SPCC 3 Marks Each

The exceptions to the principles of internal administration are as follows.
1. Internal administration in the case when a company performs a work which the company has no authority to perform. The principle does not apply.
2. This principle does not apply when a document has been obtained by fraud from a company.
3. This principle does not apply when an outsider is aware of irregularities in internal administration.
4. The person dealing with the company does not benefit from this principle even if it is necessary to investigate.
5. Apparently this principle does not apply if the act of the officer of the company is out of power.

The regulation is very useful for the secretary. The specific rules in the regulation on how to interpret different terms of the company, how to distribute shares, how to order share installments, how to seize shares, how to make transfers are useful to the secretary in office management and company management, not only accounting details, board of directors. The rules regarding the appointment of officers, auditors etc., their powers, duties etc. give precise guidance to the Secretary.

• A company whose members' liability is sufficient to guarantee the philosophical value of the shares purchased, according to the application form, is called a company with limited share capital.
• At the time of registration of such company, the number of members should be 100; But the board of directors can increase the number of members of the company from time to time as required.

• The liability of the members of the company, when the circumstances arise to sum up the company, according to the application form
• A company that is limited enough to agree to contribute to the property is called a limited liability company with a guarantee. Such regulations include the following:

1. Membership: Registration of a company requires a number of members. Member as per the business requirement of the company. The number can be increased.
2. General Meeting: All meetings except general meeting will be considered as special meeting.
3. Rules of conduct of general meeting.
4. Procedure regarding Adjournment of Meeting.
5. Rules regarding suffrage.
6. Regulation of the Board of Governors and their meetings.
7. Rules regarding dismissal of Chief Administrative Officer, Manager, Company Secretary, Chief Financial Officer - their appointment.
8. Rules regarding general seal.

• The liability of the members of such a company is unlimited.
• The liability of the members is unlimited like that of a privately owned firm or a partnership firm.
• If the company does not have sufficient assets to repay the liability at the time of liquidation, the member has to repay the company's debt from his personal property.
• Such a company cannot use the word "limited" at the end of its name.
• Such a company may start with one hundred members; But the Board of Governors may register by increasing the number of members as required from time to time.

• The liability of the members of such a company is unlimited.
• Such a company does not have share capital. Like individual or partnership, the liability of the members here is unlimited i.e. when the company is closed; the members have to pay the debt from their personal property if the company does not have enough assets to repay the liability.
• Such a company may start with one hundred members and the Board of Directors may, from time to time, increase the membership of the company as and when required.

The restrictions of making Alteration in Articles of Association are us under.
(I) No alteration in contravention of the Memorandum of Association shall be permissible.
(ii) No alteration shall be made against any existing law of India.
(iii) No alteration can be made in the Articles of Association which lead to cheating, fraud or coercion to the members
(iv) No alteration can be made in contravention of the provisions of paramount.
(v) Alteration in the Articles of Association shall not be made against the provisions of the Companies Act 2013.

Articles of Association contains rules and regulations about the internal management of the company. This is a public document so each person can presume that company has complied with the provisions of articles while dealing with the company. If company has not done so, the interest of third party is not endangereal. This rule/principle is called Doctrine of Indoor Management.

Articles of Association should be (i) Printed (ii)Divided in appropriate parte and numbered paragraphs, (iii) signed by the subscribers to Memorandum (iv) consisting of names, address and occupation of members. (v) Duly stamped.

Articles contain provisions of rights of membef suchas voting rights , right to be present at the meeting, right to appoint proxy, right to transfer shares, liability to pay the call money within due time period, forfeiture of shares etc. Company and the shareholder have to comply with all the provisions of articles of association. Thus, Articles establishes relations between members and the company.

In the Memorandum important clauses are incorporated. Articles is to be prepared being within the limits of Memorandum. Thus as article of association obey Memorandum, it is called subsidiary document. Articles can not contain any provision which is against the provisions of Companies Act. Though it is a subsidiary document, it determines-the rights and duties of members. Moreover it also determines the duties and responsibilities of the company. Hence it is considered important document.

Memorandum and Articles both are important documents of the company. Memorandum is constitution of the company. It determines the objectives and scope of operations of the company while in the articles the rules of internal management of the company are dictated. Thus, memorandum clarifies the objectives while articles lay down the rules-regulations and procedures to be followed to achieve these objectives. Hence, Memorandum and Articles are considered complementary documents.

Articles of Association is a public document showing rules about the internal management of the company. Directors cannot prepare this document as per their desire. Provisions that are violating the provisions of Memorandum and the Companies Act cannot be incorporated in the Articles of Association. While drafting the articles secretary should comply with all the provisions of Companies Act. Moreover no provision that violates any other Law in force in India can be made in the articles. So, this document cannot be prepared whimsically.

Table-F of Schedule-i of Companies Act 2013, includes following matters regarding the meetings of the company.
(i) Rules relating to General meeting.
(ii) Rules for the conducting of General meeting.
(iii) Procedure about adjournment of Meeting.
(iv) Rules/Explanations about the voting rights.
(v) Rules about proxies.
(vi) Procedure to conduct the meeting of Board of Directors.

Generally the Articles of Association contains following information about the shares.
(i) The number of shares and its face value.
(ii) Rules relating to the shares installments.
(iii) Rules relating to the transfer of shares.
(iv) The lien of the company about the value of unpaid shares.
(v) Rules about transmission and forfeiture of shares.

