Page 242 - DMGT407Corporate and Business Laws

Unit 10: Articles of Association

Notes

Task A limited company is formed with its articles stating that, Mr. Srivastava shall be
the solicitor for the company and that he shall not be removed except on the grounds of
misconduct. Can the company remove Mr. Srivastava from the position even though he is
not guilty of misconduct?

Self Assessment

Fill in the blanks:
7. The articles bind the members………………., i.e., one to another so far as rights and duties
arising from the articles are concerned.
8. The memorandum or articles do not confer any ………………….rights to outsiders against
the company or its members

9. Where the directors contravene the provisions of the articles it may affect ………………….
interest also.

10.4 Constructive Notice of Articles and Memorandum

Section 610 provides that the memorandum and articles, when registered, become public
documents and then they can be inspected by anyone on payment of a nominal fee. Therefore,
any person who contemplates entering into a contract with the company, has the means of
ascertaining and is thus, presumed to know the powers of the company and the extent to which
they have been delegated to the directors.

Did u know? What is ‘Doctrine of Constructive Notice?

Every person dealing with the company is presumed to have read its articles and
memorandum and, understood them in their true perspective. This is known as ‘Doctrine
of Constructive Notice’.
Even if the party dealing with the company does not have actual notice of the contents, it is
presumed that he has “constructive notice” of them.

Example: One of the articles of a company provides that a bill of exchange to be effective
must be signed by two directors. A bill of exchange is signed only by one of the directors. The
payee cannot claim under the bill.

Example: In Kotla Venkataswamy vs. Ram Murthy AIR (1934) Mad. 579, the articles
provided that, all deeds and documents of the company shall be signed by the managing director,
secretary and working director. A mortgage deed was accepted with secretary and working
director’s signature only.

Held: The deed was invalid.

Example: If a person enters into a contract which is beyond the powers of the company,
he does not acquire any right under the contract against the company.

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