ARTICLE OF ASSOCIATION

Meaning
Articles are the rules, regulations, and bye laws for the internal management of the affairs of a company. They are framed with the object of carrying out the aims & objects as set out in the MOA. It must be signed by the subscribers of the MOA & registered along with MOA.

Contents Of Articles
Share capital, rights of shareholders, payment of commission, share certificates, Calls on shares, Transfer & Transmission of shares, Forfeiture of shares, Number & value of shares, Share warrants, General meetings & proceedings, Voting rights of member, proxies, Directors, their appointment, remuneration, qualification, power & proceeding of BOD, Dividends & reserves, Accounts, audit & borrowing powers, Winding up.

Alteration of AOA
A co. by passing a special resolution, alter its AOA. A copy of every special resolution shall be filed with the registrar within 30 days of its passing.

Limitations to alteration
The alteration must not go beyond the provisions of companies act. Must not conflict with MOA Must not sanction anything illegal Must be for the benefit of the company Must not increase the liability of members Alteration by special resolution only. Should not cause breach of contract :

 British Murac Rubber Syndicate Ltd v. Alperton Rubber Co Ltd Company A entered into a contract with company B whereby it was agreed that as long as company A held 5,000 shares of company B, company A should have right to nominate 2 directors in company B. It was also agreed that company B cant alter this right of company A.

company B gave a notice of meeting at which it was proposed to pass a resolution to alter the articles & depriving company A of the right to nominate. The court issued an injunction restraining company B from altering the Articles

Distinction between AOA & MOA

MOA is the charter of the company. It defines companies relation with outside world. AOA are the regulations for the internal management. MOA defines the scope of the activities of the co. AOA are the rules for carrying out objects of the company as set out in MOA MOA is the supreme document & AOA is subordinate to MOA.

 Every company must have its MOA but a company limited by shares need not have articles of its own. Any act of the company which is ultra vires the MOA cannot be ratified by the shareholder. Any act of the company which is ultra vires the AOA ( but intra vires the MOA) can be confirmed by the shareholders.

Constructive notice of MOA & AOA

Every outsider dealing with the company is deemed to have notice of the contents of MOA & AOA. These documents on registration become the public documents this is known as constructive notice of MOA & AOA.

 Office of registrar is a public office MOA & AOA are open & assessable to all. It is the duty of every person dealing with the company to inspect these documents & see that it is in powers of the co. to enter into the proposed contract.

Doctrine of indoor management

There is one limitation to the doctrine of constructive notice of MOA & AOA. The outsiders are entitled to assume that the internal proceedings of the co. have been regularly done. They are presumed to have read these documents & to see that the proposed dealing is not inconsistent

Royal British bank Vs. Turquand

The directors of the co. had issued a bond to T. they had the power under the article to issue such bond provided a resolution is passed by the shareholders in general meeting. No such special resolution is passed by the co. Held T could recover the amt on the ground that he was entitled to assume that resolution has been passed.

Exception to doctrine of indoor management

Knowledge of irregularity:- If a person dealing with the co. knows of the irregularity in its internal management in connection of his dealings, he cannot claim the benefit Negligence:- A person cannot claim benefit on the basis of being negligent if he has made all enquiries

 Forgery:- The doctrine of indoor management will not apply where a document on which the person seeks to rely is a forgery. Acts outside the apparent authority:this rule doesnt apply where a person acting on behalf of co. exceeds any actual authority given to him.