ARTICLES OF ASSOCIATION

TABLE OF CONTENTS

PROJECT SUBMISSION FOR COMPANY LAW

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 ARTICLES OF ASSOCIATION
I.INTRODUCTION
1.1 Introduction
The articles of association of a company, often simply referred to as the articles are
the regulations governing the relationships between the shareholders and directors of
the company, and are a requirement for the establishment of a company under the law
of the United Kingdom and many other countries. Together with the memorandum of
association, they form the constitution of a company. The equivalent in the United
States is Articles of incorporation. Articles of association typically cover the issuing of
shares (also called stock), the different voting and dividend rights attached to different
classes of share, restrictions on the transfer of shares, the rules of board meetings and
shareholder meetings, and other similar issues.

In English Law, the articles of association are also referred to as regulations and deal
with regulations for the management of the affairs of the company. This is contained in
S.6 of The English Companies Act, 1948.1

The project is divided into seven parts. After the introduction, the relationship between
memorandum and articles of association has been looked at. The binding force of
articles of association has been deal with next. The next chapter deals with the
construction and interpretation of articles of association followed by alteration of the
articles. Finally, the doctrines of constructive notice and indoor management have been
dealt with. The last chapter is the conclusion with suggestions.

1.2 Definition
Basically, they are the bye-laws or rules and regulations that govern the management of
its internal affairs and the conduct of its business. 2 Articles means articles of
association of a company as originally framed or as altered from time to time in
pursuance of any previous companies laws or of the present Act. 3 The articles establish
a contract between the company and its members and between the members inter se.
this contract governs the ordinary rights and obligations incidental to the membership

1 H.H,J. Tophan, Palmer s Company law , 17th ed. 1942, rep. 1943, p. 28.
2 A.K. Majmudar and Dr. G.K. Kapoor, Company Law and Practice , 12th ed. 2007, p. 164. 3
S.2(2) of The Companies Act, 1956.

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of the company.3 It is optional for a public company limited by shares to have its own
articles of association. However, it is compulsory for an unlimited company or a
company limited by guarantee or a private company limited by shares to have its own
articles of association.45

1.3 Form, content and implication:

Contents of Article of Association and form are prescribed in sections 26, 27, 28 and 29
but it not mandatory for public companies limited by shares. But it is better to take care
of peculiarities of the Article of Association and not take resort to Table A which is a
general provision. Anything in the Article of Association overrides a conflicting
provision in Table A and if it is on a different point, not inconsistent with the Article of
Association then Table A will be considered as part of Article of Association (only
those parts). Table A can be excluded by an explicit provision. Further Table A applies
only to companies limited by shares alone.

Any provisions of Table A can be adopted by reference but the model articles in Tables
C, D and E are merely models which cannot be adopted by reference and will not apply
to fill lacunae in the registered articles. The contents of the memorandum and articles,
as distinct from their arrangement, must correspond to the models in the regulations but
their contents will be held to be valid even though they differ radically from those of
the models.

Theoretically speaking, one rule is enshrined in one paragraph which bears a number.
Articles are to be in a printed form and to be signed by the signatories of the
Memorandum. An important implication of the Articles is that their provisions amount
to a public notice to all those who deal with the company. The Act gives model forms
of Articles of Association for each type of company. However, these are rarely adopted
in practice.6 In India, the memorandum of association of an Indian company shall
contain the following clauses: the name clause, the registered office clause, the object

3 Naresh Chandra Sanyal v. Calcutta Stock Exchange Association Ltd: AIR 1971 SC 422.

4 T.N. Pandey, R.K.Gupta, et al. (Rev.) J.M.J. Sethna s Indian Company Law, 11th ed. 2005, Vol 1, p.
5.

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 ARTICLES OF ASSOCIATION
clause, the liability clause, the capital clause and the association clause. The
memorandum of association of a company varies in forms according to the kind of
company.7

