ARTICLES OF ASSOCIATION

 AOA are rules, regulations and bye-laws for the internal

management. Subordinate to MOA. If there is conflict - MOA will
prevail. Printed, divided into paragraphs, numbered, stamped,
signed and witnessed.
 CONTENTS OF AOA: Share capital, rights of shareholders,
calls on shares, transfer and transmission of shares, forfeiture
of shares, capitalization of profits, appointment of directors etc..
 MODEL AOA: The Act gives various models of AOA for various
types of companies.

 COMPANIES WHICH MUST HAVE ITS OWN AOA: Unlimited

Cos., Guarantee Cos., & Pvt Ltd companies.

 Public Ltd Co.s limited by shares need NOT have their own
AOA, but they may adopt model AOA.
 2. ALTERATION OF AOA

 AOA can be altered by Special Resolution and copy

filed with ROC within 30 days of passing resolution.
If AOA states that original AOA cannot be altered
it is VOID and contrary to Companies Act.

 LIMITATIONS TO ALTERATION : Alteration of AOA

MUST NOT: 1)- be inconsistent with Act or order of
CLB, 2)- conflict with MOA, 3)- anything illegal,
4) -increase the liability of members, 5) -expel any
member.
 Alteration must be bona fide & for the benefit of Co.,
if the alteration results in breach of contract
- affected party can claim for damages. Alterations
can have retrospective effect, provided it is bonafide
and for the benefit of the company as a whole.
 3. AOA
1. ARTICLES AND MOA – THEIR LEGAL RELATIONSHIP:
The Articles are subordinate to MOA, The MOA should be
read in conjunction with AOA. The terms of MOA cannot
be modified or controlled by Articles of Association.

2. LEGAL EFFECTS OF REGD. AOA: 1) Members to Co.:

It is a binding contract between members and Company.
2) Co. to its members:: Co. is bound to each
member in respect of their rights as members. Members
can get injunction if Co. commits breach. They can always
enforce their rights.

3) Members inter se: Articles regulate their rights through

the Co. They can sue in their name in case of fraud / UV.
4) Co. to outsiders: NO contract exists between Co. and
outsiders. Outsiders cannot take advantage of AOA and not
entitled to enforce AOA against the Co..
 4. CONSTRUCTIVE NOTICE AND DOCTRINE OF INDOOR
MANAGEMENT.
 DOCTRINE OF CONSTRUCTIVE NOTICE: MOA and AOA are
public documents and any outsider dealing with the Co. is
presumed to have read and understood them properly. It
protects the company against outsiders. Invoked by COMPANY.
 DOCTRINE OF INDOOR MANAGEMENT: Outsiders are entitled to
assume that as far as the internal proceedings of the Company are
concerned, everything has been regularly done. It protects
outsiders against the company. Invoked by OUTSIDERS.
 CASE LAW: Royal British Bank V. Turquand. Directors issued
bonds to T. As per AOA it must be authorized by resolution. But NO
such resolution was passed. It was held that T could recover his
money since he was entitled to assume that resolution was passed.
 EXCEPTIONS TO DOCTRINE of INDOOR MANAGEMENT: 1)
Knowledge of irregularity, 2) Forgery: when a person relies upon
a forged document made by the officers of the Co. - nothing can
validate forgery. 3) Negligence: If the person can discover the
irregularity if he had made proper inquiries. 4) Officer of the
Co. who acts outside the scope of apparent authority - Company
is not bound.
 DISTINCTION BETWEEN MOA and AOA
 MOA AOA
 CONTENTS Charter of the Co. For internal management.

 NATURE Fundamental Subordinate to MOA

 REQUIREMENT Every Co. must have Pvt. Co., Guarantee Co,

its own MOA must have its own AOA.

 RELATIONSHIP Defines relationship Defines relationship

with outsiders. with members.

 ALTERATION Strict procedure Easily altered.

 ULTRA VIR. Cannot be ratified UV of AOA but intra vires

MOA can be ratified.