MEMORANDUM OF ASSOCIATION AND ARTICLES OF ASSOCIATION

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1. MEMORANDUM OF ASSOCIATION AND ARTICLES OF ASSOCIATION . FYBMS-A ACADEMIC YEAR -2020-2021 PRESENTED BY :- SHREYA 46 BHOOMI 48 SHARDOOL 49 SWARAJ 50 UMAIMA 52

2. MEANING AND DEFINITION OF MEMORANDUM OF ASSOCIATION INTRODUCTION : Today we all must be aware about the company & the nature of the company. But do you know that How are the shareholders & the other members come to know about the company as well as how they Know the limitations & scope of the company ?

3. TYPES OF ASSOCIATIONS The answers for all the questions are given by the company by two of the important documents – • M.O.A ( Memorandum of association ) • A.O.A ( Article of Association ) So let us all study what are these two documents.

4. DEFINITION OF MEMORANDUM OF ASSOCIATION [MOA] According to Lord cairns - " The memorandum of association of a company is its structure and define the limitation of the power of the company established under the ordinance "

5. MEANING OF M.O.A ✓ Memorandum of association is a principal document of a company ✓ It is considered as the charter of the company ✓ It contains the objectives of the company ✓ It defines the limitation and scope of company activities ✓ It is a legal document which is prepared at the time of formation and registration of a company. ✓ the M.O.A determines the scope of operations beyond which actions cannot go

6. PURPOSE OF M.O.A • To enable the shareholders ,creditors & the dealers of company to know what is permitted rate of a company for its operations. • To inform all people what the company is formed to do and with what capital it has to do.

7. FORMAT OF M.O.A Note : This document is required to be published and presented to shareholders, creditors and other members associated with the company .

8. Contents of Memorandum of Association According to the Companies Act, the Memorandum of Association of a company must contain the following clauses :

9. 1. Name Clause of Memorandum of Association The name of the company should be stated in this clause. A company is free to select any name it likes. But the name should not be identical or similar to that of a company already registered. It should not also use words like King, Queen, Emperor, Government Bodies and names of World Bodies like U.N.O., W.H.O., World Bank etc. If it is a Public Limited Company, the name of the company should end with the word ‘Limited’ and if it is a Private Limited Company, the name should end with the words ‘Private Limited ’.

10. 2. Registered Clause of Memorandum of Association

11. 3. Objects Clause of Memorandum of Association This clause specifies the objects for which the company is formed . It is difficult to alter the objects clause later on. Hence, it is necessary that the promoters should draft this clause carefully. This clause mentions all possible types of business in which a company may engage in future. The objects clause must contain the important objectives of the company and the other objectives not included above .

12. 4. Liability Clause of Memorandum of Association This clause states the liability of the members of the company. The liability may be limited by shares or by guarantee. This clause may be omitted in case of unlimited liability.

13. 5. Capital Clause of Memorandum of Association This clause mentions the maximum amount of capital that can be raised by the company. The division of capital into shares is also mentioned in this clause. The company cannot secure more capital than mentioned in this clause. If some special rights and privileges are conferred on any type of shareholders mention may also be made in this clause.

14. 6. Subscription Clause of Memorandum of Association It contains the names and addresses of the first subscribers. The subscribers to the Memorandum must take at least one share. The minimum number of members is two in case of a private company and seven in case of a public company.Thus the Memorandum of Association of the company is the most important document. It is the foundation of the company.

15. ALTERATION OF MEMORANDUM As a matter of course Memorandum of Association is not alterable. In fact the words of the Memorandum cannot be changed that easily. It is said that “Memorandum of Association is an unalterable document alterable only in accordance with the provisions of the law”

16. Alteration of Memorandum of Association under the Common Law Companies Act 1862 permitted a company to change its name and its authorized share capital, but forbade any other alteration. The court has in Scott v. Scott Ltd. held that even if inadvertently the memorandum of a company does not correctly express the wishes of its subscribers, the court does not have power to rectify the mistake after the company has been registered.

17. Alteration of Memorandum of Association under Indian Law Under S.16 of the Companies Act 1.By special Resolutions and Permission of the government: under section 21 of CA. the name of a company may be changed at any time by passing a special resolution at a general meeting of the company and with the written approval of the central government. 2.By rectification of omission in name: If by mistake a company is registered with a name which is the same or similar to the name of an existing company, the company may change its name by passing an ordinary resolution and getting a written permission from the Central government. The Calcutta High Court in the case of Malhati Tea Syndicate v. Revenue Officer. wherein a company changed its name from Malhati Tea Syndicate Ltd. to Malhati Tea and Industries Ltd. It filed a written petition in its former name. Declaring the petition to be invalid the court said that nothing in the Act authorized the company to commence legal proceedings in its former name .

18. Alteration of Registered Office Clause (a)Shifting from one place to another in the same city or town: the board of directors must pass a resolution to that effect and give the name address of its registered office to the RoC within 30 days after the date of the change of address. ( b)Shifting from one town to another in the same state: it shall pass a special resolution to that effect at its general meeting and send the notification to the registrar within 30 days . ( c)Shifting from one state to another: In the first place, a special resolution of the company and in the second, confirmation by the Company Law Board can confirm the alteration only if the shifting of the registered office from one state to another is necessary for any of the purpose detailed in section 17.