In the United Kingdom, model (and default) articles of association known as Table A
have been published since 1865. The articles of association of most companies
particularly small companies are Table A, or closely derived from it. However, a
company is free to incorporate under different articles of association, or to amend its
articles of association at any time by a special resolution of its shareholders, provided
that they meet the requirements and restrictions of the Companies Acts. Such
requirements tend to be more onerous for public companies than for private ones 8. The
matters with which a company s articles usually deal are (a) the exclusion or partial
exclusion of Table A; (b) the execution or adoption of a preliminary agreement if any;
(c) the allotment of shares by the directors; (d) calls and forfeiture for non-payment of
calls; (e) transfer and transmission of shares (f) increase of capital; (g) reduction of
capital; (h) borrowing; (i)general meetings; (j) directors; (k) dividend and reserve fund;
(l) accounts and audit; (m) notices; (n) special provisions for winding up 9.

6 A. Ramaiya, Guide to The Companies Act , 11th ed. 1988, p.142.

7 H.K.Saharay, Company Law , 4th ed. 1996, p.34.

8 M. C Bhandari, R. D Makheeja, Guide to Memorandum of Articles and Incorporation of Companies ,
4th ed. 2005, p.69.
9 H.H,J. Tophan, Palmer s Company law , 17th ed. 1942, rep. 1943, p. 38.

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II. RELATIONSHIP BETWEEN MEMORANDUM AND

ARTICLES

2.1 Flexibility
The articles regulate the manner in which the company s affairs will be managed. The
memorandum defines the company s objects and various powers it possesses; the
articles determine how those objects shall be achieved and those powers exercised. But
the Companies Act, 1956 does not require the articles to provide for certain specified
matters in the same way as it requires the memorandum to do. Thus the articles of
companies might vary substantially, and the utmost flexibility is allowed to persons
who formed the company to organize its management as they wish. 10

2.2 Subordinate
The articles are subordinate and controlled by the memorandum. Also, the articles are
only internal regulations which the members can alter as long as they don t exceed the
powers of the company as laid down by the memorandum. 11 Also in cases of conflict,
the memorandum prevails.12

2.3 Contemporaneous Documents

The memorandum and articles are basically contemporaneous documents and can be
read together and any ambiguity or uncertainty in the one can be removed by referring
to the other. In fact this has been done in various cases. In Re, South Durham Brewery
Company13, the memorandum was silent as to whether the company s shares were to be
all of one class or of different classes, it was held that a power a power given by the
articles to issue shares of different classes resolved the uncertainty and enabled the
company to do so. In Rainford v. James Keith and Blackman Company Ltd.14, where
the memorandum of a training company empowered to do all things incidental to
achieving the object, it was held that provision in the articles empowering the company

10 A.K. Majmudar and Dr. G.K. Kapoor, Company Law and Practice , 12th ed. 2007, p. 164-165
11 Ashbury v. Watson: [1885] 30 Ch .D 376 CA
12 A.K. Majmudar and Dr. G.K. Kapoor, Company Law and Practice, 12th ed. 2007, p. 164-165
13 [1885] 31 Ch. D 261

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to lend money merely exemplifies the general words of the memorandum and the
company was, therefore entitled to lend money to its employees.

2.4 Distinction between memorandum and articles

While memorandum contains the fundamental conditions upon which the company
must be incorporated, the articles provide the internal regulations of the company.
While memorandum must be within the framework of the Companies Act, the articles
are subsidiary to both the act and the memorandum. Finally, while acts done by a
company beyond the scope of the memorandum are absolutely void, acts beyond the
articles can be ratified by the shareholders provided the particular provisions are not
beyond the memorandum.1516

The distinction between the two was well brought out by Bowen, L.J. in Guiness v.
Land Corporation of Ireland16 where he pointed out that the memorandum contains
the fundamental conditions upon which alone the company is allowed to be
incorporated. They are conditions introduced for the benefit of the creditors and the
outside public, as well as share-holders. The articles are the internal regulations of the
company .In any case it seems to me, certain that for anything which the Act of
Parliament says shall be in the memorandum, you must look to the memorandum alone.

