Page 237 - DMGT407Corporate and Business Laws

Corporate and Business Laws

Notes articles can be framed and altered by the members by passing a special resolution. The
memorandum is the area, beyond which the actions of the company cannot go; inside that area,
the shareholders may make such regulations for their own governance as they think fit. However,
the articles must not be inconsistent with the memorandum. Also, as in the case of memorandum,
the articles of the company must not contain anything which is repugnant to the provisions of
the Companies Act (s.9).

10.1 Articles – Registration, Subject Matter and Inspection

Section 26 states that a public company limited by shares may register articles of association,
signed by the subscribers to the memorandum. If, however, it does not register its own articles,
then the articles given in Table A of Schedule I automatically becomes applicable. Further, even
if it does register articles of its own, Table A will still apply automatically unless it has been
excluded or modified. There are actually three possible alternatives in which such a company
may adopt articles: (i) it may adopt Table A in full or, (ii) it may wholly exclude Table A and set
out its own regulations in full, or (iii) it may set out is own articles and adopt part of Table A. The
alternatives (ii) and (iii) are often employed; and partial adoption of Table A has particular
advantage for small companies, because of economy in printing and also because any provision
of Table A is legally beyond any doubt.
As regards a company limited by guarantee and unlimited liability, and a private company
limited by shares, s.26 provides for compulsory registration of articles prescribing regulations
for the company. However, they may adopt any of the appropriate regulations of Table A.
In any case, the articles of a company must be: (i) printed, (ii) divided into paragraphs, numbered
consecutively, (iii) signed by subscribers to the memorandum in the presence of at least one
witness who shall attest the signatures. Also, articles are to be stamped with requisite stamp
under the Stamp Act and filed with the registrar along with the memorandum (s.3).

Did u know? The Articles are subordinate to and are controlled by memorandum.
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. The transfer and transmission of shares;
7. The company’s lien on shares;

8. The exercise of borrowing powers including issue of debentures;
9. The general meetings, notices, quorum, proxy, poll, voting, resolution, minutes;
10. The number, appointment and powers of directors;
11. The dividends – interim and final – and general reserves;

12. The accounts and audit;
13. The keeping of books – both statutory and others.

230 LOVELY PROFESSIONAL UNIVERSITY