19. The alteration of object clause involves : Special Resolution: The company has to call a general meeting of its members and pass a special resolution and file a certified copy of the resolution with the central government . Ratification by the central government: After this, the application for proposed alteration is filed with the central government. The application shall be scrutinized by the government before confirming the alteration . Registration of alteration: A certified copy of the order of the central government shall be filed by the company with the RoC along with the printed copy of the altered memorandum within three months from the date of the order.

20. Doctrine of Ultra Vires- It is the function of the Memorandum of Association to delimit and identify the objects in such plain and unambiguous manner as that the reader can identify the field of industry within which the corporate activities are to be confined. And it is the function of the courts to see that the company does not movie in a director away from the field. That is where the doctrine of ultra vires comes into play.

21. CONCLUSION Alteration of Memorandum of Association is an important exercise through which the company brings about the required flexibility which is pertinent to its existence and survival as an entity. It is a precondition before the company can initiate any drastic change in its ‘shape or structure’. Any act of the company has to be within the limits set by the Memorandum of Association.

22. What Are Articles of Association? Articles of association form a document that specifies the regulations for a company's operations and defines the company's purpose. The document lays out how tasks are to be accomplished within the organization, including the process for appointing directors and the handling of financial records. Articles of Association (AOA) Definition As per Section 2(5) of the Companies Act, 2013 articles means the Articles of Association (AOA) of a company originally framed or altered or applied in pursuance of any previous company law or of this Act.

23. KEY TAKEAWAYS 📌 Articles of association can be thought of as a user's manual for a company, defining its purpose and outlining the methodology for accomplishing necessary day-to-day tasks. 📌The content and terms of the "articles" may vary by jurisdiction, but typically include provisions on the company name, its purpose, the share structure, the company's organization, and provisions concerning shareholder meeting.

24. understanding Articles of Association Articles of association often identify the manner in which a company will issue shares, pay dividends, audit financial records, and provide voting rights. This set of rules can be considered a user's manual for the company because it outlines the methodology for accomplishing the day-to-day tasks that must be completed. While the content of the articles of association and the exact terms used vary from jurisdiction to jurisdiction, the document is quite similar throughout the world and generally contains provisions on the company name, the company's purpose, the share capital, the company's organizations, and provisions regarding shareholders meeting.

25. Purpose of the Company; The reason for the creation of the company must also be stated in the articles of association. Some jurisdictions accept very broad purposes—"management"—while others require greater detail—"the operation of a wholesale bakery," for example. SHARE CAPITAL, ORGANIZATIONS OF THE COMPANY, SHAREHOLDERS MEETINGS.

26. Example of Articles of Association ; A person, or group of people, starting a business will typically refer to a lawyer, accountant, or both for advice when setting up a company. The company will choose a name and define its purpose. The company is then registered at the state/province or federal level. Note that trademarking a name is a different process . A company may issue shares to divide up the company if it wishes, but it doesn't need to. The articles will lay out how this can be done. The lawyer or accountant will typically work with the directors of the company, asking them questions to help figure out how they wish to grow and how the company may end up being structured in the future.

27. OBJECTIVE OF ARTICLE OF ASSOCIATION(AOA) The AOA of a company shall contain the regulations for management of the company. The AOA shall also contain such matters, as may be prescribed. Further, it shall not prevent a company from including such additional matters in its AOA as may be considered necessary for its management.

28. Forms of Articles of Association (AOA) Schedule I of the Companies Act, 2013 provides forms for Articles of Association (AOA) in tables F, G, H, I and J for different types of companies. Further, AOA must be in the respective form.

29. Alteration of Articles of Association The alteration of the Articles should not sanction anything illegal. They should be for the benefit of the company. They should not lead to breach of contract with the third parties. The following are the regulations regarding alteration of articles:A company may alter its Articles with a special resolution. Due importance and care should be given to ensure that the alteration of AoA does not conflict with the provisions of the Memorandum of Association or the Companies Act. A copy of every special resolution altering the Articles must be filed with the Registrar within 30 days of its passing.

30. The proposed alteration should not contravene the provisions of the Companies Act . The proposed alteration should not contravene the provisions of the Memorandum of Association . The alteration should not propose anything that is illegal . The alteration should be bonafide for the benefit of the company The proposed alteration should in no way increase the liability of existing members . Alteration can be made only by a special resolution . Alteration can be done with retrospective effect . The Court does not have any power to order alteration of the Articles of Association.

32. EFFECTS OF MEMORANDUM &ARTICLES DEFINE; M e morandum And A rticles Of A ssociation. A 'memorandum of association' - a legal statement signed by all initial shareholders or guarantors agreeing to form the company. 'articles of association' - written rules about running the company agreed by the shareholders or guarantors, directors and the company secretary.

