Know about Memorandum and Articles of Associations

1. Presented by
Praveen Kumar
http://praveenpammy.blogspot.com/

2. MEMORANDUM OF ASSOCIATION
“Memorandum of Association of a
company is its charter & defines the
limitations of the powers of a company. It
contains the fundamental condition upon
which alone the company is allowed to be
incorporated”
- Lord Cairns

3. MEMORANDUM OF ASSOCIATION
Definitions
“Memorandum of Association of a company as
originally framed or as altered from time to time in
pursuance of any previous companies law or of this
Act”
Sec.2 (28)

4. MEMORANDUM OF ASSOCIATION
“The purpose of Memorandum of Association is to
enable the share holders, creditors and those who
deal with the company to know what its permitted
range of enterprise is.”
- Lord Macmillan

5. FORM OF
MEMORANDUM OF ASSOCIATION
• Form as given in table B, C, D, & E in Schedule I
• Printed
• Divided into paragraphs
• Numbered consecutively
• Signed by at least 7 persons for public & 2 for
private company. Signatures attested by one
witness. Subscribers shall at least take one share

6. CONTENTS OF MEMORANDUM OF
ASSOCIATION
Six Clauses
Name Registered
Objects
office
Association
Liability Capital or subscription

7. DOCTRINE OF ‘ULTRA VIRES’
The words :
• Ultra means beyond
• Vires means the powers
• Ultra Vires means beyond the powers
A company which owes its incorporation to statutory
authority cannot effectively do anything beyond the
powers expressly or impliedly conferred upon it by the
statute or Memorandum of Association.

8. ASHBURY RAILWAY CARRIAGE & IRON
COMPANY LTD. Y. RICHE
The company has been formed with the object :
• To make and sell, or lend or hire railway carriage
and wagons and all kinds of railway plants, to
carry on the business of mechanical engineers and
general contractors etc.
• The company contracted with Riche to finance the
construction of Railway line in Belgium. The
company repudiated the agreement and was sued
for breach of contract.

9. ASHBURV RAILWAY CARRIAGE & IRON
COMPANY LTD. Y. RICHE
Rich Contended :
• Firstly, that the contract in question came well
within the meaning of the words ‘general
contractors’, and, was therefore, within the powers
of the company, secondly, that the contract was
ratified by the majority of the shareholders.

10. EFFECTS OF DOCTRINE OF ULTRA
VIRES
• Void ‘Ab Initio’
• Injunction
• Personal Liability of Directors
• Acquisition of Property that is Ultra Vires
• Directors personally liable to third parties

11. ALTERATION OF NAME CLAUSE
• Special Resolution.
• Written Approval of Central Government.
• No Approval of Central Government is
necessary if the change of name involves only
the addition or deletion of the word “Private”.
• Change by ordinary resolution and approval of
Central Government when name is identical or
too closely resembles the name of an existing
company.

12. CHANGE OF REGISTERED OFFICE
From one premises to another premises in the
same city, town or village
• By passing a resolution of Board of Directors

13. CHANGE OF REGISTERED OFFICE
From one town or city or village to another town
or city or village in the same state
1. Special Resolution.
2. Confirmation of Regional Director — when
jurisdiction of Registrar of companies is
changed.
3. Copy of (i) & (ii) to be filed with ROC.
4. Notice of new location to ROC within 30
days.

14. CHANGE OF REGISTERED OFFICE
From one state to another state
1. Special Resolution
2. Confirmation of Central Govt.
3. For certain Purposes only
(As given in section 17)

15. ALTERATION OF OBJECTS CLAUSE
A. Special Resolution
B. Alteration is sought on any of these grounds:
• To carry on its business more economically & more
efficiently
• To attain its main purpose by new or improved means
• To enlarge or change the local area of its operations
• To carry on some business which under existing
circumstances may conveniently or advantageously be
combined with the business of the company
• To restrict or abandon any of the objects specified in the
memorandum
• To sell or dispose off the whole or any part of the
undertaking
• To amalgamate with any other company
C. Copy of (A) is filed with ROC within 30 days

16. ALTERATION OF LIABILITY CLAUSE
• The liability of a member of a company cannot
be increased unless the member agrees in
writing.
• From unlimited liability, it can be made limited
by re-registration of the company.

