Articles of Association

sec 2(2) of the Act defines AOA as bylaws or rules that govern the management of its internal affairs and conduct of business. It defines the power of the officers

Contents of AOA Share capital rights of share holders, Share certificate Lien on shares Calls on shares Transfer of shares Transmission of shares Forfeiture of shares Surrender of shares General Meeting Director and first director Accounts and audit Borrowing powers Members voting rights Winding up

Doctrine of ultra vires Powers exercisable by company are to be confined to the objects specified in the memorandum. A activity beyond the powers of the company will be ineffective This is called as Doctrine of ultra vires. The rule of ultra vires was devised for protection of the companys interest.

Doctrine of indoor management This doctrine lays down that person dealing with company are not bound to inquire into the regularities of the internal proceedings. An outsider is not bound to see that the company carries out its own internal regulations.

Case Law Royal British Bank vs Turquand

Facts : 1 Directors borrowed money sum of money from
Plaintiff, AOA provided directors can borrow from time to time to be authorised by resolution passed in general meeting of the Company. Director gave bond to Turquand without authority of such resolution. Held : Turquand could sue the company on the strength of bond, as he was entitled to assume that necessary resolution had been passed. This is called as Doctrine of Indore Management.