &
b) Persons who, having been formerly in the employment
of the company, were members of the company while
in that employment & have continued to be members
after the employment ceased,
3) Prohibits any invitation to the public to subscribe for
any securities of the company.
Articles of guarantee & unlimited companies
As per section 5(6) of the Act the articles of
association of any company, not being a company
limited by shares, shall be in such one of the
Forms in tables G, H, I & J in schedule I as may be
applicable, or in a form as near thereto as
circumstances admit. The articles of the above
types of companies, which do not have share
capital, may follow the pattern as prescribed in
the act as under:Table ‘G’- articles of association of a company
limited by guarantee & having a share capital.
Table ‘H’- Articles of association of a company
limited by guarantee & not having share capital.
Table ‘I’- Articles of association of an unlimited
company & having a share capital.
Table ‘J’- Articles of association of an unlimited
company & not having share capital.
Printing & signing of articles [section 7(1)(a)]. The
articles must be printed & divided in to
paragraphs, numbered consecutively. The Articles
of Association printed on computer laser printers
should be accepted by the Registrar for
registration of a company provided they are neatly
& legibly printed.
CONTENTS OF ARTICLES
The Articles of a company may contain whatever rules the
members decide should regulate the business of the
company. Utmost care must be taken to prepare the
articles of association of the proposed company. Everything
stated in the articles is subject to the Companies Act. The
articles can’t authorize anything expressly or impliedly
forbidden by the act. Any clause which is contrary to the
provisions of the act is simply inoperative & void.
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Example:- the articles provided that no winding up petition
could be presented without the consent of two directors or
unless a resolution to wind up was passed at a general meeting
or the petitioner held one – fifth of the share capital. None of
these conditions was fulfilled . Held, the restrictions were
invalid & the petition could be presented. [Re Peveril Gold
Mines ltd. (1898) 1. ch.122 C.A.].
The articles usually contain rules regarding
following matters:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Adoption of preliminary contracts.
Allotment of shares.
Lien on shares.
Forfeiture of shares.
Conversion of shares in to stock.
Meetings.
Borrowing powers.
Accounts & audit.
Calls on shares.
Alteration of capital.
ALTERATION OF ARTICLES (SECTION 14)
A company has a statutory right to alter its articles
of association. The company contract itself out of
its inherent statutory power to alter its articles &
provide that any of its articles are remain unaltered.
Thus, a provision in the articles that no alteration of
articles shall be made without the consent of X is
contrary to the provisions of Companies Act & is
therefore ineffective or void. A company can never
replace its articles. It is only regulations contained
therein which may be changed.
ALTERATION OF ARTICLES UNDER ORDER OF THE
NATIONAL COMPANY LAW TRIBUNAL (SECTION 241-242)
The alterations made under an order of the tribunal
shall have the same effect as if they were made by
the company in accordance with the act. The
company must file a certified copy of the order with
the Registrar within 30 days of the issue of that
order.
Procedure: subject to the provisions of the Act & to the
conditions contained in its memorandum, a company may
by a special resolution alter or add to its articles. The
company must file with the registrar a copy of the special
resolution within one month from the date of its passing.
The altered articles will bind the members in the same way
as did the original articles. A company can alter its articles
of association at any time by passing a special resolution.
LIMITATIONS ON POWER TO ALTER ARTICLES
Must not be against the provisions of Act.
 Must not be inconsistent to the
Memorandum.
 Must not sanction anything illegal.
 Not be inconsistent with any alteration
made by Tribunal [sec. 404].
 Approval of Central Government for
conversion of public company into private
company.
 No increase in the liability of members.

Alteration by special resolution only.
 Should not cause breach of contract.
 Must be for the benefit of the company.
 Fraud on the minority.
 Retrospective alteration.
 Articles cannot be made unalterable.
 An alteration of articles with permission
of Central Government only section 14.
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BINDING EFFECT OF MEMORANDUM & ARTICLES
This section aims to impart contractual force to
the memorandum & articles. The effect of these
provisions is to constitute through the
memorandum & the articles of association of a
company a contract between each member & the
company. The effect & the implications of this
section may be appreciated by considering how far
the memorandum & the articles bind1. The members to the company,
2. The company to the members,
3. The members inter se,
4. The company to the outsiders.
CONSTRUCTIVE NOTICE OF MEMORANDUM &
ARTICLES OF ASSOCIATION
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The memorandum & articles of association of every
company are required to be registered with the
Registrar of Companies. The office of the registrar is a
public office & consequently the memorandum & the
article on registration become public documents. They
are open & accessible to all.
These documents are open for public inspection on
payment.
Every one dealing with the company, whether a
shareholder or an outsider is presumed to have read the
two documents. He will be presumed to know the
contents of these documents. This deemed knowledge
of the two documents & their contents is known as the
constructive notice of memorandum & articles.
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The parties dealing with the company must be taken not
only to have read these documents but also to have
understood them according to their proper meaning.
When a person deals with a company in a manner which
is inconsistent with the provisions of the memorandum
or articles, or enters into a transaction which is beyond
the scope of the powers of the company, he must take
the consequences in respect of such dealings.
Example- the articles of a company required that all
deeds & other important documents should be signed by
the managing director, the secretary & a working director
on behalf of the company. The plaintiff accepted a deed
of mortgage executed by the secretary & the working
director only. It was held that the plaintiff could not claim
under this deed as the bond was invalid. The court
applied the doctrine of constructive notice in favors of
the company.[kotla Venkataswamy v. Ram Murthi AIR
1934 Mad. 579].
DOCTRINE OF INDOOR MANAGEMENT
The doctrine of indoor management is an exception to
the rule of constructive notice. A person dealing with a
company is deemed to have knowledge of the
memorandum & the articles of association of the
company. So, if he enters into a transaction with the
company which is ultra virus of the memorandum or
articles, he can’t treat the transaction as binding on the
company. On the other hand, if the transaction appears
to be proper one , when compared with the
memorandum & articles, it would be grossly unfair if the
company could escape liability under it by showing that
there was some irregularity in the conduct of the
company’s affairs leading up to the transaction, when
the other party did not know of the irregularity & has no
means of discovering it.
ROYAL BRITISH BANK V. TURQUAND (1856) 6E & B. 327].
Point decided is:- the outsiders dealings with the
company are entitled to presume that as far as
the internal management of the company is
concerned, every thing has been regularly done.
Facts of the case are: The articles of a company stated that the
directors could borrow money on behalf of the
company, if they are so authorized by a
resolution passed by the shareholders in
general meeting.
The directors borrowed money from Mr. T without
obtaining any authorization from shareholders.
 T had lent the money to the company assuming
that the shareholders had authorized the directors
to borrow money as per the requirements of the
articles.
 It was held that borrowing of money by the
directors without any authorization from the
shareholders amounted to a mere internal
irregularity & further held that Mr. T could sue the
company on the strength of the bond as he was
entitled to assume that necessary resolution had
been passed.
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EXCEPTIONS
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Knowledge of irregularity.
Negligence.
Forgery.
Acts outside the apparent authority.
No knowledge of the contents of
articles.
COMPANY SECRETARY’S DUTIES FOR ALTERATION OF
AOA
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Board meeting
Consent of members
General meeting
Validity of ordinary resolution
Special resolution
Changes in articles must be given in explanatory
statement
Alteration regarding directors
Conversion of public company into private company
Copy of articles
Stock exchange
Noting of alteration