Name: Shashwat Somvanshi

Enrolment No.- L19BALB032

BALLB-19 (Batch-B)

Q1.
Directors are a group of people in a company that are responsible for the controlling, managing
and directing the matters that company deals with, they are collectively called as board of
directors. There are numerous types of directors of directors that have been defined under the
Companies Act of 2013, they are as follows:
➢ Residential Director: According to the act, company is bound to have a director who
have come to India and has stayed for atleast days as per the academic calendar of the
previous year

➢ Independent Director: These types of directors are basically categorized under non-
executive directors and their work generally is to expand the corporate credibility as
well as the improve the ethics of governing in the company which makes them the
individual who’s relation influences the freedom of the judgment they pass.

➢ Small Shareholders Directors: In a listed company subjected to notice there could be

atleast a thousand small shareholder or that might constitute to 10% of the number of
such shareholders (whichever may be lesser), such companies can have a director who
is elected by such small shareholders.

➢ Women Director: In a company (Private or Public), it is required to appoint atleast a

women director subjected to fulfilment of conditions that are: It is a listed company
with all its securities been listen up on stock exchange and that the company has 100
crore rupees as a paid-up capital or has over 300 crores of annual turnover.

➢ Additional Director: Such director is a person who is appointed, and he holds the
position until the next Annual General meeting takes place.

➢ Alternate Director: Such directors describes a person that the board appoints, to
substitute the director who is away from the nation due to some reason for 3 months or
more.

➢ Nominee Directors: A specific class of shareholders, banks, loaning financial

organisations, any other parties through means of contract or the government in cases
oppressiom etc tends to appoint a director which is known as nominee director.
No, a person cannot be appointed as a director without a valid Director Identification Number
(DIN). The Companies Act, 2013, specifically specifies that an individual must have a valid
DIN in order to be appointed as a Director. With the addition of Sections 266A to 266G of the
Companies (Amendment) Act, 2006, the notion of a Director Identification Number (DIN) was
introduced for the first time. As a result, all current and prospective Directors must obtain DIN
within the specified timeframe. Anyone who wants to be the first director of a new company
but doesn't have a DIN must fill out an eForm SPICe application. Along with the application,
the applicant must submit proof of identity and address. Only after the form has been approved
will a DIN be assigned to User.

Q2.
Who has the power to rule is determined by the majority and minority. Democracy is structured
in such a way that the majority has absolute power. The majority rule and decisions appear to
be fair and justifiable in the corporate sector as well. The majority's power is more significant
in the corporation, and the court seeks to stay out of the internal matters of the shareholders'
administration. When the majority is superior, there is always inferiority among the minority,
indicating a firm imbalance. The Companies Act of 2013 decreases minorities' inferiority. This
article discusses the majority's rules as well as the minority's rights in a corporation. The Board
of Directors and the Shareholders are given equal power under the Companies Act. The board
of directors and the shareholders exercise their powers democratically through meetings. The
board of directors' meetings and the general meetings are among the events. Through the
Memorandum of Association (MoA) and Articles of Association, the shareholders entrust
certain powers to the board of directors (AoA). The board of directors has all of the authorities
and can do anything, and they operate in the same way that the firm does. However, the Act
limits the board of directors' ability to exercise powers that only shareholders can exercise at
general meetings.
Non-Interference Principle: The usual norm is that when there is a disagreement among the
members, the subject is decided by the majority. If the majority oppresses minority
shareholders' rights, the business law will safeguard them. When the majority exerts its control
over a company's internal administration, however, the courts will not intervene to safeguard
the majority's rights.
It establishes the fundamentals of the non-interference principle in the case of Foss v. Harbottle.
The rule is that if there is a complaint about something that the majority needs to do, if
something is done sporadically that the majority has to do regularly, or if something is done
illegally that the majority has to do legally, then there is no use in having a lawsuit about it.
Finally, there will be a gathering when the majority will be able to express their preferences
and make decisions.
The Rule's Exceptions
For the majority, the rule is not absolute; the minority has certain safeguards as well. The
principle of non-interference does not apply to the following:
 • Individual shareholders can take action if they believe the majority has committed a
criminal act or violated the ultra virus act. Individual shareholders have the ability to
impose restrictions on the corporation. This is made feasible by a court order or an
injunction.
• Minority Fraud: If the majority defrauds the minority, the minority has the right to take
action. If the definition of minority fraud is ambiguous, the court will resolve the issue
based on the facts.
• Wrongdoer in Control: If the corporation is controlled by a wrongdoer, the minority of
shareholders can file a fraud representation action. If the minority does not have the
legal right to sue, the majority will prevent them from suing the corporation, and their
complaint will be dismissed. Individual shareholders can take action if the act requires
a special majority yet is passed by a simple majority.
• Personal Action: The majority of shareholders always adhere to the individual
membership's rights. Individual members have the right to demand a majority in order
to comply with legislative provisions and legal standards.
• Breach of Duty: If the majority of shareholders and directors fail to fulfil their
obligations, the minority shareholder has the right to sue.
• Oppression and Mismanagement Prevention: The minority can take action against the
majority of shareholders to prevent oppression and mismanagement.

