MEMORANDUM OF ASSOCIATION

CONSTITUTION OF A COMPANY &

ARTICLE OF ASSOCIATION
COMPANY’S MEMORANDUM & ARTICLES OF
ASSOCIATION
• The Memorandum of Association (MA) is the basic constitutional document of a Company

• Sets out the company’s structure and aims

• Define the face that the company presents to the outside world

• The Articles of Association (AA) is the document setting out the internal regulation of the company – its by-laws

• Bowen J in Guinness v. Land Corporation of Ireland explained the relationship between MA and AA:

• the memorandum contains the fundamental conditions upon which the company is allowed to be

incorporated. They are conditions introduced for the benefits of the creditors, and the outside public as well

as the shareholders. The articles of association are the internal regulation of the company
EFFECT OF THE MEMORANDUM AND
ARTICLES OF ASSOCIATION
• Sec 33 (1) – the MA and AA constitutes a contract between the company and its members and among
the members inter se to the same extent as if they had been signed and sealed by each member.

• The contract is deemed to contain a covenant on the part of each members to observe all the
provisions in the MA and AA

• There exist there sets of relationship:-

• Members and members

• Members and company

• Company and outsider

 Contractual Effect Among Members
• Every members have the personal right to have the terms of the MA and AA
observed – not subject to the rule in Foss v. Harbottle
• This contract is however unique as it may be altered by the majority – member
may be bound by terms that he doesn’t consent to.
• Unless the amendment can be impeached – the member has no remedy except
to get out from the company
• A member may enforce his rights by way of injunction – mandatory or prohibitive
• The action may be brought directly against another member – company does not
have to be joined as party.
 Contractual Effect Between Members and Company
The MA and the AA is also a contract between the company and its members.

Relationship Between Company And Outsiders

The articles are a contract only among members of the company

Non-members are not privy to this contract and cannot enforce any rights that the
MA and AA confer upon them

Corollary of the principle that the AA does not constitute to contract btw the
company and outsider in the principle that the amendment of the AA cannot affect
the existing relationship with an outsider

That if there is a contract btw the company and outsider – alterations of the AA will
not justify any breach of the contract
PROVISIONS UNDER THE NEW
COMPANIES ACT 2016
SECTION 31. CONSTITUTION OF A COMPANY
1) A company, other than company limited by guarantee, may or may not have a
constitution.
2) If a company has a constitution, the company each director and each member
of the company shall have the rights, powers, duties and obligations set out in
this Act, except to the extent that such rights, power, duties and obligations are
permitted to be modified in accordance with this Act, and are so modified by
the constitution of the company.
3) If a company has no constitution, the company, each director and each
member of the company shall have the rights, powers, duties and obligations
as set out in this Act.
SECTION 32. COMPANY MAY ADOPT A CONSTITUTION

1) A company may adopt a constitution for the company and the adoption shall be by way of special
resolution.

2) The constitution of a company has no effect to the extent that it contravenes or is inconsistent with the
provisions of this Act.

3) Subject to the provisions of this Act, the constitution adopted under subsection (1) shall be binding on
the company, its directors and its members.

4) The company shall lodge the constitution with the Registrar within thirty days from the adoption of a
constitution under subsection (1).

5) The company and every officer who contravene subsection (4) commit an offence and shall, on
conviction, be liable to a fine not exceeding fifty thousand ringgit and, in the case of a continuing offence,
to a further fine not exceeding five hundred ringgit for each day during which the offence continue after
conviction.
SECTION 36. COMPANY MAY ALTER OR AMEND CONSTITUTION

1) A company having a constitution may, by a special resolution, alter or amend its constitution
unless the constitution itself prohibits the alteration or amendment.

2) Upon the date of the special resolution was passed or a later date as specified in the
resolution, aby alteration or amendment to the constitution shall bind the company and the
members accordingly.

3) The company shall notify the Registrar of the alteration or amendment of its constitution and
lodge a copy of the constitutions as altered or amended within thirty days from the date the
special resolution was passed.