2.5 Registration
Articles of association may be registered along with the memorandum of association in
the case of (a) a public company limited by shares, (b) an unlimited company, (c) a
company limited by guarantee, or (d) a private company limited by shares. 17 As per
English law, where articles have been registered, a copy of every special resolution for
the time-being in force is annexed to or embodied in every copy of the articles of
association that may be issued after passing of such resolution, and where no articles
have been registered, a copy of any such special resolution is to be forwarded in print to
any member requesting the same on payment of one shilling. There is a penalty for
default.18

14 [1905] 2 Ch. 147

15 A.K. Majmudar and Dr. G.K. Kapoor, Company Law and Practice , 12th ed. 2007, p. 165.
16 Ch. D. 349, 381.

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III. BINDING FORCE OF ARTICLES

3.1 Introduction
The articles constitute a social contract 19 which is also a sophisticated way of saying
that they constitute the constitution of an association. The articles create a contract
binding each member of the company but the member is only bound qua member. The
articles also create certain rights and obligations between the members and the
company. Even between a member and a company, the articles of association constitute
a contract only in respect and liabilities as a share holder but not in respect of rights and
liabilities which he has in a capacity other than that of a member. The articles constitute
a contract between individual members. Normally this would be enforceable through
the company but it may be possible in certain circumstances to have direct redress. 2021

3.2 Members as members

The company is bound to its members in the same way members are bound to the
company, and just as the liabilities imposed upon the member are limited to the
liabilities incurred by him in this capacity, so are the rights which he has against the
company limited to rights qua member. Consequently, a right purported to be conferred
upon him by the Articles as a director or an outsider cannot normally be enforced by
him by virtue of the articles.22

3.3 In relation to outsiders

The articles do not per se constitute an enforceable contract between a company and an
outsider.23 This is no doubt due to privity of contract and lack of mutuality. Outsider
means a person who is not a member or a member acting in a capacity other than that
of a member. Even a director is normally treated as an outsider for this purpose. Any
right claimed by an outsider must be conferred by a separate contract or relationship
outside
the articles.23

17 S.26 of The Companies Act, 1956.

18 H.H,J. Tophan, Palmer s Company law , 17th ed. 1942, rep. 1943, p.29.
19 Dutton V. Goron, (1917) 23 CLR 362 at p.395.
20 T.N. Pandey, R.K.Gupta, et al. (Rev.) J.M.J. Sethna s Indian Company Law, 11th ed. 2005, Vol 1, ps.
21 -647.

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 ARTICLES OF ASSOCIATION

3.4 Invalidity of the articles by reason of conflict between the Act,

Memorandum of association and other laws:
Any provision in a company s Articles will be ineffective if it is in conflict with the
memorandum, the Companies Act or any other law for the time being in force. For
example, in the case of Peveril Gold Mines, Re24 it was held that statutory rights of
members under the Companies Act cannot be nullified through articles like right
placing restrictions to present a petition for winding up. Where the memorandum
defines the rights f the respective classes of shareholders such rights cannot be altered
by the articles. However, where the class rights are set out in the memorandum and the
memorandum and articles do not contain a variation of the rights clause, those rights
can be varied if all the members of the company agree to the variation. The articles are
void to the extent of inconsistency even if the provision in the memorandum with
which it is
inconsistent is not required by law to be there. 25

22 Ibid.
23 Hickman v. Kent, (1915) 1 Ch 881.
23
Supra note 3.
24 (1808) 1 Ch 122

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IV. CONSTRUCTION AND INTERPRETATION OF ARTICLES

4.1 Introduction
Articles of association are commercial documents and must be liberally constructed. In
interpreting them, the maxim, ut res magis valeat quam periat should be applied which
basically means validate if possible26 . The general presumption is that the parties have
expressed every material term which they intended to govern their agreement, whether
oral or in writing. But it is well recognized that there may be cases where obviously
some term must be implied if the intention of the parties is not to be defeated, some
terms of which it can be predicated that it goes without saying , some term not
expressed but necessary to give to the transaction such business efficacy as the parties
may have intended.

4.2 Case Law

An article cannot be rectified by the courts as held in Scott V. Frank F. Scott (London)
Ltd.27 The power to alter is purely statutory. Any alteration must be effected by special
resolution of the company. If there is any inconsistency between different parts of the
articles, the court will follow the ordinary canons of construction and look to the whole,
seeking to achieve harmony between the different provisions and compliance with the
law.

