Articles of Association and Contents of Articles in Business Memorandum

Published March 30, 2010 company Leave a Comment

Tags: business, company, Market

Articles of Association:
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 and objects as set out in the memorandum of Association. They are
as such subordinate to, and controlled by, the Memorandum of Association.
Contents of articles:
Articles usually contain provisions relating to the following matters:
Share capital, rights of shareholders, variation of these rights, payment of
commissions, share certificates
Calls on shares
Transfer of shares
Transmission of shares
Forfeiture of shares
Conversion of shares into stock
Share warrants
Alteration of capital
General meetings and proceedings there at
Voting rights of members, Voting and poll, proxies
Directors, their appointment, remuneration, qualifications, powers and
proceedings of board of directors
Manager

Secretary
Dividends and reserves
Accounts, audit and borrowing powers
Capitalisation of profits
Winding

up

Companies which must have their own Articles:

The following companies shall have their own articles, namely,
Unlimited companies,
Companies limited by guarantee,
Private companies limited by shares,
The Articles shall be signed by the subscribers of the Memorandum and
registered along with the Memorandum,
A public company may have its own Articles of Association. If it does not
have its own Articles, it may adopt Table A given in schedule I to the Act
Regulations required in case of an unlimited company, a company limited by
guarantee and a private company
Unlimited company: In the case of an unlimited company, the Articles shall
stateThe numbers with which the company is to be registered, and
If it has a share capital, the amount of share capital with which the company
is to be registered

Company limited by guarantee: The case of a company limited by guarantee,

the articles shall state the number of members with which the company is to
be registered.
Private company: In the case of a private company having a share capital,
the Articles shall contain provisions whichRestrict the right to transfer shares,
Limit the number of its members to 50 (not including employee-members),
and
Prohibit any invitation to the public to subscribe for any shares in, or
debentures

of,

the

company.

Form of Articles in the case of other companies:

The Articles of any company, not being a company limited by shares, shall
be in such one of the Forms in Tables C,D, and E in schedule I to the Act
Such a company may include any additional matters in its Articles in so far
as

they

are

not

inconsistent

with

the

provisions

Form and signature of Articles:

Printed,
Divided into paragraphs, and
Signed by each subscriber of the Memorandum (who shall add his address,
description and occupation, in the presence of at least l witness who will
attest the signature and likewise add his
occupation.

address)

description and

Memorandum of Association and Contents of Memorandum

Published April 13, 2010 business Leave a Comment
Tags: article, capital, company, investment, liability, memorandum, shares

Memorandum of association is a fundamental document. It is the charter of

the company and defines its reason for existence. It regulates the external
affairs of the company in relation to outsiders. Its purpose is to enable
shareholders to know what its permitted range of enterprise is. It is the area
beyond which the actions of the company cannot go.
Purpose of memorandum:
The prospective shareholders shall know the field in, which their money is
going to be used by the company and what risk they are undertaking in
making investment. The outsiders dealing with the company shall know the
objects of the company.
Printing and signing of memorandum:
The Memorandum of Association of a company shall bePrinted
Divided into paragraphs numbered consecutively, and
Signed by 7 (2 incase of a private company) subscribers
Each subscriber shall sign (and add his address, description and occupation,
if any) in the presence of at least l witness who shall attest the signature
and shall likewise add his address, Description and occupation.
Form of Memorandum:
The Memorandum of Association of a company shall be in such one of the
Forms in Tables B, C, D and E in Schedule I to the Companies Act, 1956.
Contents of Memorandum:

The Memorandum of every company shall contain the following clauses. The
name of the company, with Limited as the last word of the name in the case
of a public limited company and with private Limited as the last words of
the name in the case of a private limited company. The state in which the
registered office of the company is to be situated.
The objects of the company which shall be classified asThe main objects of the company to be pursued by the company on its
incorporation and objects incidental or ancillary to the attainment of the
main objects; and
Other objects of the company not included in (a)
In the case of companies (other than trading corporations) with objects not
confined to one state, state to whose territories the objects extend
Limited liability:
The Memorandum of a company limited by shares or by guarantee shall also
state

that

the

liability

of

its

members

is

limited.

Share capital:
In the case of a company having a share capital, each subscriber shall take
at least one share and shall write opposite his name the number of shares
his lakes. The Memorandum of a company limited by guarantee shall also
state that each member undertakes to contribute a certain sum to the assets
of the company.
Doctrine of Ultra Vires:
A company has the power to do all such things as areAuthorized to be done by the Companies Act, 1956;

Essential to the attainment of its objects specified in the Memorandum;

Reasonably and fairly incidental to its objects
Everything else is ultra vires the company
Ultra means beyond and vires means powers
It means that the doing of the act is beyond the legal power and authority of
the company.
The purpose of these restrictions is to protectInvestors in the company so that they may know the objects in which their
money is to be employed;
Creditors in the by ensuring that the companys funds are not wasted in
unauthorized activities
Ultra vires act is void
If an act is ultra vires the company, it does not create any legal relationship
It is not necessary that an act to be considered ultra vires must be illegal; it
may or may not be
The main feature of the doctrine of ultra vires is that a company being a
corporate person should not be (fined or punished) for its own acts or acts of
its agents
Whether a particular act on the part of a company is within its powers is a
question of fact and is decided on the construction of the terms of the
Memorandum
Ultra vires the directors:

If an act transaction is ultra vires the directors (i.e., beyond their powers but
within the powers of the company), the shareholders can ratify it by a
resolution in a general meeting
If an act is within the powers of the company, any irregularities may be
cured by the consent of the shareholders
Ultra vires the articles:
If an act or transaction is ultra vires the articles, the company can ratify it by
altering the articles by a special resolution