Page 161 - DCOM404_CORPORATE_LEGAL_FRAMEWORK

Corporate Legal Framework

Notes 8.4.3 Subject Matter of Articles

The articles of a company usually deal with the following matters:

1. the business of the company;
2. the amount of capital issued and the classes of shares into which the capital is divided; the
increase and reduction of share capital;
3. the rights of each class of shareholders and the procedure for variation of their rights;

4. the execution or adoption of a preliminary agreement, if any;
5. the allotment of shares; calls and forfeiture of shares for non-payment of calls;
6. transfer and transmission of shares;
7. company’s lien on shares;

8. exercise of borrowing powers including issue of debentures;
9. general meetings, notices, quorum, proxy, poll, voting, resolution, minutes;
10. number, appointment and powers of directors;

11. dividends – interim and final – and general reserves;
12. accounts and audit;

13. keeping of books – both statutory and others.

8.4.4 Inspection and Copies of the Articles

A company shall, on being so required by a member, send to him within seven days of the
requirement, on payment of one rupee, a copy of the articles. If a company makes default, the
company and every offi cer of the company, who is in default, shall be punishable with fi ne up
to ` 50 (s.39).

8.4.5 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. A printed or

type written copy of every special resolution altering the articles must be filed with the Registrar
within 30 days of the passing of the special resolution.
The right to alter just by passing special resolution is so important that a company cannot in any
manner deprive itself of the power to alter its articles. Also, the power to reduce or increase the
number of members in the case of a company limited by guarantee without share capital, from
time to time, as given in the articles can be done by a special resolution of the general body of
members. However, in spite of the power to alter its articles, a company can exercise this power
subject to certain limitations.

8.4.6 Limitations on Power to alter Articles

These are:

(i) The alteration must not exceed the powers given by the memorandum or conflict with the

other provisions of the memorandum.
(ii) The alteration must not be inconsistent with any provision of the Companies Act or any
other statute. For example, no company can purchase its own shares (s.77) and if the articles

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