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Question
Distinguish between the following:
Memorandum of association and articles of association.
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Solution
Sr. No. |
Memorandum of association |
articles of association : |
|
1 |
Memorandum of Association is the primary, fundamental, and the main document of the company which lays down its constitution and defines its objects and the scope of its activities. |
The Articles of Association is a secondary, subsidiary, and subordinate document of the company which lays down the rules and regulations for the internal management of the company. |
|
2 |
It is the basic, fundamental, primary, and supreme document of the company. It is a life-giving document. |
It is a secondary and subordinate document. It is subordinate to the Memorandum of Association. |
|
3 |
It defines the sc0pe of the activities of the company, its objects, and their limits or the area beyond Which the activities of the company cannot go. It fixes the area of its operation. |
It lays down the rules for carrying out the objects of the company. The rules are meant for the internal management of the company within the area defined by the Memorandum. |
|
4 |
It defines the relationship of the company with the outsiders, e.g. buyers, sellers, creditors, debtors, etc. |
It defines the relationship between the company and members and also between members. It has nothing to do with the outsiders. |
|
5 |
Every company irrespective of its types, nature and size must prepare and file its own memorandum. No company under the Companies Act can be registered Without the Memorandum of Association. |
Every company must prepare and file its own articles. However, a public company may adopt table A of the Companies Act, 1956, as its articles. |
|
6 |
The procedure for the amendment or alteration Is very difficult. It requires an ordinary or special resolution, sanction by the Central Government or the Company Law Board or the Court. |
The procedure for alteration is relatively simple. The Articles can be altered subject to the Companies Act and general law provided the alterations are intra Vires the Memorandum and they are in the interest of the company as a whole. |
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RELATED QUESTIONS
______ describes the relationship between company and outsiders.
Select the correct answer from the option given below and rewrite the sentence.
Any act done by the company beyond the powers of Memorandum is called as _______.
Select the correct answer from the option given below and rewrite the sentence.
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Select the correct answer from the option given below and rewrite the sentence.
_______ is an invitation to the public to subscribe for the shares of the Company.
Match the pairs:
| Group ‘A’ | Group ‘B’ |
| a) Capital clause | 1. Details of capital structure of a company |
| b) Liability clause | 2. Used for multiple issue of shares |
| c) Acts beyond the powers of Memorandum | 3. Abridged Prospectus |
| d) Red Herring Prospectus | 4. Describes main objectives |
| e) Shelf Prospectus | 5. Used for Rights Issue |
| 6. Incomplete Prospectus | |
| 7. Ultra Vires | |
| 8. Doctrine of Indoor management | |
| 9. Extent of liability of members | |
| 10. Articles of Association |
Write a word or a term or a phrase which can substitute the following statement:
Clause which gives details of authorized capital or Registered Capital.
Write a word or a term or a phrase which can substitute the following statement:
Document which establishes relationship between a company and its members.
State whether the following statement is True or False:
Any act done by the company beyond the powers of Memorandum is Ultra Vires.
State whether the following statement is True or False:
Articles of Association can have provisions that contradict the Memorandum.
State whether the following statement is True or False:
Memorandum contains rules and regulations for the internal management of a company.
State whether the following statement is True or False:
Entrenched Articles cannot be easily altered.
State whether the following statement is True or False:
Every company has to issue shelf prospectus every time it offers shares to the public.
Find the odd one.
Complete the sentence.
Any act done by the company which goes beyond the powers of Memorandum of Association will be calledas _________
Complete the sentence.
The document which is subordinate to the Memorandum of Association is called _________
Complete the sentence.
The document which contains the rules and regulations governing the internal management of a company is called _________
Study the following case/situation and express your opinion:
The Articles of a company stated that while borrowing any money from outsiders. The document must have the signatures of the Managing Director (MD) and any one of the directors. The Articles of Association clearly stated the procedure to be followed while borrowing money. The Managing Director did not follow all the procedures but still borrowed money from Mr. X. Mr. X assumed that the MD has followed the required procedures:
(a) Can the MD be held punishable for his act?
(b) Under which Doctrine can Mr. X take action against the company?
(c) Explain the Doctrine.
Study the following case/situation and express your opinion:
The object clause of Memorandum of a company stated the main object as the manufacturing of plastic chairs and tables and any other activity in furtherance of achievement of its main activity. The Board of Directors wants to now also produce TV. Serials and feels that the shareholders may give their permission.
a) Can the company with immediate effect start producing TV? Serials? Why?
b) How can the object clause of the company be altered?
Study the following case/situation and express your opinion:
A company stated in its prospectus that it has been making profits since the last 5 years. However, Mr. X. an investor found out that two years back the company had not made any profit. The prospectus was filed with the ROC on 1 st Jan 2017 and was issued to the public on 10th Feb 2018.
a) Can Mr. X state that there was a misstatement in the prospectus?
b) If found guilty which two types of liability will the company and its officers face?
c) Can the prospectus be valid for issue to the public on 10th Feb 2018?
