Page 238 - DMGT407Corporate and Business Laws

Unit 10: Articles of Association

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

Self Assessment

Fill in the blanks:
1. Section 26 states that a public company limited by shares may register articles of association,
signed by the subscribers to the…………………….
2. Articles are to be stamped with requisite stamp under the ………………..and filed with the
registrar along with the memorandum.
3. If a public company limited by shares does not register its own articles, then the articles
given in ………………. of Schedule I automatically becomes applicable.
10.2 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.

!

Caution It is requisite that a printed or typewritten 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 a 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. These are:
1. The alteration must not exceed the powers given by the memorandum or conflict with the
other provisions of the memorandum.

2. The alteration must not be inconsistent with any provisions of the Companies Act or any
other statute. Example: No company can purchase its own shares (s.77) and if the articles of
a company are altered so as to have the power to purchase its own shares, then such power
will be void.
3. The altered articles must not include anything which is illegal, or opposed to public policy
or unlawful.
4. The alteration must be bona fide for the benefit of the company as a whole. The alteration
will not, however, be bad merely because it inflicts hardship on an individual shareholder.

Example: A company had a lien on all shares “not fully paid” for calls due to the company.
There was only one shareholder A, who owned fully paid-up shares. He also held partly-paid
shares in the company. A died. 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 legal
representative of A challenged the alteration on the ground that the alteration had retrospective
effect.

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