Q4.
The Turquand rule, often known as the idea of indoor management, is a 150-year-old principle
that protects outsiders from the company's actions. Anyone who gets into a contract with the
firm must make certain that the transaction is authorised by the company's articles and
memoranda. There is no requirement to investigate internal irregularities, and even if
irregularities exist, the company will be held liable because the person acted in good faith. The
precedent-setting case Royal British Bank v Turquand (1856) established the doctrine. The
following are the facts of the case: The company's Articles of Incorporation allow for bond
borrowing, which needs a resolution voted by the General Meeting. Although the directors
were able to obtain the financing, they were unable to pass the resolution. The debt was not
paid back, and the corporation was held accountable. In the lack of a resolution, the
shareholders declined to accept the claim. As a result, the firm will be held liable because
everybody engaging with the company has the right to expect that all internal management
requirements have been met. The theory of indoor management is diametrically opposed to the
doctrine of constructive notice. The idea of indoor management is based on the doctrine of
'constructive notice,' which has been established in a number of court rulings. The
inconveniences caused by the requirement of constructive notice' to outsiders engaging with a
corporation have been sought to be mitigated by the idea of indoor management.' It provides
outsiders with some protection from the firm.
The exceptions to the theory that have been judicially recognised, which give conditions in
which a person dealing with the corporation cannot claim the benefit of indoor management,
are as follows:
• Irregularity Awareness: This rule does not apply if the person who is impacted is
aware of the irregularity either directly or indirectly.
• Irregularity Suspicions: If anyone interacting with the company has a suspicion about
the conditions surrounding a contract, he should inquire about it. He can't rely on this
rule if he doesn't inquire.
• Forgery: Forgery-related transactions are void from the start (null and void), because
it is not a case of lack of free permission; it is a case of no consent at all. The Ruben V
Great Fingall Consolidated case established this.
The Turquand rule, often known as the ideology of indoor management, is a century-old
concept that has been updated to match modern needs. The philosophy of indoor management
arose as a response to the constructive notice theory. It limits the concept of constructive notice
and protects third parties who are working with or contracting with the company in good faith
or with a good intention. The concept will not apply randomly; there are several constraints
imposed on it, such as forgery, third-party knowledge of irregularity, negligence, when the
third party fails to read the MOA and AOA, and the theory will not apply where the question
involves the company's fundamental survival. Indoor management is a theory that incorporates
the acts made by government personnel while performing their duties.

Q5.
A name clause, a registered office or company location provision, an objective or objects
clause, a liability clause, a capital clause, and an association clause are all included in a
memorandum of association (MOA). MOAs are legal documents that are prepared before a
limited liability company is registered (LLCs).
An MOA's objective is to describe a company's relationship with all of its stakeholders. It
contains the business constitution as well as the articles of association, which are a sort of legal
corporate document.
➢ Clause with a Name: The desired name of the limited liability firm is stated in this
clause. The following are the naming policies that enterprises in the UAE must follow:
• The company name must be original, not identical to or similar to the name or trademark
of another company.
• It should not mention any religious or political affiliations.
• It shouldn't imply that a new company is doing business with an established one.
• Indecent or filthy language should not be used in the business name.

➢ Clause Regarding the Registered Office: This section specifies where the company
operates and where it may be located. The jurisdiction of a registered office, as well as
which court a Registrar of Companies it is registered with, is determined by its
 geographical location. It also includes the full address of the registered office, which
makes communication easier.

➢ Clause of Objectives or Objects: For a memorandum of association, the objects clause,

often known as the objective clause, is required. It defines and limits the scope of a
business's operations. It specifies how funds contributed by members will be used, as
well as the scope of activity the firm will undertake. This clause ensures that stakeholder
funds are protected and used only for defined company goals, rather than being risked
on unrelated ventures. Furthermore, this clarifies why the company was founded. A
firm cannot legally engage in any form of business that is not specified in the class. In
a MOA, the object clause should include the following:
• Nothing is against the law;
• Nothing that is contrary to the country's rule of law;
• Nothing that is detrimental to the general good;
• Any object that isn't in the incidental or primary categories;
• Incidental objects that are required to achieve the company's principal goal;
• Following approval for incorporation, the LLC's major objectives will be pursued.

