Articles of Association & Memorandum of Association

Q. No. 01:

Contents of Articles of Association ?

Ans. to the Q.No.01:

Apart from many others, the following are the Common articles generally available in any articles of association.

1. Schedule -1: Whether it is excluded and if so to what extent.
2. Definitions : (i.e. Interpretation of terms used )
3. Share capital: Its divisions, Rights, Calls, Certificates increase, Decrease and other matters.
4. Transfer, Transmission and verification of shares.
5. Borrowing power and how to exercise them.
6. General meetings and allied i.e. Notices, quorum, voting, polling, proxies etc.
7. Constitution, Management and power of the Board or Directors.
8. Constitution ,Management and power of the Board of directors
9. Inspection of Documents’
10. Common Seal
11. Dividend
12. Accounts and Audit
13. Winding up, etc.
    
    
    Q. No. 02 :
    Memorandum of Association Define and its purpose and contents describe?

Ans. to the Q.No.02:

Memorandum of Association is the chapter of a company that regulates external affairs of a company whilst articles of association internal matters.

The purpose of a memorandum is to …

1. Ascertain its Name
2. Ascertain its domicile (Nationality )
3. Define its Nature e.i. Public or Private Liability and
4. Define its Objective is
   It also entails about the registered office, Association clause etc. Section 6 to 16 provides for contents Name, Alteration or modification procedures of the memorandum.
   
   
   
   
   Q. No. 03 :
   Particulars of Articles ?
   Ans. to the Q.No.03:
   The Act lays down that the memorandum of association of every company shall contain the following particulars:

1. Name Clause
2. Situation Clause
3. Domicile Clause
4. Objects Clause
5. Area of Operation Clause
6. Liability Clause
7. Share Capital Clause
8. Association Clause
9. Contribution Clause etc.
   
   
   Q. No. 04 :
   Whats is the procedure altering the various clauses in the memorandum ?
   
   
   Ans. to the Q.No.04:
   There are certain statutory provisions as to alteration / Amendment of the memorandum and articles of association of the company.
   
   
   The following table will show the course of changes in the memorandum or articles :
   
   

Changes	Regulation Required	Statutory Obligations	Whether returns to be filed with sec. and return from No.
Name	Special Resolution	Permission from registrar and BOI	Required Sec.11 (6) & 88 return from -111
Registered office	Ordinary Resolution	Premission from BOI	Needed by sec 77 (2) and return from –vi
Objective	Special Resolution	Permission from BOI and high court confirmation	Amended MA with HC Confirmation Must be filed Sec-12 ,15 & 88 Form-viii
Capital Clause	Ordinary Resulation	None	Required for authorized capital required fee to be deposited section 53 & 56 Form-iv
Articles	Special Resulation	None	Required under sec.20 & 88 From-viii

Every alteration or amendment needs to be incorporated in all copies of the memorandum and articles of association of the company.

Q. No. 05 :

Distinguish between the memorandum of association and articles of association.

Ans. to the Q.No.05:

S.L.	Memorandum association	Articles of Association
01	It is the principle decument of a company .It includes object .Power and right of a company.	It is the internal documents of a company .It includes internal operation rules.
02	It maintains the relation between company and third party	Its maintains internal relations
03	It is the guidance and law of articles	It is controlled by memorandum of association.
04	It is made by company law	0It is made by company law and memorandum
05	It maintains all general contents of company	It states and explains the contents of memorandum.
06	It must be registered	It is not obligated for registration
07	Every company must have the memorandum	Joint stock company may not have this.
08	It cannot be altered without the permission of court.	It can be altered without the permission of court.

Q. No. 06 :

Can the object of the company be altered? If so how ?

Ans. to the Q.No.06:

The object clause of memorandum of association of the company can be altered according to the company law for any of the following reason:

1. To carry on its business more economically or more effeciciently.
2. To attain its main purpose by new or improved means.
3. To enlarge or change the local of its operations.
4. To restrict or abandon any of the objects specified in the memorandum
5. To sell or dispose of the whole or any past of the undertaking of the company,
6. To amalgamate with any other company or body or persons.
   
   
   Q. No. 07 :
   What are articles of association? What are the contracts of the articles of association?
   
   
   Ans. to the Q.No.07:
   Articles of Association:
   According to company act 1994, Section 2 (1) a ,”Articles “ means the Articles of Association of a company as originally framed or as altered by the special resolution including so far as they apply to the company. The regulation contained in the first schedule to this Act.
   
