Page 89 - DCOM106_COMPANY_LAW

Company Law

Notes China played the devil’s advocate. “Is it possible to prove that only a particular partner
was negligent and not the others?” Wafers replied, “They will have to divide work amongst
themselves appropriately. This could create disputes between partners, but crystal clear
division of duties between partners will go a long way in reducing the same.”

“Excellent,” said Muskan. “The LLP form of organisation would help the small and medium
practitioners by encouraging networking and specialisation of functions.”
Wafers had a word of caution, “The decision to go for LLP will be based on the interplay
of costs and benefits.” China continued his black hat thinking, “Other forms of organisation
are tried and tested. Why then should one go for something new?” Wafers answered this
question philosophically quoting John Rockefeller, “If you want to succeed, you should
strike out new paths rather than travel the worn out paths of accepted success.” China
smiled.
Question
Comment on “A partnership is the relationship between persons who have agreed to
share the profits of a business carried on by all or anyone of them acting for all”. (Hint:
Refer partnership act)
6.10 Summary

The articles of association of a company and its bye laws are regulations which govern the
management of its internal affairs and the conduct of its business.

Section 26 states that a public company limited by shares may register articles of association
signed by the subscribers to the memorandum.
Section 31 provides that subject to the provisions of the Act and to the conditions contained
in its memorandum, a company may, by special resolution alter or add to its articles.
The company altered its articles striking out the words “not fully paid up” and thus, gave
itself a lien on all shares whether fully paid up or not.

The doctrine of constructive notice throws a burden on people entering into contracts with
the company that they are presumed to have read the documents, though in fact, they
might not have read them.

6.11 Keywords

Alteration of Articles: Section 31 provides that subject to the provisions of the Act and to the
conditions contained in its memorandum, a company may, by special resolution alter or add to
its articles.
Article of Association: The articles of association of a company and its bye laws are regulations
which govern the management of its internal affairs and the conduct of its business.
Doctrine of Indoor Management: Doctrine of indoor management allows all those who deal
with the company to assume that the provisions of the articles have been observed by the
officers of the company.

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