Private company has to show the following three special Provisions in its Articles of Association.
(i) There must be minimum 2 and maximum 200 members in the company.
(ii) There must be restriction on the share transfer.
(iii) The company must not invite the public to purchase its own shares.

Exceptions of the Doctrine of Indoor Management:
(1) The doctrine of Indoor Management is nt applicable in the event of such an act done by a company of which it has no power.
(2) If any document is obtained from the company by fraud this doctrine is not applicable.
(3) When any outsider is aware about the irregularity of internal administration oI-’a company this principle does not apply.
(4) When it becomes necessary for outsider dealing with a company to inquire about the company inspite of that he does not make inquirrto.&Jvantage of this doctrine is available.
(5) When the act of an officer of a company is apparently without power the Doctrine ofIndoor Management is not applicable.
In the vent of above mentioned exceptional circumstances the Doctrine of Indoor Management is not applicable. Therefore the outsiders (Third Party) get protection against the internal mismanagement and negligence of the company.

Important for Secretary : Articles of Association is very important for the secretary. The important rules prescribed in the Articles of Association regarding the interpretation of various routine words, Rights and Responsibilities of Shareholder, distribution of shares, rules regarding installments, forfeiture and transfer of shares, rules regarding office administration and functioning, Provisions of meeting, accounting rules, appointment of Directors, auditors, clarification of their authority, duties and responsibilities etc. help the secretary in office administration and functioning of a company.

Table-G: Articles of Association of a Company Limited by Guarantee and having Share Capital A company where the liabilities of its members as per the Memorandum of Association is limited to the extent of the amount of the shares purchased by the members is called company limited by Guarantee having share capital.
At the time of the registration of such companies the number of its members has to be 100 (one hundred). However as per the requirement of the company, the Board of Directors has powers to increase the number of its members from time to time.
Such companies have to prepare their Article of Association by accepting these provisions over and above Table-E.

Table H : Articles of Association of a Company Limited by Guarantee and not having Share Capital:
Where the liability of the members of a company in the event of its liquidation is limited to the extent of the contribution agreed to be paid in the assets of the company as per the Memorandum of association it is called a company limited by Guarantee and not havinghare capital. Following matters are to be included in such Articles of Association:
(1) Number of Members: For the purpose of registration of a company the number required is 100. The company may increase the number of its members as per its requirements.
(2) General Meeting All meetings of the company écept General meeting will be considered as special meetings.
(3) Conducting Meeting : Rules regarding conducting General meeting are mentioned in it.
(4) Adjournment of Meeting : The circumstances under which the meeting can be adjourned and procedure for adjournment of meeting are stated in it.
(5) Voting Right : The rules regarding voting rights of members are mentioned in the Articles of Association.
(6) Meeting of Board of Directors : The information regarding Board of Directors and regulations of their meetings are mentioned in Articles of Association.
(7) Rules for chief officers : The rules of appointment and removal of chief administrative officer, Manager, Company Secretary Chief financial officer are mentioned in Articles of Association.
(8) Common seal/stamp : Rules regarding the use of common seal/stamp of a company and its preservation are mentioned in Articles of Association.

Table I: Articles of Association of company with unlimited liability and having a Share Capital:
The liabilities of the members of such company are unlimited. Such companies also issue shares. Just like sole proprietorship firm or partnership firm, the liabilities of members are unlimited. At the time of winding up of such company if the company does not have sufficient assets to set off its liabilities then the member has to realize debt of a company from his personal assets. Such company cannot use the word ‘Limited’ after its name.
Such company may be commenced with 100 members. However depending upon the requirement the Board of Directors may increase the number of its members from time to time.
The provisions of Articles of Association prescribed in Table F are also applicable to such companies.

Table J : Articles of Association with unlimited liability and not having Share Capital:
The liabilities of the members of such company is unlimited. There is no share capital in such company. In such companies also just like sole proprietorship or partnership firm the liabilities of the members are unlimited. It means that when the company is to be wound up , if the company does not have sufficient assets to realize its debt, the same is to be realized from the personal assets of its members.
Such company may be commenced with 100 members. However depending upon the requirement, the Board of Directors may increase the number of its members from time to time.
The Articles of Association prescribed in Table H is also applicable to such companies over and above Table J.

The following information about shares is usually covered in the regulation.
1. Number of shares and its expressive value.
2. Rules regarding share installment.
3. Rules regarding exchange of shares.
4. Company's lien on unpaid value of the share.
5. Rules regarding dispatch of shares and confiscation of shares.

• This principle means that an outsider working with the company assumes that the internal administration of the company runs smoothly and systematically.
• Individuals working with the company are assumed to be aware of the details of the application form and regulation.
• Since both the application form and the regulation form are public documents as per the Companies Act, the ignorance that no one is aware of the information in these documents is not valid in terms of law.
• The average person can assume that the company has done what it did in accordance with the rules set out in the articles.
• The ordinary person can assume that all the work has been done to implement the work which is authorized by the application form and regulation.This rule is called the principle of internal administration.

The restrictions on modifying the regulation are as follows:
1. Should not be contrary to the provisions of the application form.
2. Should not be against any existing law in India.
3. Members should not be betrayed, cheated or bullied.

1. A private company has to show the following three features in its regulation:
A. The number of members of the company shall be minimum 2 and maximum 200.
B. The exchange of shares will be controlled.
C. The Company will not invite the public to purchase its own shares.