It was held in the case of S.S.Rajkumar v. Perfect Castings Pvt. Ltd.28 that the articles
of association of a company, being a business document must be interpreted strictly,
unless there are compelling circumstances to import into it a meaning other than
normal. Though the general presumption is that every material term in the articles
regulating a company have bee expressed, yet in some cases, certain terms are

25 th

T.N. Pandey, R.K.Gupta, et al. (Rev.) J.M.J. Sethnas Indian Company Law, 11 ed. 2005, Vol 1, p.
649.
26 Vaisey J. in Rayfield V. Hands, (1960) Ch 1 at p.4.
27 (1940) Ch 794: 56 TLR 924.
28
(1968) 38 Comp Cas 187.

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necessarily implied in order to give effect to the intention of parties as held in Somesh
Chandra Manilal Nanavati v. Jivan Lal C. Chenai. 28

The articles are drawn up for the purpose of internal administration of the business and
cannot supersede the objects set out in the memorandum of association. The courts
should hesitate to place an interpretation on the articles which may have the effect of
imposing restrictions on transferability which may be in restraint of trade and therefore,
opposed to public policy.29

In construing the relevant articles of association, the court may, before accepting any
specific construction, take into account all the relevant Articles together with the
byelaws. If the words are ambiguous, attempt should be made to reconcile them and
adopt such construction of the words as would avoid conflict between them. This was
held in Shiv Omkumar Maheshwari V. Bhansidar Jagannath. 30 It was also held in the
same case that, where the articles of association of the Chamber of Commerce provided
that all disputes arising out of or n the course of all dealings and transactions between
its members shall be settled by arbitration, it was held that a dispute as to the
existence of a transaction or dealing itself was not covered by the articles and there was
no obligation upon any member to refer such dispute to arbitration.

It was held in Sunil Dev V. Delhi and District Cricket Association 32, where the
conduct of the parties reveals that there has been some practice in vogue for several
years which was accepted by everyone concerned without any challenge or question,
then that practice in the course of long years in itself becomes an indication that the
articles of association were understood in that sense.

It was further held in G. Karunakaran V. State of Kerela33 that unless the exercise of
pleasure by the Governor is shown to be mala fide or against the public interest, the

28 (1956) 26 Comp Cas 148

29 Jarnail Singh Harjit Singh v. Bakshi singh Shan Singh, (1960) 30 Comp Cas 192 at p.199: AIR 1960
Punj 455.
30 (1957) 27 Comp Cas 255: AIR 1956 Bom
459. 32(1994) 80 Comp cas 174 (Del) 33(1987)
61 Comp cas 334 (Ker).

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court cannot interfere with the order nominating a person as director in the place of
another.

4.3 Terms in Articles by implication

The articles of a company constitute a statutory contract with its own distinctive
features. For example, the articles cannot be defeated on the grounds of
misrepresentation, nor rectified on the grounds of mistake, whereas an ordinary
contract is subject to these processes. It may be possible for the court to infer a term
purely by way of constructional implication, but it is not possible to go further and
imply a term from extrinsic circumstances. It is not possible to imply a term that the
shareholders of the company should be under an obligation to make an additional
financial contribution. This also seems to the court to be going beyond the language of
the articles.31

4.4 International Law

In the case of Powell Duffryn Plc v Petereit 32 the main question before the Court of
Justice was whether a jurisdiction clause contained in the articles of association of a
company (a voluntary association under Dutch law which although not the same thing
as a company is analogous to a company; therefore, the rule adopted in Peters was
extended to companies.) was an ""agreement" in terms of Article 17 of the Brussels
Convention on Jurisdiction and Enforcement of Judgments in Civil and Commercial
Matters 1968 Art.17. In most Member States, the articles of association of a company
are regarded as being contractual in nature, but in some they create obligations which
are considered institutional, normative or sui generis. It was this difference in the
conceptual nature of the relationship between a shareholder and the company which led
to doubts regarding the effect of a jurisdiction clause contained in the articles of
association. The court held that the concept of an ""agreement" in Article 17 must in
all cases be
interpreted on an autonomous basis.33

31 Bratton Seymour Service Co. Ltd v. Oxborough, (1992) BCLC 693 (CA).
32 Times, April 15, 1992 (ECJ)
33 Trevor C. Hartley, Case Comment: Convention under Article 220, EEC , E.L. Rev. 1993, 18(3),
225228.

