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IIBF LRAB FREE IMPORTANT NOTES ON COMMERCIAL LAWS FOR JAIIB 2022

IIBF LRAB FREE IMPORTANT NOTES ON COMMERCIAL LAWS FOR JAIIB 2022

In this article, you will be reading about the important topics from the LRAB Syllabus 2022 for the preparation of JAIIB Exams 2022. It covers concepts from exam point of view & will help you understand MOA & AOA.

The JAIIB Law notes are very important especially for the candidates preparing the JAIIB paper whether in June or in November!

 

COMMERCIAL LAWS WITH REFERENCE TO BANKING OPERATIONS

Memorandum of Association & Articles of Association are both the legal documents which are required when a company is getting Incorporated. 

Memorandum of Association talks about the relationship between the company and the outsiders while articles of association define the regulations under which the company is required to operate.

DEFINITION: MOA

Memorandum of Association, also referred to as MOA, is the utmost important document which contains all the information of the company (such as the objects of the company, powers, and scope of a company i.e the range of activities it is allowed to undertake, etc.) at the incorporation time. 

It is a public document, therefore, accessible by the same users who use financial statements of a company. It also contains the names of the shareholders along with their shareholdings and the address of the registered office of the company which is getting incorporated.

No company can be incorporated without a memorandum of association. A company gets registered with the Registrar of Companies (RoC). 

By default, it is always assumed that any person who is dealing with the company such as shareholders, investors & creditors have already read the Company’s Memorandum of Association which contains the object and area of operations of a company. It is also referred to as ‘the charter of the company’.

JAIIB SYLLABUS PRIORITY

PPB Syllabus Priority 2022
AFB Syllabus Priority 2022

CLAUSES OF MEMORANDUM OF ASSOCIATION

Name Clause: Companies cannot register with a name that resembles an already registered company or even a name the central government thinks is unfit for the company.

Situation Clause: Every company which is getting incorporated is required to specify the name of the state where the company’s registered office is located & if there is no permanent office has been set up at the time of incorporation then address of the temporary office could be given.

Object Clause: This clause requires that MOA must contain the primary objectives as well as the auxiliary objectives and vision of the company. 

Liability Clause: This clause something is all the details in regard to being members’ liability as to whether the liability is limited or not & if limited up to what amount. 

Capital Clause: This clause contains all the details regarding the capital of the company such as authorized, subscribed, and paid-up capital, etc.

Subscription Clause: It contains all the details of the subscribers to the memorandum of association, the shares that will be taken by the subscribers and witnesses, etc.

DEFINITION: AOA

Articles of Association (AOA) is the secondary document, referred to as AOA (by its initials), is a secondary document in which the rules and regulations are made for administration and day-to-day management of the company. 

In addition to the above, AOA also contains the responsibilities, the powers, the rights and the duties of members and directors of the company as well as also contains information about the books of accounts and the audit of the company.

Each and every company is required to have its own articles of association. Although a public limited company instead of preparing its own articles of association can adopt Table-F

Articles contain all the details of internal affairs and the management of the company. It is prepared basically for the internal persons such as members, employees, directors etc. of the company to guide them in regard to the internal affairs of the company. 

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JAIIB/CAIIB Full Video Course

 

A company is governed as per the rules described in the articles. This way a company can frame its own rules as per its own requirements and choices.

Articles contain every information of every process, starting from the appointment of directors today implementation of initial and marketing plans of the company. 

It is a kind of rule book of the company which is required to be followed strictly. These also fall under the category of public documents but they also affect the employees of the company because it is basically the internal rulebook of the company. 

All the clauses contained in articles define the overall working of a company, procedures that need to be implemented, etc.

The article is a contract between the company and its members as well as between the members themselves wherein the rights and duties of members and directors are specified. It has to be noted that the provisions of the association of articles should not conflict with the provisions of the memorandum of association. If any conflict arises between the two then the memorandum of association will prevail over articles of association. 

COVERAGE:-

Articles of association cover aspects of powers, duties, rights, and liabilities of directors and members; rules framed for the meetings of the company; dividends; calls on shares; transfer, forfeiture, and transmission of shares; voting power of members, etc all fall under its purview. 

Articles of association can be in any of the forms that have been specified in tables B, C, D & E of the first schedule given in the Companies Act.

Note: MOA is a fundamental document while AOA is a subsidiary document, both of whose samples are available at MCA web portal.

ALTERATION OF ARTICLES OF ASSOCIATION:-

Subject to the provisions of Companies Act as well as Memorandum of Association (MOA), a company can change the provisions of its AOA by passing a special resolution at the General Meeting. 

Provided that such change does not affect the conversion of a public limited company into a private company.

When these articles get registered with RoC binds the company and its members to the same extent as if it was signed by the company and by each member.

MEMORANDUM OF ASSOCIATION VS. ARTICLES OF ASSOCIATION 

Both the documents, MOA & AOA, are two charter documents which require companies to be set up. MOA sets the constitution of the company and AOA contains rules and regulations designed to operate the company. 

These two documents are required to be registered with the Registrar of Companies at the incorporation time. 

To comprehend the difference between the two documents, please go through the below-written text:

BASIS  MOA AOA
Meaning Have all the fundamental information which is required to get the company Incorporated.  Contains all the governing rules and regulations of the company. 
Type of Information contained Company’s powers and objective  Operating rules of the company 
Status Subordinate document to be Companies Act  Subordinate document to the MOA 
Retrospective Effect Any amendment in MOA cannot be made retrospectively.  Amendments in AOA can be done retrospectively. 
Major contents Have 6 clauses  Please can contain as many provisions as the company desires. 
Obligatory Mandatory for all the companies  Private companies have to frame their AOA. 
Compulsory filing at the time of Registration Must  Is not a requirement. 
Alteration Changes can be done through special resolution in AGM along with the previous approval of the Central Government  Changes can be done by passing a special resolution at AGM 
Relation between Company & outsider. Company & its members;

among the members inter se.

Acts done beyond the scope Void Shareholders can be ratified by unanimous voting.
Inconsistency MOA will prevail over AOA AOA will not prevail if it’s inconsistent with MOA

 

Being the two most important documents of a company, they provide guidance in various matters related to the company. They help in managing and reading the company throughout its existence. This is one of the main reasons why memorandum and articles are required at the time of incorporation of the company.

Getting a company registered in itself is an overwhelming process. The simple reason is because of the involvement of so many documents that are required to be prepared and submitted to various authorities which is a tedious task. 

JAIIB SYLLABUS PRIORITY 

PPB Syllabus Priority 2022
LRAB Syllabus Priority 2022
AFB Syllabus Priority 2022

 

Incorporation excuse giving a company a legal identity and making it more reliable to get into contact with. There are different clauses including all the details of every working area of the company.

After the incorporation of a company, if the company decides to enter into an area of work which wasn’t previously mentioned in the memorandum of association, then it means to be altered. 

This alteration or change can be made by filing MGT-14. 

This is all about the MOA & AOA of the companies.

 

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