33. Legal Effect of Memorandum and articles of association (Sec. 10 of the Companies Act, 2013) Under sec.10 of the Companies Act, 2013, the memorandum and the articles when registered, shall bind the company and its members to the same extent as if it had been signed by them and had contained a covenant on their part that the memorandum and the articles shall be observed

34. Sub section As per sub section(1) of Section 36 of the Companies Act,1956 provides that when Memorandum and Articles of Association once registered shall bind the company and its shareholders.Whatever terms and conditions are in the Memorandum and Articles of Association shall bind the company and its members. As per Sub section (2) of section 36 of the Companies Act provides that all money payable by any member to the company under the memorandum or articles shall be a debt due from him to the company .

35. . Under section 41(1) It provides that the subscribers of the memorandum of a company shall be deemed to have agreed to become members of a company, and on its registration, shall be entered as members in its register of members . Under section 41 (2) provides that every other person who[agrees in writing] to become a member of a company and whose name is entered in its register of members, shall be a member of the company.

36. STATEMENT The Supreme Court's ruling in V. B. Rangaraj vs V. B. Gopalakrishnan (1991 6 CLA 211) is the authority for the proposition that a clause in a shareholders' agreement that is not Unacceptable , to the Companies Act or to the company's Memorandum would stand legal scrutiny only when it is incorporated in the company's Articles of Association . Example.; The articles of a company contained a clause that on the bankruptcy of a member, his shares should be sold to other person and at a price fixed by the Directors. ‘B’, a shareholder was adjudicated bankrupt. His trustee in bankruptcy claimed that the was not bound by these provisions and should be liberty to sell the shares at the true value. Held, that the trustee was bound by the articles, as shares were purchased by ‘B’ in terms of the articles. [Borland Trustees v. Steel bros. Ltd. (1901) 1 Ch. 279]

37. LEGAL EFFECT OF MEMORANDUM AND ARTICLES The memorandum and articles, when registered, bind a company and the members there of to the same extent as if they had been signed by the company and each member .

38. 1.members to the company: The memorandum and the articles constitutes a binding contract between the members and the company the effect of this is that each member is bound to the company as if each member has actually sighned the memorandum and the articles. 2.company to the members: A company is bound to the individual members in terms of their ordinary rights as members,only accordance with the provisions in the memorandum and the articles.

39. 3.members interse : Each member is bound to the other members, by the terms contained in the Articles. Thus if the Articles provide about certain rights of the members interese , a member can enforce such rights against the other members.. 4.company to the outsiders All outsiders, dealing with the company and are bound by the same .Outsiders shall be deemed to have constructive notice of the contents of Memorandum and Articles of the Company.

40. All money payable by any member to the company under the memorandum or articles shall be a debt due from him to the company . The agreement between Shareholders and the company are treated as a contract and it should contain all essentials of valid contract as mentioned above. CONCLUSION

41. Docrorine Of Indoor Management The Doctrine of Indoor Management is an exception or limitation to the Doctorine Constructive Notice . As the Doctorine of constructive notice protects the company in its dealing with outsider , the Doctorine of indoor management comes in their aid & protects the outsiders in the same manner .

42. The Turquand Rule The Turquand Rule Case Royal British Bank vs Turquand The Directors of the company had powers to issue Bonds under Article of Association provided that they were authorised by the resolution which has to be passed by shareholders at General Meeting of a company. Therefore no such Resolution was passed by the Company for authorising the directors to do so. But the directors issued the bond to Mr Turquand . Thus On the maturity of the bond the company refused to redeem . It was held that Turquand had full right to receive the money under the benefit of Doctorine Of Indoor Management. Hence it came to be know as '' Turquand rule

43. Case - Napoleon vs Bank of Barcelona The Director of the company was the principal shareholder of a company. He used to deposit the cheques favouring the company in his personal account . The bank used to credit those cheques in his personal Account instead of crediting it in the account of the company. A suit was filed against bank by the company on behalf of debenture holder. The bank then sought the protection of doctrine of indoor management but was failed to entitled the benefit.

44. Case - Ruebel vs Great Fingall Consolidated Co . A share certificate was forged by the secretary of the company by forging the signature of 3 directors and issued ro Mr Ruebel under the seal of the company without authority against a sum of money lend to the company .Later on the company refused to register the certificate And Mr Rubel file a suit for damages and sought the benefit of the Doctrine of Indoor Management. Thus it was held that he is not entitled to the benefit of Turquand Ruebel , because the rule does not apply in forgery.

45. https://accountlearning.com/memorandum-of-association-meaning-contents-of-moa/ https://accountlearning.com/articles-of-association-meaning-contents-alteration-of-aoa/ https://www.lawteacher.net/free-law-essays/business-law/alteration-of-memorandum-of-association-business-law-essay.php https://taxguru.in/company-law/articles-association-aoa-companies-act-2013.html http://thelawstudies.blogspot.com/2017/01/memorandum-of-association-of-company.html?m=1 http :// capitial.blogspot.com/2009/08/legal-effect-of-memorandum-and-articles.html?m=1 THANK YOU ……TTTH THANK YOU………….. ……….