12.4.1 (ARTICLES OF ASSOCIATION)

Meaning and Purpose. The articles of association of a company and its bye laws are regulations which govern the management of its internal affairs and the conduct of its business. They define the duties, rights, powers and authority of the shareholders and the directors in their respective capacities and of the company and the mode and from in which the business of the company is to be carried out. The Articles of association of a company have a contractual force between company and its members as also between the members inter se in relation to their rights as such members. They are subordinate to and are controlled by memorandum. Articles cannot supersede the objects as set out in the memorandum of association [Birds Investments Ltd, v. C.I.T. (1965) 35 Comp. Cas.147 Cal.] The memorandum, as we have seen earlier, lays down the scope and powers of the company, whereas the articles govern the ways in which the objects of the company are to be carried out. Also the alteration of memorandum involves elaborate procedure, whereas the articles can be framed and altered by the members by passing 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 against or repugnant to the provisions of the Companies Act (s.9). Thus, where article 2 of the Articles of a company limited by guarantee without share capital provided as follows: For the purpose of registration, the number of members is 1500. This may be reduced or increased from time to time by the general committee. The article was held to be void. The articles can be altered only by a special resolution of the general body.