Article
of Association
The article of the
association defines the duties, rights, and the powers of the governing body as
between themselves and the company at large. It has rules and regulations that
deal with the internal management of the company. The article of Association is
subordinate to the memorandum thus the rule made in the Article of Association
should comply with the memorandum and should also be in accordance with the Company
Act 2017. The article of Association defines the rights and duties of the
governing body of company, where is memorandum explains the particulars of the
company. The article of association gives the mode and form in which changes in
the internal regulations of the company may from time to time be made.
Form
of Articles of Association
Section 41 provides the form of the Article of
Association;
Content
of Articles of Association
Table A of the first
schedule S36 and 2(49) gives the content of the Article of Association;
·
Definition of important terms and phrase
·
Adoption of execution of pre-incorporation
contracts
·
Share capital and the rights of the
shareholder
·
Allotment of share
·
Procedure as to the making of calls of
shares
·
Transfer of Shares
·
Lien on Shares
·
Share certificates and share warrants
·
Alteration of share capitals and else
Memorandum
and Articles of Association as a Contract
After the registration,
the memorandum and article of Association bind the company and the members of
the company to the signed documents. Section
17(1) defines the effect of the memorandum and article. It says that the
registered documents bind the company and members to the extent they have
signed.
Binding
on members in relation to the company
The memorandum and
article of association bind the members with respect to their provisions. The
company has the right to sue the members for the enforcement of the provisions.
Bradford Banking
Company v Briggs
It was mentioned in the
article that for a debt due from a member in the company, the company has the
first charge on members' share. A member of the company owning debt also
borrowed money from the bank on the security of his shares. The company claimed
the prior charge but the court held that the company has the prior charge over
the member's share.
Binding
on Company in relation to the members
The company is also
bound to perform under the documents as the members are bound. A member may sue
the company for the enforcement of the provisions and can also restrain from
committing a breach of provisions.
Pender v Luchington
The right of veto is the
right of the shareholder. The chairman of the meeting cannot deprive a member
of his voting rights.
Binding
on members inter se
The members are also
bound to each other by provisions.
Rayfield v Hands and
Others
The article mentioned
that members shall inform during transferring the share to the director of his
intentions. The member informed by the directors refused to take the share. It
was held that the directors are bound to take the shares.
Not
Binding on the Company in Relation to Outsider
The company and its
members are not bound to outsiders. Thus a person stranger to the
constitutional documents cannot bring an action on the basis of the contract.
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