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V. ALTERATION OF ARTICLES OF ASSOCIATION

5.1 Introduction
A company can alter its internal regulations by a special resolution provided the
alteration does not stand in direct or implied conflict with the memorandum or
provisions of the statute. So subject to the provisions of the Act, and the Memorandum,
a company may alter and add anything to its articles by special resolution. When
alteration of the articles is made to give effect to the conversion of a public company
into a private company, it shall require the approval of the central government 34. On
approval of such alteration by the Central government, a printed copy of the altered
articles shall be filed with the Registrar of companies within one month of the date of
receipt of the order of approval. If alteration of the articles is not inoperative or void by
reason of inconsistency with the provisions of the Act or Memorandum, the alteration
shall be deemed to be valid as is originally contained in the articles. In the garb of
alteration of articles of association, a Company cannot provide for expulsion of a
member by the management because it is opposed to the fundamental principles of
company jurisprudence and is therefore ultra vires the company. It is not necessary to
prove that all alterations in the memorandum or articles are to be effected in all copies
of the memorandum and articles. If in any time a company issues any copy of the
memorandum or articles without showing the alterations made therein, the company
and every officer of the company is liable to punishment with a maximum fine of ten
Rupees for every copy so issued35.

5.2 Case Law

In Scott V. Frank F. Scott (London) Ltd 36 it was held that the court has no
jurisdiction to rectify the mistakes in the articles of those do not accord with what is
proved to have been the concurrent intention of the signatories at the time of signature.
In the case of Grant V. U.K. switchback Rys. Co.,37 it was held that although a
resolution giving the directors powers to do certain acts in future which they are not
authorized by the articles to do would amount to alteration of the articles and would

34 S.31(1) of The Companies Act, inserted in 1960.

35 S.40 of The Companies Act, 1956.

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require a special resolution to be passed. But where the directors entered into a contract
without authority of the adoption of the contract which was within the objects of the
company by ordinary resolution would not amount to alteration of the articles.

5.3 Restrictions
Alteration of the articles is made subject to few restrictions. Firstly, the articles must
not exceed the powers given by the memorandum or be in conflict any provisions of
the memorandum. In such a case, the memorandum will prevail. Second, the alteration
must not be inconsistent with any provisions of the Companies Act or any other statute.
In Madhava Ramachandra Kamath v. Canara Banking Corporation 38, where a
resolution was passed expelling a member and authorizing him the director to register
the transfer of his shares without an instrument of transfer, the resolution was held to be
invalid as being against the provisions of the act. However, the Articles may impose on
the company conditions stricter than those provided under the law but must not dilute
the conditions of the memorandum and of The Act. Nether can the alteration be
inconsistent with an order of The Company Law Board, now Tribunal. 39Third, the
altered articles must not include anything which is illegal or opposed to public policy or
unlawful.

Fourth, the alteration must be bona fide for the benefit of the company as a whole. In
Allen V. Gold Reefs of West Africa Ltd 43. a company had a lien on all shares not fully
paid-up for calls due to the company. There was only one shareholder A who owned
fully paid up shares. He also held partly paid up shares in the company. A died. The
company altered its articles by striking the words fully paid up and thus giving itself a
lien on all shares whether fully paid up or not. The legal representative of A
challenged the alteration on the ground that the alteration had retrospective effect. It
was held that the alteration was good as it was done bona fide for the benefit of the
company as a whole, even though the alteration had a retrospective effect.

36 (1940) 3 All ER 508

37 (1888) 40 Ch D 135
38 [1941] 11 Comp Cas 78 (Mad)
39 S. 397 or 398 of The Companies Act, 1956.
43
[1900] 1 Ch. 656.

