Articles of Association
Contains the rules , regulations and by laws of the general
administration of the company.
It need to be registered along with the memorandum.
S.26-The companies which must have AoA
Unlimited companies
Companies limited by guarantee
Private company limited by shares
Not mandatory for public companies
S.27-Mandatory regulations in AoA of Unlimited companies,
guarantee company and private company limited by shares.
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Features of Articles of Association
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It constitute a contract between the shareholders &the company.
And between the members interse.(s.36-effect of MoA &AoAbinding force of MoA &AoA).
Articles must not conflict with the provisions of the Act or any
other law for the time being in force.(s.9 gives overriding effect
to the act)
Examples-s.439-petition for winding up of a company in
certain cases S.205- no dividend shall be paid by the
company except out of the profits- company can not
incorporate any clauses in the AoA to do away with or it
can not exclude these provisions.
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Sch.1 of the Companies Act contains model
forms of memorandum and Articles of AoA
• A company limited by shares may either frame
its own set of articles or may adopt all or any of
the regulations contained in Table- A(S.28(1)
• Other companies may adopt Table C,D or E to
Sch.1
• Form and signature of Article is contained in
s.30
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Articles must not contain anything the
effect of which is to alter a condition
contained the memorandum or which is
contrary to its provisions.
• AoA is subordinate to MoA
• If there is a conflict between AoA and
MoA MoA would prevail over it.
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Alteration of Articles of Association-s.31
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Every company have the power to alter its articles of association
by a special resolution .
Limitations on the power of alteration
1)It must not be in contravention of the provisions of the Act.
2) The power of Alteration in the article is subject to the
conditions contained in the MoA.
3)An Alteration can not require a member to purchase more
shares or increase his liability in any way except with his consent
in writing.(s.38- effect of alteration in the MoA or AoA)
4)Alteration must not constitute a fraud on the Minority
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Alteration in the Articles as to converting a
public company into private companyapproval of the central govt. Proviso to
S.31(1)
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Restriction on Alteration of AoA- cases
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Allen v. Gold reef of west AfricaLtd[1900]1Ch.656
Greenhalgh v. Adrene Cinemas Ltd [1951]1Ch.286
Peter’s American Delicacy v.Heath(1938)61CLR 457
Gambatto v. WCP Ltd (1995)182 CLR 432
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Doctrine of constructive notice
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Every person dealing with the company was treated
as having the knowledge of the contents of the
memorandum. (Public documents of the company).
It seeks to protect the company against the outsider.
Imputation of knowledge –whether the party
concerned has actual knowledge or not.
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A member of the company can sue for an
injunction to restrain the company or its
directors from doing an ultra vires act.
• All contracts made by the company for an ultra
vires purpose are void and can not be ratified
and validated by any kind of resolution passed
by the general meeting of the company or even
with the unanimous consent of its members.
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Doctrine of indoor management
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The rule in
Royal British bank.Turquand(1856)
Persons dealing with the company are assumed to
have read the public documents of the company and
to have ascertained that the proposed transactions
are not inconsistent there with, they are not required
to no more ,they need not inquire into the regularity
of the internal proceedings and may assume that all
is being done regularly.
It operates to protect outsiders against the company.
The rule is beneficial for convenience in business
relations.
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• An outsider is presumed to know the constitution of
a company, but not what may or may not have taken
place within the doors that are closed to him.
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The Rule in Turquand may extend to
• A)A defective appointment of the director or a
director continuing to act for the company after
he cease to be a director
• B) Failure to hold a properly convened board
meeting to authorize the transaction
• C) Disregard of the limitations imposed on the
directors authority by the MoA or AoA
Exceptions to the rule in Turquand’s case
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1)Persons having knowledge of irregularity
2) Persons on inquiry
3) Forgery