Articles of Association

1. 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.”

2. 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

3. 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.

4. 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

5. Restrictions imposed on the alteration of AOA • Statutory Restrictions • Alteration must be by a special resolution • Alteration must not be inconsistent with the provisions of the Companies Act • Alteration must not be inconsistent with the memorandum of association • There must be the permission of Central Government to alter the articles • There must be written consent of the members • There must be confirmation by the Tribunal • Judicial Restrictions • The alteration must not be illegal for business • The alteration must be in good faith and for company’s benefit • The alteration must not deprive any person of his right s under a contract • The alteration should not be a fraud on the minority by the majority • The alteration must not cause breach of contract with a third party

7. 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 .

8. 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.

9. Exceptions to the Doctrine of Indoor Management • Knowledge of Irregularity • Negligence on the Part of Outsiders • Forgery

10. 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: • To protect the interest of the shareholders • To protect the interest of third parties

11. 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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