Memorandum and Article of Association

MEMORANDUM AND MEMORANDUM AND ARTICLE OF ASSOCIATIONARTICLE OF ASSOCIATION

GLUL3033 - memorandum & Article 1

THE COMPANY’S THE COMPANY’S CONSTITUTIONCONSTITUTION


Memorandum: Objects and Memorandum: Objects and powerspowers

Object clause contains the objectives or purpose of the incorporation of the company.Object clause identifies the activities in which the company wishes to engage in.Object v powers?Anything outside the objects and powers of a company is ultra vires.The effect of ultra vires differs under the common law and Companies Act 1965


Memorandum: Objects and Memorandum: Objects and powerspowers

Public Bank Bhd v Metro Construction Sdn Bhd [1991] 3 MLJ 563 main types of provisions in object clause:

Main or independent objects;dependent objects; Bell Houses Ltd v City Wall Properties Ltd [1996] 2 QB 656powers

Attorney-General v Great Eastern Railway Co (1880) 5 App Cas 473Arab-Malaysia Finance Bhd v Meridien International Credit Corp ltd London [1993] 3 MLJ 193


Doctrine of Doctrine of ultra vires ultra vires under the under the Common LawCommon LawAny ultra vires act by a company is void

◦Ashbury Railway Carriage & Iron Co. lwn Riche (1875) LR 7 HL 653

A company may not enforce an ultra vires contract◦Re Jon Beauforte (London) Ltd [1953] Ch 131

A company may not sue the parties under an ultra vires contract

A third party acting bona fide cannot rely on the ground that he has no notice of the company having no power to act.

A company acts within its object but power had been illegally exercised. Re Introduction Ltd [1970] Ch 199


Lessening the strictness of Lessening the strictness of the doctrine of the doctrine of ultra viresultra vires

Cotman v Brougham [1918] AC 514Bell Houses ltd v City Wall Properties

ltd [1966] 2 QB 656HA Stephenson & Son Ltd v Gillanders

Artbuthnot & Co (1931) 45 CLR 476


The doctrine of The doctrine of ultra vires ultra vires under the Companies Act 1965under the Companies Act 1965

The doctrine has been modified by S 20(1) – If a transaction is valid, it is immaterial if the company did not have the capacity to enter into it.

S.20(1): “No act or purported act of a company…. and no conveyance or transfer of property.. to or by a company shall be invalid by reason only of the fact that the company was without capacity or power to do the act or to execute or take the conveyance or transfer”.

S 20(1) strikes down the effect of ultra vires doctrine.


The doctrine of The doctrine of ultra vires ultra vires under the Companies Act 1965under the Companies Act 1965 Exceptions: The ultra vires doctrine is however

applicable under these 3 circumstances – S.20(2)(a)

◦ “.. In proceedings against the company by any member, holder of debentures secured by floating charge or the trustee of those debentures to restrain the doing of any act or acts or the conveyance or transfer of any property to or by the company;

◦ Hawkesbury Development◦ Pamaron Holdings Sdn Bhd lwn Ganda Holdings Bhd

S.20(2)(b)◦ “.. In proceedings by the company or by any

member of the company against present or former officers of the company”; and

SS.20(2)( c)◦ “.. Any petition by the Minister to wind up the

company”.


Alteration of object clauseAlteration of object clause


Alteration of the Alteration of the memorandummemorandumS.21(1) – the memorandum may

be altered only in accordance with the Act

Alteration of name[s.23]Alteration of capital [s.62 & 64]


Article of AssociationArticle of Association


Article of AssociationArticle of Association 1. Contract between company and members

◦ Beh Chun Chuan v Paloh Medical Centre Sdn Bhd [1999] 3 MLJ 262

◦ Wong Kim Fatt v Leong & Co. Sdn. Bhd [1976] 1 MLJ 140

◦ Hickmen v Kent [1915] 1 Ch 881◦ Pender v Lushington (1877) 6 Ch D 70◦ Eley lwn Positive Government Security Life

Assurance (1875) 1 Ex D 20 2. Contract among members inter se

◦ Rayfield v Hands [1960] Ch 1◦ Re Carrati Holding Co. Pty. Ltd

3. No contract between company and outsiders◦ Raffles Hotel Ltd v Malayan Banking Bhd.◦ Forbes v NSW Trotting Club Ltd◦ Southern Foundries v Shirlaw [1940] 2 AllER 445


Alteration of ArticlesAlteration of ArticlesS.31 – a company may by special

resolution alter or add to its articleS.31(2) – any alteration or addition

to the articles is as valid as if originally contained in the articles

Limitations on alteration of articles:◦S. 33(3)◦S. 181(4)◦S.65◦Prinsip ‘majority rule’


Doctrine of constructive Doctrine of constructive noticenoticeThe company’s constitution

(memorandum & articles) is available for inspection at CCM.

Thus under constructive notice, the law will deem that an outsider dealing with the company has the knowledge of any limitation on authority of the company’s organs, officers or agents as provided for by the constitution.


Exceptions to the rule in Exceptions to the rule in Turquand’sTurquand’s case caseThe outsider has actual knowledge of

the irregularity or is put upon inquiry by the circumstances of the case and fails to make inquiries;

The outsider knew or ought to have known of the limitation; thus they could not rely on the rule as an outsider;

If the outsider dealing with the company is put on inquiry and fails to inquire, the rule has no application.


Indoor management ruleIndoor management ruleAlso known as the rule in Turquand’s case

(Royal British Bank v Turquand (1856 6E & B327) – a person dealing with a company is taken to have constructive notice of the contents of the company’s public documents, they need not go further to ensure that the internal proceedings of the company have been properly carried out.

Aik Ming (M) Sdn Bhd v Chang Ching Chuen [1995] 2 MLJ 770

Pekan Nenas Industries Sdn Bhd v Chang Ching Chuen [1998] 1 MLJ 465


Memorandum and Article of Association

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