WLC 15 CHAPTER 04 –ARTICLES OF ASSOCIATION

CHAPTER 4
ARTICLES OF ASSOCIATION
MEANING – NATURE OF ARTICLES OF ASSOCIATION
• The rules and regulations, which are formed for internal management of a company, are, set out in a
document known as the Articles of Association. The articles regulate the internal management of the company.
They define the powers of the officers. They also establish a contract between the company and members and
between the members inter se this contract governs the ordinary rights and obligation incidental to membership
in the company. (Naresh Chandra Sanyal Vs. The Calcutta Stock Exchange Association Ltd.)
• Section 2 (2) of the Act defines Articles of Association of a company as originally framed or as altered from
time to time.
Articles subordinate to memorandum
• The articles of a company are subordinate to and controlled by the memorandum of association, which is the
dominant instrument and contains the general constitution of the company. The memorandum is fundamental
and can be altered only under certain circumstances provided by the Act. But the Articles are only internal
regulations, over which the members of the company have full control and may alter them according to what
they think fit.
Articles amount to constructive notice
• An important implication of the articles is that their provisions amount to a public notice, known as constructive
notice, to all those who deal with the company. They are deemed to have notice of the manner in which the
articles require the company to deal with a particular thing in a particular situation. That is why when the
company alters the articles; the alteration has to be filed with the Registrar of Companies.
DOCTRINE OF CONSTRUCTIVE NOTICE AND INDOOR MANAGEMENT
• The memorandum and articles bind the company to the members and the members to the company. Those
who become members of the company are bound by its constitution. The memorandum and articles give rise
to two doctrines of company law, namely, the principles of constructive notice and that indoor management.
• Constructive notice compels those dealing with company to consult for their own protections the provisions of
the memorandum and articles and to deal with the company only in the manner prescribed.
• The rule of indoor management compels those handing the company’s affairs to assure proper internal
proceedings because they cannot prejudice outsiders by raising internal irregularities of their own making as a
defence.
• Indoor management is an application of the principles of the law of agency coupled with the equitable doctrine
of estoppel.
MODEL FORM OF ARTICLES AND ITS REGISTRATION
• The Articles of Association of every company duly stamped and signed by the subscribers shall also be
registered with ROC simultaneously with the memorandum. [Section 26]
• Following shall be form of Articles of Association
 A company limited by shares - Table A (may adopt all or any of the regulations).
 A company limited by guarantee and not having share capital - Table C
 A company limited by guarantee and having a share capital – Table D
 An unlimited company – Table E
• Articles shall –
i. Be printed
ii. Be divided and paragraphs numbered consecutively; and
iii. Be signed by each subscriber of the memorandum of association (who shall add his address,
description and occupation, if any) in the presence of at lease one witness who shall attest the
signature and shall likewise add his address, description and occupation, if.
CONTENTS OF THE ARTICLES OF ASSOCIATION
• The regulations and bylaws laid down in the articles relate to the following (illustrative only)
1. Share capital and its subdivision into different classes of shares, rights of the shareholders and their variation;
2. The procedure for making allotment, calls on shares and transfer, transmission, forfeiture and surrender of
shares, including lien or shares
3. Share transfer – Physical as well as shares traded though electronic mode and their
dematerialisation/rematerialisation.
LECTURES BY PROF. S N GHOSH
WLC 16 CHAPTER 04 –ARTICLES OF ASSOCIATION

4. Nomination by Shareholders
5. Alteration and reduction of capital
6. Borrowing powers
7. Appointment powers, duties, qualifications, remuneration etc of the Directors, powers and proceedings of the
Board (now Central Government);
8. Appointment of Managing Director, Manager, Secretary
9. Provisions regarding Nominee Director
10. Declaration of dividend
11. Procedure for convening, holding and conducting different kinds of meetings, voting rights and methods
12. Maintenance of books of account and their audit
13. Share Certificates and Share Warrants, conversion of shares isnto stock
14. Seal of the company
15. Winding up.
[NOTE: A listed/to be listed may have some other provisions in the Articles of Association as well so as to
comply with the Listing Agreement(s)]
ALTERATION OF THE ARTICLES OF ASSOCIATION [SECTION 31]
A company may alter from time to time, the Articles of Association by Special Resolution. Requisite return along
with amended copy of Articles of Association and necessary fees has to be filed with ROC within 30 days of
passing of the resolution.
• The alteration must be bonafide for the benefit of the company as a whole. The alteration will not however be
bad merely because in inflicts hardships on an individual shareholder.
EFFECT OF MEMORANDUM AND ARTICLES
• The memorandum and articles when registered with the Registrar of Companies create a binding contract
between
 Members bound to the company
 Company bound to the members
 Members bound to members
 Company and the outsiders.
EFFECT OF ALTERATION IN MEMORANDUM OR ARTICLES
• A member shall be bound by an alteration made in the memorandum or articles after the date on which he
became a member.
• All the alterations shall be noted in every copy of the memorandum and articles of association of the company.
• A company shall, within 7 days of the receipt of a request from a member along with a fee of Rs. 1/-, send to a
copy each of Memorandum and Articles of Association besides any other Agreement(s), if any. Any default
shall be punishable with a fine upto Rs. 500/-.

LECTURES BY PROF. S N GHOSH