Page 245 - DMGT407Corporate and Business Laws

Corporate and Business Laws

Notes
The altered Article envisages that so long as the Reliance Group of Companies holds 26
per cent or more of REL’s paid-up voting equity share capital, it will have the right to
appoint majority of REL’s directors on the board of the company.

Reliance Industries had earlier said that it had not sought in any withdrawal of powers
conferred on Mr Anil Ambani. It had also said that RIL had not been consulted by REL
before the proposed re-amendment of the relevant articles of association. The move to
alter the articles of association was seen as part of the ongoing differences between the
Ambani brothers over control of the ` 99,000-crore Reliance Group, of which REL is a
subsidiary.
REL had, by way of a special resolution, asked shareholders to mail their votes through
postal ballot for a change in its Articles of Association.
The company had sought permission to change Article 131 (a), 131 (a) (ii) and 131 (aa),
which allowed Mr Anil Ambani the power to appoint one-third or majority of the total
directors on REL’s board, choose the Vice-Chairman of the company and even decide the
tenure of the Chairman, Vice-Chairman and the directors appointed by him.
REL sought to vest these powers with its prime shareholder, Reliance Industries.
Question
Why does Reliance want alteration in Reliance Energy’s articles?

Source: thehindubusinessline.com

10.6 Summary

The articles of association of a company are its bye laws and regulations, which govern the
management of its internal affairs and the conduct of its business.
The articles of a company must be printed, divided into paragraphs, numbered consecutively
and signed by subscribers to the memorandum in the presence of at least one witness who
shall attest the signatures.

A company may, by special resolution alter or add to its articles, subject to the provisions
of the companies Act and to the conditions contained in company’s memorandum.
An alteration of articles to effect a conversion of a public company into a private company
cannot be made without the approval of the Central Government.
The articles are the regulations of the company binding on the company and on its
shareholders.

The articles bind the members inter se, i.e., one to another so far as rights and duties
arising from the articles are concerned.

The memorandum or articles do not confer any contractual rights to outsiders against the
company or its members, even though the name of the outsider is mentioned in the
articles.

The memorandum and articles, when registered, become public documents and then they
can be inspected by anyone on payment of a nominal fee.

Every person dealing with the company is presumed to have read the articles and
memorandum and, understood them in their true perspective. This is known as ‘Doctrine
of Constructive Notice’.

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