4) The company and every officer who contravene subsection (3) commit an offence and shall, on
conviction, be liable to a fine not exceeding ten thousand ringgit and, in the case of continuing
offence, to a further fine not exceeding five hundred ringgit for each day during which the
offence continues after conviction.
SECTION 35. CONTENTS OF A COMPANY’S CONSITUTION

1) Subject to the provisions of this Act, the constitutions of a company may contain provisions relating to:

a) the object of the company;

b) the capacity, rights, powers or privileges of the company if the provisions restricts such capacity, rights,
powers or privileges;

c) matters contemplated by this Act to be included in the constitution; and

d) any other matters as the company wishes to include in its constitution.

2) For the purposes of paragraph (1)(a), if the constitutions sets out the objects of a company –

a) the company shall be restricted from carrying on any business or activity that is not within those objects; and

b) the company shall have full capacity and powers to achieve such objects, unless the constitution provides
otherwise.
SECTION 38. COMPANY LIMITED BY GUARANTEE SHALL HAVE A CONSTITUTION

1) A company limited by guarantee shall have a constitution.

2) The constitution of a company limited by guarantee shall be signed by the person intending to incorporate
such a company and lodged with the Registrar at the time the company is incorporated.

3) The constitution shall state –

a) that the company is a company limited by a guarantee;

b) the objects of the company;

c) the capacity, rights, powers and privileges of the company;

d) the number of members with which the company proposed to be incorporated;

e) matters contemplated by this Act to be included in the constitutions; and

f) any other matters as the company wishes to include in its constitution.

SECTION 34. FORM OF CONSTITUTION

The constitution of a company –

a) In the case of a company limited by shares incorporated under this

Act, is a document adopted as its constitution under section 32;

b) A company limited by shares may adopt constitution by passing a

special resolution, as long as it does not contravene s32(2)
CA 2016 requires company to have constitution under certain
circumstances:

1. Company with different classes of shares

2. Private company to restrict transfer of shares

3. Company having a common seal

Unlimited Company

S34 does not require unlimited co. to have constitution. They are
covered by S34(A)
SECTION 33. EFFECT OF CONSTITUTION

1) The constitution shall, when adopted, bind the company and the
members to the same extent as if the constitution had been signed
and sealed by each member and contained covenants on the part
of each member to observe all the provisions of the constitutions.

2) All moneys payable by any member to the company under the

constitution shall be a debt due from such member to the company.
EFFECTS OF CONSTITUTION
CONTRACT BETWEEN COMPANY AND MEMBERS

S33(1) and S38(6) –

CONTRACT BETWEEN COMPANY AND MEMBERS

Hickman v Kent of Romney Marsh

Quins v Axien

CONTRACT BETWEEN MEMBERS

Wong Kim Fatt v Leong

POSITION OF OUTSIDERS
Doctrine of Privity –
Outsiders not permitted to enforce any clause of constitution

Raffles Hotel v Malayan Banking

Eley v Positive Assurance
Beattie v Beattie Ltd
Re New British Iron
ALTERATION OF CONSTITUTION

1. S36 – A Co may alter its constitution by passing a special resolution

unless the constitution itself prohibits its alteration.

1. S37 – A director or member may apply to court to grant the

alteration of constitution if it is not practical under the procedure o
CA2016 or constitution.
Cases:

Allen v Gold Reefs of West Africa

Greenhaign v Ardene Cinemas

Peter’s Amarican Delicacy v Health

EFFECT OF ALTERATION ON MEMBERS
S. 194
Any alteration where liability of members is increased, is effective only on
new members but not on existing members
On Third Parties
If there is separate contract, the third party may take legal action against the
company
Southern Foundries v Shirlaw
Objects Clause

CA 1965 stated every company’s MA must include the objects of a company.

For the benefit of third parties in dealing with Co or subscribing their shares

Certain persons under 20(2) can raise ultra vires if Co lack capacity or power
to enter certain contracts
Under CA 2016

S21 (1) Company shall have the capacity to carry on or undertake any
business or activity

S35(2)(A) If constitutions states the object of the company, the Co shall

be restricted from carrying on any business or activity
Rights of Third Party

If 3rd party is not aware that their transaction with the Co is outside the
company’s object, the contract is valid and must be performed. 3rd
party may assume that the transaction is not ultra vires. S 21(1)

S39 – Doctrine of constructive notice does not apply notwithstanding

the Co’s constitution is available for inspection
Alterations of Object Clause

CA 2016 does not prescribe any procedure for company to alter it’s
object clause. Company only need to pass special resolution