Topic 3

MEMORANDUM OF ASSOCIATION (MOA)

& ARTICLES OF ASSOCIATION (AOA)
 Learning Outcomes

At the end of this lecture, students

should able to:

• Define memorandum of association and articles of

association.
• Describe the contents of memorandum and articles.
• Explain the object clause in the memorandum.
• Discuss the doctrine of ultra vires.
• Explain the binding effects of memorandum and articles.
 Topic Outline
Introductio
n MoA
Registratio Contents
n of MoA of MoA

Object Doctrine of
clause ultra vires

Contents
of AoA AoA
Binding
 Introduction

Memor
andum Basic constitution and Matters of internal
of presents (structure) the administration.
Associa company to the outside
tion world.
Article s
of
Associati
on

The contents must not infringe or over-ride

any of the provisions s of the Companies Act
or any other relevant legislation.
MEMORANDUM OF ASSOCIATION
(MOA)
 Contents of MoA

Sec. 18(1)

Basic requirements

Limited by Limited by
shares guarantee
 Need to Lodge MoA
Requirement to
Sec. 16(1) lodge the MoA

To
Registrar

Registrar issues The comp acquires

certificate of legal status of
incorporation body corporate
 Constructive Notice as to MoA
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Members' Right to Have Copy of MoA

A copy of
Subject tothe
a payment
MoA must
of RM5
be issued
or such
by the
lesser
company
sum. after the
date of alteration.
 Conflict between MoA and AoA

MoA
AoA
External
affairs
Internal
affairs

The MoA can

"override and overrule any
provisions of the AoA which may
be at variance with it".
 Alteration of MoA
Conversion
Name unlimited –
limited
Conversion
private – public

Conversion of Object Share

public – private clause capital
Alteration by
the HC under
sec. 181
 Construction of MoA

General rule

• Nothing in the MoA must contradict the provisions of the Act, unless a contrary
intention is provided by the Act itself.

Section 33(1)

• A statutory contract binding between the company and its members qua members
and between the members inter se.
 Object Clause

Validlypersonality
Legal do in its capacity
of a comp
onlyfor
such
purposes
things as
stated
are within
in the MoA.
its
Types ofand
objects activities
things /reasonably
businesses.incidental thereto and are not
prohibited by the law.

Any departure from its objects will render

the transaction ultra vires and wholly void
in common law.
 Sample of Object Clause
GENERAL TRADING
• To carry on, all or any, in Malaysia or in • To carry on, in all or any of
any part of the world, the business of
general merchants, traders, suppliers,
their respective branches, all
importers, stores, storekeepers, or any of the business of
removers, packers, brokers, distributors, general contractors,
manufacturers, manufacturers’
representatives, commission, insurance,
contractors, general
managing financial and general agents, construction contractors
investors, franchisors, carriers engineering contractors,
shipowners; and or in any other capacity, consultants, advisers, civil,
and dealers in, and to buy, prepare,
manufacture, render marketable, sell, electrical, and mechanical
barter, exchange, pledge, charge, make contractors, builders,
advances on and otherwise deal in or masonry, plumbers, hauliers,
with or turn to account by wholesale or
retail goods, general merchandise and surveyors and planners,
other commodities of all kinds and developers and property
description. developers.
 Legality of Object

Unlawful

Forbidd Opposed
en by
Defeat Fraud Immo to public
any law ulent ral policy
any law
 Lodgment of Special Resolution
A

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alteri
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 Effect of Alteration
Takes effect upon Not upon the
lodgment of the passing of the
special resolution special resolution

The altered objects should

only be implemented by
the company on or after
the effective date

Not immediately
upon the passing of
the special resolution
 Doctrine of Ultra Vires