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Fifth, the alteration must not constitute a fraud on the minority by the majority. In
Brown v. British Abrasive Wheel Co.40 the majority which held 98% of the shares
passed a special resolution that upon the request of the holders of 9/10 th of the issues
shares, a shareholder shall be bound to sell and transfer his share to the nominee of
such holder at a fair value. The alteration was held to be invalid since it amounted to
oppression of minority.

Sixth, there cannot be alteration of articles so as to compel an existing member to take

or subscribe for more shares or in any way increase his liability to contribute to share
capital, unless he gives his consent in writing. 41 Seventh, an alteration of articles to
effect a conversion of a public company into a private company cannot be made
without the approval of the Central government. 42 Eighth, a company cannot justify
breach of
contract with third parties or avoid a contractual liability by altering articles.

Ninth, the amended regulations in the articles of association cannot operate

retrospectively but only from the date of amendment. 47 Also provisions by way of
contractual obligation in articles of association of a company cannot limit statutory
power of a company to alter its articles. Finally, amendment of articles to empower
Board of Directors to expel a member is opposed to the fundamental principles of
company jurisprudence and is ultra vires the company.43

5.4 United Kingdom:

In UK, shareholders may vote at the general meeting to alter the articles of
association, which requires a three-quarters super-majority. The board of a typical
public company in the U.K. is comprised of both non-executive directors and executive
directors. The board, as a whole, does not typically manage the day-to-day operations
of the company; rather, the board delegates these duties to the chief executive (also
called the "managing director") and other executive directors. 49
40 [1919] 1 Ch 290
41 S.38 of The Companies Act, 1958.
42 S.31 of The Companies Act, 1958.
43 Pyare Lal Sharma V. Managing director J&K Industries Ltd.: [1989] 3 Comp. L.J. (SL) 70 49 A.K.
Majmudar and Dr. G.K. Kapoor, Company Law and Practice , 12th ed. 2007, ps. 169 - 172. 50 Jaclyn
Braunstein, Pound foolish: Challenging executive compensation in the U.S. and the U.K. , 29 Brook. J.
Int'l L. 747.

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VI. DOCTRINE OF CONSTRUCTIVE NOTICE AND INDOOR
MANAGEMENT

6.1 Doctrine of Constructive Notice

Section 610 provides that the memorandum and articles when registered with Registrar
of Companies become public documents and then they can be inspected by anyone on
payment of a nominal fee. Therefore any person who wants to enter into a contract with
the company has the means of ascertaining and is thus presumed to know the powers of
the company and the extant to which they have been delegated to the directors. This is
known as doctrine of constructive notice .50

However, this is more or less an unreal doctrine as people know a company through its
directors and not its documents. S.9 of The European Communities Act, 1972 has
abrogated this doctrine and this change is now incorporated in S.35 of The English
Companies Act, 1985. In TCB Ltd. V. Grey4445 where a debenture issued by a company
was signed by a solicitor as attorney of director of a company but not the director
personally. The articles of the company provided that every instrument to which the
seal shall be affixed shall be signed by a director . Even so the company was held
liable. Stating the effect of the new provision, the court said that before this enactment
came into force a person dealing with the company was required to look at the
memorandum and articles to satisfy that the transaction was within the corporate
capacity. However S.9 (1) of The English Companies Act, 1985 says that good faith is
to be presumed and the person dealing with the company is not bound to enquire. 52

The courts in India also do not seem to have taken the doctrine of constructive notice
seriously. In the case of Dehra Dun Mussoorie electric tramway Company V.
Jagmandardas46 the articles of a company expressly provided that the directors could
deligate all their powers except their power to borrow. Even so, an overdraft taken by
the managing agents without approval of the board was held to be binding, the court

44 A.K. Majmudar and Dr. G.K. Kapoor, Company Law and Practice , 12th ed. 2007, p. 178.
45 JBL 10
46 Avtar Singh, Company Law , 15th ed. 2007, ps. 95-96. (Eastern Book Company, Delhi)
54
AIR 1932 All 141