   
   Actually it is the domestic regulation of a company. The regulation contained in the first schedule to this Act.
   Actually it is the domestic resignation of a company and governs its internal administration.
   It includes and controls ,share distribution , share transfer, capital changing ,directors appointment ,dividend distribution ,voting power, conduct of board meetings and general meeting ,books of accounts and audit and writing up of company etc. the person who signature on the memorandum are also signature in the articles. It explains the clauses of memorandum.
   
   
   The Contents of the Articles of Association:
   
   
   The Contents of Articles of association are as follows:

1. Full Name of the company
2. Daily functions and rules of management
3. Name address and other description of directors and managing directors
4. Responsibilities duties right and power of directors and managing directors
5. Number of directors
6. Appointment rules of manager and secretary
7. Remunerations of director
8. Number and value of qualification share of directors
9. Total amount of authorized capital and number and classification  of shares
10. Par value and payment system of shares
11. Terms and conditions of share for  forfeiture
12. Procedure of share issue and transfer
13. Commission of share underwriting
14. Borrowing power and procedure of company
15. Calling and operating system of meeting
16. Voting system of the meeting
17. Voting power of the meeting
18. Rule of dividend declared and dividend transfer to the capital
19. Accounting and auditing procedure
20. Name and address of auditors, Banker solicitors broker and managing agent
21. Winding up procedure of company
22. 
    
    
    
    
    
    Q. No.08:
    What are the legal effects of Articles of Association ?
    Ans. to the Q.No.08:
    Following are the legal effects of articles of association :

1. Contractual Obligation :
   A registered Articles of Association makes a contractual obligation among the members and the company. So that the members are obligated to follows the articles.
2. Case File :
   Company can file case against any members due to avoid articles. Any member can also file case against other member or the company.
3. Due Debts :
   All money payable by any member to the company under the articles shall be considered as debts due to him.
4. Open Document :
   Since the articles of association is an open document to the company, Assume that all parties are aware from the contents of articles. So if any parties make any transaction avoiding the rules of articles, the company will not be liable.
5. Contract between the company & Third party :
   The company or its member does not make any contract with the third party according to articles of association.
6. Directors Obligation :
   The power and responsibilities of directors are limited by the rules of articles, if any directors are limited by the rules of articles, if any director violet any rule of articles is to be liable personally.
   Q. No.09:
   Can articles be altered? If altered how?
   Ans. to the Q.No.09:
   Articles of association can be altered, extended and amended according to rules of company law, without permission of court but taking decision in the members meeting.
   
   
   The following rules and restriction are to be followed to alter the articles –

1. The articles of association can be altered by taking special resolution but not any other types of resolution.
2. Alteration of articles never violet the rules of memorandum and company.
3. The alteration in the articles should be fair and for the benefit of the company as a whole and not for a class or group of members only.
4. Alteration of articles is not to be contradiction with the order of the court.
5. The right of the minority members cannot be taken by alteration of articles.
6. Alteration of articles is not for increasing the liability of all member or a few of member.
7. Alteration of article is not for breaking the contract with the third party.
   Every special resolution amending the articles of association must be supported by a return to the registrar within fifteen days of passing of the resolution as required under section 88 of the Act.
   
   
   Q. No.10:
   Memorandum defines and confirms the power of a company –Explain the statement,
   
   
   Ans. to the Q.No.10:
   Memorandum of association is the principal document of a company which regulates the external affairs.
   The limit of scope and power the company is said in this document, nothing can be done outside the scope of the object clause of memorandum.
   So it is called the constitution of the company .Anything done outside the scope of the object clause of memorandum is ultra virus.
   The all possible function of a company is mention in this clause.
   So, it can be said that the memorandum defines and confirms the power of a company.
   
   
   Q. No.11:
   What are the legal effects of memorandum of association?
   
   
   Ans. to the Q.No.11:
   As a man document of the company the legal effects of memorandum of association are as follows:

1. Contractual Condition :
   Memorandum of association of a register company make contractual obligation between the company and members.
   As a result the members and their legal agent are legally obligated to follow  the memorandum.
2. Constitution and power :
   Constitution and power of the company are made on the basis of memorandum of association so the company cannot do anything outside the rules of memorandum.
3. Expressed document :
   Memorandum of association is an expressed document of a company .All related parties are award about by this documents.
4. Liabilities of company :
   Company is not liable for doing anything outside the memorandum to the directors and shareholders.
5. Effect on shareholder and director :
   The directors cannot make the company liable to third party by doing anything outside their power described in memorandum.
   Shareholders also cannot approve anything outside the memorandum.
   
