ABSTRACT
The articles of association are the document that internally regulates the company. It is similar in concept to the list of rules that regulate a club or society. This chapter enables students to appreciate fully the importance of the articles in acting as a contractual document, binding the company and its shareholders or members. On registration the memorandum and articles bind the company and the members as if each member had individually given his seal. Therefore, on subscribing to the memorandum and articles the first members enter into an implied contract between themselves and the company. Alteration of the articles may be achieved in three ways: alteration by special resolution, alteration through assent, alteration by a written resolution made by a private company. An alteration to the articles cannot be used to justify a breach of contract with a third party. This includes the situation of a shareholder having a separate contract with the company.