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 ARTICLES OF ASSOCIATION
saying that such temporary loans must be kept outside the purview of the relevant
provision.54

6.2 Doctrine of Indoor Management

This rule, as against the previous rule, tries to protect outsiders from the company. The
rule is based on obvious reasons of convenience in business relations. The
memorandum and articles of association are public documents, open to public
inspection. But the details of internal procedure are not thus open to public inspection.
Hence an outsider is presumed to know the constitution of the company but not what
may or may not have taken place within the doors that are closed to him 47
. The rule is
of great practical utility and has been used in cases involving rights and liabilities. Thus
where the directors of a company, having the power to allot shares only with the
consent of the general meeting, allotted them without any such consent, where the
managing director of a company granted a lease of the company s properties, something
which he could do only with the approval of the board, where the managing agents
having the power to borrow with the approval of directors borrowed without any such
approval, the company will be held bound. 48

The doctrine of indoor management cannot be resorted to in the following cases.

Firstly, the rule does not protect any person who had actual or even an implied notice of
the lack of authority of the person acting on behalf of the company. Also, the rule
cannot be invoked in favor of a person who did not consult the memorandum and
articles and thus did not rely on them. Neither does it extend to transactions involving
forgery nor those that are otherwise void ab initio. The doctrine also does not reward
those who behave negligently. Nor does is apply in cases where the question is with
regard to the very existence of an agency. It is also not applied where a pre-condition is
required to be fulfilled before the company itself can exercise particular power. Finally,
the doctrine can be invoke only with reference to acts which relate to provisions of
memorandum and articles, and not in a case where oppression is alleged. 4950
47 Supra note 3.
48 Pacific Coast Coal Mines Ltd. V. Arbuthnot, 1917 AC
607.
49 th

Avtar Singh, Company Law, 15 ed. 2007, p. 98.

50 Ibid at p.
182.

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VII. CONCLUSION

Thus articles of association are an essential part of incorporation of a company. Articles

of association deals with the matter of internal regulation. It is optional in the case of
public companies limited by shares but is obligatory in all other cases. For all these
cases except public companies limited by shares, there is a necessity under section 3(1)
(iii) to file Article of Association and for guarantee company and unlimited company,
the number of members must be stated in the Articles pursuant to section 27(1) and
27(2). Hence it is only non-obligatory for public companies limited by shares and Table
A can be adopted. When a company has a share capital, then one share must be held at
least for membership.

The applicability of Table A is automatic only in case of companies limited by shares

only when they are not in consistent with the Articles itself; though it can be expressly
overridden. This automatic application is only for companies limited by shares
registered under Companies Act, 1956.

Ultimately, constitutional documents should be crystal clear and no scope should be left
for its ambiguity. Tables given in the First Schedule should be their role model.
Memorandum of Association should contain the fundamental document of the
company and should be unalterable in the interest of the shareholders, public and
especially the creditors of the company while the Articles of Association should be
freely alterable by the shareholders in the general meeting.

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BIBLIOGRAPHY

CASES REFFERED

1. Allen V. Gold Reefs of West Africa Ltd [1900] 1 Ch. 656.

2. Bratton Seymour Service Co. Ltd v. Oxborough, (1992) BCLC 693 (CA).

3. Brown v. British Abrasive Wheel Co. [1919] 1 Ch 290

4. Dutton V. Goron, (1917) 23 CLR 362

5. G. Karunakaran V. State of Kerela (1987) 61 Comp cas 334 (Ker).

6. In Re, South Durham Brewery Company [1885] 31 Ch. D 261

8. Madhava Ramachandra Kamath v. Canara Banking Corporation [1941] 11 Comp Cas

78 (Mad)

9. Naresh Chandra Sanyal v. Calcutta Stock Exchange Association Ltd: AIR 1971 SC

422.

10. Peveril Gold Mines, Re (1808) 1 Ch 122

11. Pyare Lal Sharma V. Managing director J&K Industries Ltd.: [1989] 3 Comp. L.J.

(SL) 70

12. S.S.Rajkumar v. Perfect Castings Pvt. Ltd (1968) 38 Comp Cas 187.

18