   
   
   
   Articles of Association:
   “Articles “ means the articles of association of a company including so far as they apply to the company , the regulations contained in schedule l to this Act.----Sec. 2 (1-a)
   
   

The Law of Contract

Q.No.01:

What is contract?

Ans. to the Q.No.01:

Section 2 (h) of the Bangladesh Contract Act Provides that “An agreement enforceable by law is a contract “

Therefore in a contract there must be –

1. An agreement and
2. The agreement must be enforceable by law.
   
   
   “Every promise and every set of promises, forming the consideration for each other , is an agreement.”
   
   
   Q.No.02:
   What are the essential elements of a contract?
   
   
   Ans. to the Q.No.02:
   An agreement becomes enforceable by law when it fulfils certain conditions. These conditions, Which may be called the essential elements of a contract, are explained below:

1. Offer and acceptance
2. Intention to create legal relationship
3. Lawful consideration
4. Capacity of parties
5. Free Consent
6. Legality of the Object
7. Certainty
8. Possibility of performance
9. Void agreements
10. Writing, Registration and legal formalities.
    The elements mentioned above must all be present if any one of them is absent, the agreement does not become a contract.
    An agreement which fulfils all the essential elements is enforceable by law and is called a contract.
    From this it follows that,
    “Every contract is an agreement but all agreements are not contracts.”
    
    
    Q.No.03:
    Define the classification of contract.
    
    
    Ans. to the Q.No.03:
    In the law of contract certain terms are used indicating their meaning .The terms also show that contracts can be classified in to four broad divisions ,Namely-

1. The method of formation of a contract,
2. The time of its performance
3. Its parties  and
4. Its legality or validity
   
   
   Method of formation-

1. Express contract
2. Implied Contract
3. Quasi Contract
   The time of performance-

1. Executed contract
2. Executory Contract
   The parties of the contract-

1. Bilateral Contracts
2. Unilateral Contracts

Legality or validity of the contract-

1. Valid Contract
2. Void Contract
3. Voidable Contract
4. Illegal Contract
5. Unenforceable Contract

Q.No.04:

What do you mean by termination of contract? Discuss the various ways by which a contract may be terminated.

Ans. to the Q.No.04:

When the obligations created by contract come to an end, the contract is said to be discharged or terminated. A Contract may be discharged or terminated in any of the following ways:

1. By performance of the promise or tender
2. By mutual consent cancelling the agreement or substituting a new agreement in place of the old.
3. By Subsequent impossibility of performance.
4. By operation of law-e.g. Death, Insilvency or merger.
5. By lapse of time
6. By material alteration without the consent of the other parties.
7. By breach made by one party.

Q.No.05:

The rule of termination of contracts

Ans. to the Q.No.05:

The rules regarding termination of contracts-

1. Termination by performance the obligations of a party to a contract come to an end when he performs his promise
2. Termination by mutual agreement, Tender
   
   
   
   

Q.No.06:

What do you mean by the “Frustration of contract “?

Ans. to the Q.No.06:

The doctrine of frustration-

When the common object of a contract can no longer be carried out, the court may declare the contract to be at an end.

This is known as the doctrine of frustration.

Anson says,

Most legal systems make provision for the discharge of a contract where subsequent to its formation a charge of circumstances’ renders the contract legally or physically impossible of performance.”

Lord lore burn says,

“The doctrine of frustration is only a special case of the discharge of contract by and impossibility of performance arising after the contract was made.”

Q.No.07:

Causes of frustration

Ans. to the Q.No.07:

Later on many exceptions to the Doctrine of Frustrations were made and on various grounds .The court gave relief to aggrieved persons.

In the following cases in to English courts accepted that the contract came in to and end:

1. Destruction of an object;
2. Change of law
3. Failure of pre-Conditions
4. Death or personal incapacity and
5. Outbreak of war
   
   

Exceptions:

Some illustrations are given below cases which do not come in the principle of supervening impossibility.

1. Difficulty of performance
2. Commercial impossibility
3. Tricks ,Lock-Outs, Civil disturbances and riots
4. Failure of one of the objects.

Q.No.08:

Describe the basis of the Doctrine of Frustration.

Ans. to the Q.No.08:

In English court various theories have been put forward at different times as to the basis of discharges of contracts by frustration.