➢ Clause of Liability: This clause states how each company member is responsible. In a
limited-by-shares firm, each member's liability is restricted to the face value of each
share. The provision establishes the obligation of each individual stakeholder in a
limited by guarantee firm. The clause would not be included in an unlimited company
because all stakeholders are fully responsible for the firm.

➢ Capital Clause: This section contains information about a proposed company's entire
capital. The amount is known as a company's authorised capital. Companies are not
allowed to collect more money than is specified in their authorised capital. This section
must also explain how capital is allocated between preference share capital and equity
share capital. A memorandum of association must include the number of shares a firm
prefers to put into preference share capital and equity share capital, as well as their
value.

➢ Clause of Association: The association clause confirms that all individuals who signed
the memorandum of association at the bottom intend to be a part of the company. The
MOA must have a minimum of seven signatures. The minimum number of signatories
for a private company is two. A public notary is also required to witness the signatures.
A single witness may be present for each of the signatures. In writing, all witnesses and
subscribers must provide their employment and addresses.
Q6.
Companies must borrow money from time to time for a variety of projects in which they are
involved. Borrowing is an essential aspect of a company's day-to-day operations, and no
organisation could possibly function without borrowing from time to time. Companies disclose
balance sheets every year, and you'll be hard pressed to find one without borrowings in the
liabilities section. However, there are some limitations when it comes to taking out such loans.
Borrowings that go above a company's borrowing power may be considered ultra-vires. The
company's constitution is regarded the memorandum of association. It specifies the company's
internal and external scope and region of operation, as well as its aims, powers, and scope. A
firm is only allowed to conduct things that are within the extent of the rights granted by the
memorandum. A corporation can also accomplish anything that isn't directly related to the
memorandum's major goals. Anything that goes beyond the scope of the memorandum's
authorization is an ultra-vires act.
The House of Lords first established the notion of ultra-vires in the classic case of Ashbury
Railway Carriage and Iron Co. Ltd. v. Riche, (1878) L.R. 7 H.L. 653. In this instance, the firm
and M/s. Riche agreed to fund the construction of a railway line under the terms of a contract.
The contract was later annulled by the board of directors because it was ultra-vires of the
company's memorandum. Riche launched a lawsuit against the corporation, claiming damages.
The term "generic contracts" in the company's objects clause, according to Riche, implied any
type of contract. According to Riche, the corporation possessed all of the necessary powers and
jurisdiction to enter into and carry out such transactions. The deal was later ratified by the
majority of the company's owners. However, the company's board refused to carry out the
contract, claiming that the conduct was ultra-vires and that the company's shareholders could
not ratify an ultra-vires act. When the case was heard in the House of Lords, it was decided that
the contract was ultra-vires the company's memorandum, and so null and void. The term
"general contracts" was interpreted in conjunction with the terms "mechanical engineers," and
it was determined that this term only referred to contracts involving mechanical engineers and
not to all contracts. They further claimed that even if every business shareholder had ratified
the act, it would have been null and unlawful since it was ultra-vires the company's
memorandum. Any ultra-vires act cannot be ratified, and the company's memorandum cannot
be altered retrospectively.
This philosophy guarantees the company's creditors and shareholders that the funds will be
used only for the purposes mentioned in the memorandum of incorporation. As a result, the
company's investors may rest certain that their money will not be used for purposes that were
not specified at the time of investing. If a corporation's assets are improperly applied, the
company may become insolvent, which implies its creditors will not be paid. This doctrine aids
in the avoidance of such a predicament. This idea establishes a defined line beyond which
corporate directors are not permitted to operate. It regulates the operations of the board of
directors and prevents them from deviating from the company's mission.
Section 4 (1)(c) of the Companies Act, 2013, specifies that in the memorandum of the company,
all of the objects for which incorporation of the business is intended, as well as any other item
considered necessary in its furtherance, should be indicated.
Whereas, under Section 245 (1) (b) of the Act, members and depositors have the right to file
an application with the tribunal if they have reason to believe that the company's affairs are
being conducted in a manner that is prejudicial to the company's or its members' or depositors'
interests, and to enjoin the company from doing anything that could be considered a breach of
the company's memorandum or articles.

