Article of association

Lecture Objectives
• To study the legalities involved in articles and its
alteration
• Describe the importance of documents required in
company formation
• Describe the importance of Doctrine of constructive
Notice
• To understand the doctrine of Indoor management and
the exceptions of doctrine of indoor management
 Definition –Articles:
• As per Section 2(5) of the Companies Act,2013 

“articles” means the articles of association of a company as originally

framed or as altered from time to time or applied in pursuance of any
previous company law or of this Act.

• .
 MEANING
• There are some Regulations & Rules in all companies
• Managing the internal affairs of company and
• For managing the relation between members and company,
These rights, duties, regulations and rules shall be in recorded written
format, this written document is called Articles of Association (AOA).
• .
• The Articles have to be submitted to the Registrar of Companies
during formation of a company in Form INC-34 along with the
Memorandum of Association in Form INC-33
• Section 5 of the Companies Act,2013 deals with AOA.
• The articles of a company shall contain the regulations for
management of the company
• Also, they are meant to carry out the objects of MoA
• The articles of a company shall be in the respective forms specified
in Tables G,H,I,J in Schedule I as may be applicable to such
company.
•

Note -The liberty to have articles or in a form as near thereto as

circumstances admit, which was available in the 1956 Act is no longer
available in the 2013 Act.
The articles of a company shall be in respective forms specified Schedule I as
may be applicable to such company.
 Content of Articles :
1. Regulations for management of the company
2. Matters as may be prescribed by rules
3. Additional matters.
4. Provision for entrenchment.
 Content of Articles :
1.Regulations for management of the company

2. Matters as may be prescribed by rules

(matters as may be prescribed by rules made by central govt.)

3. Additional matters.
 4.Provision for entrenchment
Objective of the Provision
– It provides additional layer of protection to investors
– Additional safeguard for alteration.
•  An entrenchment clause is the one which makes certain
amendments either impossible or difficult.

Note- The provisions of entrenchment as stated above, are new and were not
there under in companies act 1956
 Please Note
• It contains specified provision of articles may be altered only if
more restrictive conditions or procedure is followed.
• Any entrenchment Clause which is against the provision of
Companies Act, 2013 or Memorandum of Association is void and
unenforceable.
An entrenchment provision can be made-
 at the time of incorporation of the company,
or
 after the incorporation of the company by way of an amendment
to the articles of association of the company

Note- Where the articles contain such provision Company shall give
the notice to registrar in prescribed manner
Statutory right of alteration-
• Sec 14 of the act gives a clear and statutory power to the company
to alter AOA

• This power cannot be taken away from company.

• Any clause in articles of association providing that company cannot

alter its article, is invalid
 Constructive Notice of Memorandum and Articles :
Every outsider is deemed to have notice of contents of
memorandum and Articles.
These public documents on registration becomes
‘constructive notice’.
 Doctrine of Indoor
Management
The Limitation of the Doctrine of Constructive Notice is ‘Doctrine of
Indoor Management’.
Assumption :
The outsiders assume that internal proceedings of the company are
regularly done with.
Constructive doctrine protects the company from outsiders
And
Doctrine of Indoor protects the outsiders from the company

Also Known as TRQUAND’S RULE

 ???
The Directors of the Company were authorized by the articles to
borrow on bonds if authorized by a special resolution passed at a
general meeting A bond under the seal of the company, signed by two
directors and the secretary was given by the Directors to Turquand.
Whether the company was liable on that bond.?
• It was held that the bond was binding on the company as Turquand
was entitled to assume that the resolution of the Company in
general meeting had been passed. 
Exceptions :
1. Knowledge of irregularity
2. Suspicion of irregularities
3. Negligence (sale of company’s property by an accountant)
4.Forgery (sale of forged shares)
5. Acts outside the scope of apparent authority