Beyond the power Lack of power

Acts which are Acts carried out in

excess or abuse of
beyond the the powers of the
capacity company by its agents
 Ashbury Railway
Carriage and Iron
Company v. Riche
•A company contracted to build a railway line. The
objects clause stated that the company had been
established; “to make, sell, or lend, railway
carriages, wagons and all kinds of railway plant,
fittings, machinery and rolling stock".
•The objects of the company permitted it to
manufacture train stock and parts for railways;
not to actually construct railway lines
themselves.
•Held: The contract was void, and the directors of
Ashbury were entitled to repudiate the contract.
 Effects of Ultra Vires

Malaysian
English law
law
•Any transaction •Sec. 20(1) – Any
which is made transaction which is
made outside object
outside object clause is still valid as
clause will be long as the parties to the
void. contract concerned.
 Sec. •Member of the company have right to
take action against the company to

20(2)(a)
restrain the performance of ultra vires
act.

Sec. •Company or member of the company can

take action against the officers of the

20(2)(b)
company who authorised the ultra vires
transaction.

Sec. •Member can claim for the damages.

•Minister charge with the responsibility for
companies may petition to wind up the company

20(3) which entered into ultra vires transaction.

How to Avoid Ultra Vires?
ARTICLES OF ASSOCIATION (AOA)
 The Nature of AoA
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AoA Not to be Rectified by the Court
Court Sec.
Alterat
has no 31 –
ion
jurisdi Statut
ction ory
to proce
rectify dure
(corre of SR
ct / –
amen requir
d) es
large
majori
ty
vote
 Contents of AoA
Preliminar Classes of
Office Table A y contracts shares

Lien on Calls on Transfer of Transmissio

shares shares shares n of shares

Alteration Reduction General

of share of share meetings
Directors

Account Winding
and audit
Dividends Notices up
 •Must be named in the MoA
1st Director or AoA.

1st •Must be named in the MoA or AoA.

•Sec. 11(8) – Registrar may require the MoA or AoA

Secretary to be amended if name of 1st Secretary is omitted.

Form of •Must be printed and divided

AoA in numbered paragraph.
 Companies Requiring AoA
Limited both by
Limited by shares and
guarantee guarantee

Unlimited
 Table A

Solaiappan & Ors v.

Lim Yoke Fan & Ors
•Particulars in Table A
Not required
Comp limited Model were only
to register its
by shares
AoA
articles "specimens”/ sample
and it was open to any
company to adopt all
or any of them, and
even to add some of
their own.
If elect not to Table A will
register AoA be the AoA

If the provisions in
Table A not excluded, it
will form part of the
registered AoA

Sec. 31(1)
Alteration of
AoA
 Binding Effects of AoA
Sec. 33(1)

• When registered, it constitutes a statutory contract.

• Binding as if signed and sealed by every members.

The essential effect

• Binding between the company and the members qua members.

• Binding between the members inter se.

Statutory contract

• Not defeasible and is furthermore incapable of being rectified by the court.

Hickman v. Kent or Romney
Marsh Sheepbreeders'
Association
•Art. 49 – disputes between the association and a
member should go to arbitration.
•Hickman complained about refusal to register his
sheep and was under threat of being expelled.
He started proceedings in the High Court.
•Held: The contract affects members in their
capacity as members. As a member, Hickman was
bound to comply with the company procedure
for arbitrating disputes and could not resort to
court.
 Wong Kim Fatt v.
Leong & Co Sdn Bhd
& Anor.
•The articles provided that, the holders of 7/10 of
the issued capital of the co. may at any time serve
the co. with a requisition to enforce the transfer of
any particular shares not held by the requisitionists.
•The 2nd Df held 250,000 shares out of 300,000 issued
shares. He served a requisition to buy out Wong’s
shares. Wong objected to this.
•Held: It is purely a matter of contractual obligation
and the Pf must be held to the obligations he had
undertaken.
 Summary
• MoA and AoA are 2 important documents to
reflect the legal personality of a company.

• Both MoA and AoA is binding as if it is sealed

and signed and thus constitute as statutory
contracts between the company and members
qua members and between the members
inter se.
Tutorial