Q9.
The company's existence is unaffected by the insolvency or death of a member. Unless it is
officially wound up or the objective for which it was founded has been finished, a corporation
does not cease to exist. A company's membership may change from time to time, but this has
no bearing on the company's survival. The organisation is distinct from its members. Because
it is an artificial juridical person, a corporation does not die naturally. It is founded by law, does
its business in accordance with law throughout its life, and is eventually obliterated by law. In
most cases, a company's existence is ended through winding up. Companies may, however, use
tactics such as reorganisation, reconstruction, and merging to prevent going out of business.
A corporation is founded by law and will exist until it is destroyed. Even if all of the company's
members are deceased, the company's corporate existence is unaffected. The terms of its
Memorandum define its lifespan. A company's membership may change from time to time, but
this has no bearing on the company's long-term viability. This demonstrates the company's
inexorable succession. Members may come and leave, but the corporation will continue to exist
until it is disbanded. As a result, perpetual succession refers to a company's ability to continue
to exist by adding new members on a regular basis. When a member dies, their legal heirs are
regarded to be the holders of the deceased's shares. They can transfer the shares in their own
name by submitting the relevant legal documents for the transfer.
Therefore, perpetual succession means that a company's membership may change from time to
time without affecting its continuity. Because a business is a separate legal person, it is
unaffected by the death or departure of any of its members, and it continues to exist despite a
complete change in its membership. An incorporated corporation never dies unless it is legally
wound up. The membership of an established business may change because one shareholder
has transferred his shares to another, or because his shares devolve on his legal representatives
upon his death, or because he ceases to be a member under the Companies Act in another way.
As a result, perpetual succession refers to a company's ability to prolong its existence through
a continuous stream of new employees who take the place of those who leave the organisation.
The stipulations of a company's Memorandum of Association define its lifespan. It can exist
indefinitely or for a set period of time to carry out a duty or achieve an objective outlined in
the Memorandum of Association.

Q10.
The firm's Memorandum and Articles are two highly significant documents that must be kept
up to date because they govern the company in different problems. They also assist in the
efficient management and operation of the business throughout its lifespan. That is why each
business must have its own memorandum and articles of incorporation. While both serve as
charter documents for a corporation, a MOA (Memorandum of Association) provides the firm's
basic details, whilst an AOA (Article of Association) contains the company's rules and
regulations. The MOA serves as the company's constitution, while the AOA consists of by-
laws that aid in the company's operation. Before a company can be registered, it must first be
registered with the Registrar of Companies (ROC).
The following are the main distinctions between a memorandum of association and an article
of association:
➢ A Memorandum of Association is a document that lays out all of the conditions that
must be met in order for a company to be registered. The company's Articles of
Association are a set of rules and regulations that govern how the company is run.

➢ The Companies Act is subordinate to the Memorandum of Association, whereas the

Act is subordinate to both the Memorandum of Association and the Articles of
Association.

➢ In the event of a conflict between the Memorandum and the Articles of Association
regarding any clause, the Memorandum of Association will take precedence.

➢ The company's powers and objectives are detailed in the Memorandum of Association.
Articles of Association, on the other hand, contain information on the company's norms
and regulations.

➢ The six clauses must be included in the Memorandum of Association. Articles of

Association, on the other hand, are drafted at the company's discretion.

➢ At the time of company registration, the Memorandum of Association must be

registered with the ROC. It is not necessary to be submitted with the registrar, unlike
the Articles of Association, although the company may do so freely.

➢ A Memorandum of Association establishes the company's interaction with third parties.

Articles of association, on the other hand, control the relationship between the firm and
its members, as well as among the members themselves.
 ➢ When it comes to scope, any actions taken outside of the scope of the memorandum are
null and invalid. Acts that go outside the scope of the articles, on the other hand, can be
ratified by all shareholders voting unanimously.

Therefore, the Memorandum of Association can be considered a crucial document in the

foundation of a business. It is the company's charter. A company cannot be incorporated
without a memorandum. The company's constitution is made up of the memorandum and the
articles of association. Articles of Association, on the other hand, is a document that outlines
the roles and responsibilities of the company's directors and members. It regulates the
company's internal management. It is a fundamental document that, along with the
memorandum, comprises the company's primary constitution and rule book. It describes the
functions of directors and their relationships with other members of the company while also
addressing the relationship between members of the firm. The stipulations of a company's
Memorandum of Association define its lifespan. It can exist indefinitely or for a set period of
time to carry out a duty or achieve an objective outlined in the Memorandum of Association.