Company Law Notes for Company Law Notes

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Articles of Association (AoA)

  • AoA is another important document needs at the time of incorporation of company.
  • AoA and Articles of Incorporation (AoI)are same.
  • AoA regulates the way in which a company’s internal affairs are managed.
  • (Ashbury Rail Carriage & Iron Company V. Riche 1875 LR 7 HL 653) - “ the articles defines the duties, rights, and powers of governing body as between themselves and company at large, and the mode and the form in which the business of the company is to be carried on, and the mode and form in which changes in internal regulations of company may from time to time, be made.’’
  • Rules and Regulations for governing body of company or management.
  • AoA is subordinate to the memorandum.
  • Rules & Regulations do not exceed provisions of memorandum.
  • “The Articles of Association are the internal regulations of the company and are for the benefit of shareholders’’( Guiness v. Land Corporation of Ireland 22 ch. D. 349)
  • Thus, AoA is the collection of rules & regulations, framed for the internal management of the companies.
  • Section 20 of the Nepalese Companies Act has mentioned about meaning of AoA and matters to be included in AoA.

Amendment of MOA and AOA

  • There are some special legal provisions relating to amendment of MOA and AOA in the Companies Act 2063 BS.
  • Generally, a company shall not alter the conditions contained in its memorandum except in the cases, in the mode and to extent for which express provision made in the Act
  • There are some prescribed conditions for amendments in MOA and AOA in Section 21 of the Companies Act 2063 B.S.
  • Generally, there may be following conditions of changes in MoA & AoA
    • Change in Name
    • Change in objects
    • Change in Procedures

Change in Name

By special resolution, Section 21(3) - any company can amend its name by adopting a special resolution to that effect at its general meeting and make an application, accompanied by the prescribed fees, for prior approval of the office and if the office gives approval to amend the name as per application so received, the name of the company shall be amended.

So, prior approval of the authority is most for the amendment of name.

Change in Objects

The object’s clause can also be altered but the alteration is subject to a number of restrictions.

These restrictions are for the protection of the interest of the shareholders and creditors.

As per the determined process of sec 21(1) of the companies Act 2063 B.S. the general meeting of a company can amend the MOA and AOA by adopting a special resolution

Special Resolution

Special resolution is most for amendment, except the change in name, in other change giving the information of amendment is sufficient.

As per the legal provision stipulated in section 21(2)- The Company shall give information of amendment made to MOA and AOA to the office within 30 days and the office shall record the same and give information thereof to concerned company within 7 days after receipt of such information.

Restriction on Amendment

On the following basis;

  • As mentioned the basis in section 6 of Nepalese Company Act ‘power to refuse to register’.

  • The company cannot amend the objects clauses or name as a routine affair.

Change in Name or objects is necessary for the following purpose;

  • To conduct its business more economically or efficiently.

  • To attain its main purpose by new or improved means.

  • There is only limited scope for change. That is to conduct the business efficiently. The business must be same as before e g. Pharmaceutical Company cannot change objects to carry the business of real state.

  • For the attainment of the objects.

  • for the improved means of conducting business.

  • enabling the company to take advantage of new scientific discoveries and inventions.

  • to enlarge or change the area of operation

  • to make changes number of shareholders, capital of company, shares, etc.

  • to make change in status of company i.e. conversion private to public & public to private company.

  • to restrict or abandoned any objects specified.

  • to sell or dispose the whole or any part of undertaking.

  • to amalgamate with any other company or body of person.

  • to adopt the new process and procedures mentioned in AOA regarding meeting notice,

  • to carry on some additional or convenient business under the existing circumstance. e.g. School level company converted in to college and school both or in college only.

  • In a Public company shareholder has right to challenge in court for amendment within 21 days of that change (Section 21(4)), otherwise it is automatically activate.

Change in Procedures

  • AOA is related to procedures. The amendment is possible regarding the various procedural aspects.

  • Section 148 - private company which has no annual general meeting, if they passed the unanimous agreement.

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