Unit - 57 : Memorandum of Association and Articles of Association
Legal & Regulatory Aspects of Banking -
Unit - 57 : Memorandum of Association and Articles of Association Memorandum of Association: 1. It is the fundamental document 2. It is the Charter of the company. 3. It dictates external and internal affairs of the company. 4. It has effects on the members as well as the outsiders. 5. Ratification: No act can be ratified which is done beyond the memorandum: This is called as “Doctrine of Ultra Vires”. 100% members of the company also cannot ratify such ultra virus acts. 6. The memorandum of association is bound to observe. (a) The provisions of the Companies Act, 1956; (b) Any other law in force.
The first step in formation of a company is preparing memorandum of association ( MOA ). It is a document of great significance as it embodies the fundamental rules regarding the constitution and scope of activities of a company .
The purpose of MOA among others is to enable the member's creditors and those who deal with the company to know the permitted scope of its activities .
Contents of various clauses of the MOA : A. Name Clause B. Registered Office Clause C. Objectives Clause D. Liability Clause E. Capital Clause F. Association or subscription clause
Articles of Association (AOA): It is the second important document of a company . It consists of a set of rules / regulations and bye laws made by the company for internal management of the company and for carrying out the objects of the company embodied in its MOA. Schedule I of Companies Act , 1956 sets out the tables or model forms of AOA for different companies . TABLE A is applicable to public companies limited with shares . 1. It is the subsidiary document. 2. These are me regulations of the company. 3. It dictates only internal affairs and management of the company. 4. It has effects on the members and employees of company. 5. Ratification: An act covered by articles of association can be ratified by majority principle. It is called ‘Indoor Management’. 6. The Articles of Association are bound to observe,— (a) The provisions of the Companies Act, 1956 and Rules; (b) Any other law in force; and (c) The memorandum of association of the company.
Distinction Between :
1. Contains Fundamental conditions upon which the company is incorporated . The AOA are the internal regulations of the company and they provide the manner in which the proceedings of the company are to be carried on.
2. Dominant instrument as it states the purpose of the company and the reasons for which it has came into existence. AOA are always held to be subordinate to MOA .
3. Clauses can be altered only by Special Resolution passed by company and with the sanction of company law board. Any terms in AOA can be altered and no approvals required for the same .
4. No act can be ratified which is done beyond the memorandum: This is called as “Doctrine of Ultra Vires”. 100% members of the company also cannot ratify such ultra virus acts. An act covered by articles of association can be ratified by majority principle. It is called ‘Indoor Management’.