The theories are summarized briefly-

1. The implied terms
2. Disappearance of the foundation of the contract
3. The just and reasonable solution
4. Change in the obligation
   
   
   Or

1. Hypothesized condition
2. Destruction of the essential subject of contract
3. Occurrence of conditional event
4. alteration of condition.

Q.No.09:

Limits of application of “Doctrine of Frustration”.

Ans. to the Q.No.09:

In English law there are certain limits of the Doctrine of Frustration.

1. If the frustration is self –induced by the party (e.g. negligent acts) the contract is not frustrated.
2. The frustrating event should defeat common intention of the parties.
   There cannot be frustration on one side only.

Q.No.10:

Effects of Doctrine of Frustration.

Ans. to the Q.No.10:

In English law Frustration procedures the following effects.

1. The contract terminates automatically and immediately it is void and not voidable only.
2. All future obligations are discharged
3. Some reliefs have been given in England by the law reform (Frustrated Contract Act-1943)
   
   
   Summarized:

• Rejection of Contracts
• Ending the Future obligation
• Remedies

Q.No.11:

What do you mean by breach of contract.

Ans. to the Q.No.11:

When a contract is broken by one party, the other party or parties are freed from the obligation of performing the contract .They can also take the remedial measures to which they are entitled.

Breach of contract create two was –

1. Breach of contract by promisor
2. Breach of contract by promise

Breach of contract may arise in two was :

1. By anticipatory breach
2. By actual breach or present breach.

Q.No.12:

Consequences of anticipatory Breach of contract.

Ans. to the Q.No.12:

When anticipatory breach occurs, the aggrieved party can take the following steps :

• Resolved the liability of performance
• Claim of legal remedies
• Refuse the breach of contract.

Q.No.13:

Remedies of breach of contract

Ans. to the Q.No.13:

When a breach of contract occurs, the aggrieved party of the injured party becomes entitled to the following reliefs:

1. Rescission of the contract
2. Suit for damages

• Compensatory damages
• Special damages
• Nominal damages ,contemptuous damages
• Exemplary ,punitive or vindictive damage

1. Suit upon Quantum merit
2. Specific performance of the contract
3. Injunction

Q.No.14:

Distinction between a contract of indemnity and contract of guarantee.

Ans. to the Q.No.14:

Basis	Contract of indemnity	Contract of guarantee
No. of Parties	There are two parties indemnifiers and the indemnity –holder	There are three parties principal debtor, creditor and surety.
No. of Contracts	There is only one contract between indemnifiers and indemnity holder	There are three contracts ,one between creditor and principal debtor, second between surety and principal debtor , and third between surely and the creditor.
Undertaking	The indemnifier undertakes to some the indemnity holder from any loss	The surely undertakes for the payment of debts of principal debtors
Nature of liability	The liability of indemnifier is primary and unconditional	The liability of surely is secondary and conditional. Surely liability secondary in the sense that the primary liability is of principal debtor. Surety’s liability is conditional in the sense that it arise only on default of principal debtor.
Nature of event	The liability arise only on the happening of a contingency	The liability arises only on the non-performance of an existing promise or non-payment of an existing debt.
Request	The indemnifier not act at the request of indemnity –holder	The surety acts at the request of the principal debtor
Right to sue	The indemnifier cannot sue a third party in his own name because of absence of privities of contract between him and a third party. He can sue the third party in his own name if there in an assignment in his favour.	A surety on discharging the debt of principal debtor, can sue the principal debtor in his own name.

Q.No.15:

What do you mean contract of guarantee?

Ans. to the Q.No.15:

A contract of guarantee is a contract to perform a promise or discharge the liabilities of a third person in case of his default.

Parties to a contract of guarantee:

There are three parties to a contract of guarantee principle debtor, creditor and surety.

1. Principal debtor (Section 126 ) the person in respect of whose default the guarantee is given is called the “ principal debtor “.
2. Creditor [Section 126 ] the person to whom the guarantee is given , is called the” creditor “.
3. Surety [Section 126] the person who give the guarantee is called the “ Surety “.
   
   

Q.No.16:

Essential features of a contract of guarantee.

Ans. to the Q.No.16:

The essential features of a contract of guarantee are shown below-

1. Tripartite agreement
2. Consent of three parties
3. Existence of a liability
4. Essentials of a valid contract
5. Guarantee not to be obtained by misrepresentation
6. Guarantee not to be obtained by concealment