17. ALTERATION OF CAPITAL CLAUSE
• Increase of authorized share capital.
• Consolidation and subdivision of shares.
• Conversion of shares into stock & vice versa.
• Diminution of share capital.

18. ARTICLES OF ASSOCIATION
Definition
‘Article’ means the articles of association of a
company as originally framed or as altered from
time to time in pursuance of any previous
companies laws or of this Act’
Sec.2 (2)

19. ARTICLES OF ASSOCIATION
“…. The articles proceed to define the duties, the
right and the powers of the governing body as
between themselves and the company at large and
the mode and form in which the business of the
company is to be carried on and the mode and form
in which changes in the internal regulations of the
company may from time to time be made.
- Lord Cairns

20. CONTENTS OF ARTICLES
1. The extent to which Table ‘A’ is applicable
2. Different classes of shares and their rights
3. Procedure of making an issue of share
capital and allotment thereof
4. Procedure of issuing share certificates and
share warrants
5. Forfeiture of shares and the procedure of
their re-issue
6. Procedure for transfer and transmission of
shares

21. CONTENTS OF ARTICLES
1. The time lag in between calls on shares conversion
of shares into stock
2. Directors, their appointment, remuneration,
qualifications, etc.
3. Account and audit
4. Lien of shares
5. Payment of commission on shares and debentures
to underwriters
6. Rules for adoption for ‘preliminary contracts’ if
any

22. CONTENTS OF ARTICLES
1. Re-organization and consolidation of shares
capital
2. Alteration of share capital & Buyback of
shares
3. Borrowing power of directors
4. General meeting, proxies and polls
5. Voting rights of members
6. Winding up

23. ALTERATION OF ARTICLES (SEC 31)
Procedure :
• Alteration by passing a special resolution.
• Copy of resolution to be sent to registrar
within 30 days.
• Copy of altered articles to be registered
within 3 months of passing of resolution.

24. LIMITATIONS REGARDING ALTERATION
OF ARTICLES
1. Alteration should not be inconsistent with
a. Provisions of Company Act or any other statute
b. Conditions contained in memorandum
2. Approval of govt. to be obtained in certain cases
3. Alteration must not deprive any person of his rights
under a contract
4. Alteration must not constitute a fraud on the
minority
5. Alteration must be bonafide for the benefit of the
company as a whole

25. BINDING FORCE OF MEMORANDUM AND
ARTICLES (SEC 36)
The following are the legal implications:
• Company is bound to its members
• Each member is bound to the company
• Each member is bound to other members in
exceptional case only
• Neither the company nor the members are bound
to outsiders

26. Memorandum of Articles of Association
Association
Charter of Company Regulations for interal management
Defines the scope of the activities Rules for carrying out the objects of
company.
Supreme document Subordinate to the memorandum.
Must for every company Company limited by shares need
not have it (Table ‘A’ applies)
Strict restrictions, alteration only Can be altered by special
with sanction of central govt./ resolution.
tribunal.
Act, ‘Ultra Vires’ is wholly void & Act ‘Ultra Vires’ (but intra vires the
cannot be ratified. memorandum) can be ratified.

27. DOCTRINE OF CONSTRUCTIVE NOTICE
• Documents are open & accessible to all.
• Presumption that any outsider dealing with
company has read & understood the
documents.
• It is a negative doctrine, acting only against
the outsiders & not the company.

28. DOCTRINE OF INDOOR MANAGEMENT
• Persons dealing with the company in good faith
have a right to assume that the internal
requirements prescribed in public documents
have been observed
• Persons are not bound to enquire into regularity
of internal proceedings
Exceptions :
• Knowledge of irregularity
• Negligence on part of the outsider
• Forgery
• Acts outside scope of apparent authority