Doctrine the memorandum and the articles of association

Doctrine of constructive notice can be
defined as a company’s memorandum and articles of association are registered
with the Registrar of Companies and then the memorandum and articles become
public documents (Gajjar. K, 2017). These documents are all open and accessible
to the public (Gajjar. K, 2017). Under the Old Act 1965 of the doctrine of
constructive notice, anyone who has been deal with a company to review the
documents is to ensure that his contract is in conformity with their provisions
(Gajjar. K, 2017). In other words, an individual is supposed to have a notice
of the contents of the memorandum and the articles of association when executing
a contract with a company (Gajjar. K, 2017).

Section 39 of New Companies Act 2016 has
abolished the doctrine of constructive notice as there is no relevance and it
is unfair to outsiders dealing with the company. In other words, the
constitutions are no longer compulsory, the new Act do not apply this doctrine
except for documents relating to charges instrument (Easylaw, 2017). An
individual who deals with the company is not deemed to have notice or knowledge
of the contents that relating to the company’s constitution or document has
been registered through the Registrar or is available for inspection at the
registered office of the company (Easylaw, 2017). A company shall be capable of
exercising an incorporated company’s functions as well as have the capability
that is either to continue or undertake any other business activities while
without the requirement to have a constitutions under the New Companies Act
(Shin. O, 2017).

Even
though approached is a necessary way that is taken under section 39 of the CA
2016 which to protect a party that dealing with the companies. However, there
is a vital had to notice that whether any person who has been deal with the
company has the company’s objects of the notice which is not relevant to the
validity of the transaction where the transaction is ultra vires in the manner (Skrine,
2017). In the Companies Act 2016, the doctrine of constructive notice is
abolition and that there is not limit the operation of ultra vires (Skrine,
2017). The parties will only be protected of absence of notice where there is a
situation in lack of authority or abuse of corporate powers (Skrine, 2017). Yet,
it is doubtful that an individual who are dealing with the company which is
able to claim in a circumstance of without notice where it has been provided
with a copy of the company’s constitution (Skrine, 2017).

The effect of the doctrine of constructive notice it is a tough for any
person who involved. And it does not take notice of the realities of business
life (Xalxo.
A, 2016). Generally, most of the public would know and
understand a company by its officers but not through its documents (Xalxo. A, 2016). An example of the impact of the new provisions
has showed that the practical the rule of constructive
notice by a case of Kotla
Venkataswamy v Chinta Ramamurthy. In this case, there is an argument whether
the mortgage bond was validly implemented as per the company’s articles of
association as the company has to responsible (LawTeacher, 2018). The managing
director, the secretary and the working director on behalf of the company are required
to sign all of the documents. The plaintiff accepted a deed of mortgage implemented
by the secretary and working director only (LawTeacher, 2018). Yet, the court said
that the plaintiff, notwithstanding acted in good faith and consequently the
plaintiff is unable to claim under this deed (LawTeacher, 2018). And then the
court held that the plaintiff must have to discover a deed. For instance, she
is required to execute by three specified officers of the company and also she required
to refrain from accepting a deed inadequately signed (LawTeacher, 2018).

There is an impact in
this rule which is whether the person had reads the documents or not, it shall
be deemed that he has read these such documents in detail (Xalxo.
A, 2016).  After that, to decide the exact company’s
powers to access into agreement, the extent to which these powers
have been delegated to the boards of directors and the restrictions to
such powers (Xalxo. A, 2016). Also, assumed
that anyone who have to understand the meaning properly but not merely to have
read the constitution of the company
(Gajjar. K, 2017). And all of these
documents must be read together in the event of any ambiguity. However,
the contract will become void as someone who entering into a contract that
is ultra vires the memorandum or beyond the powers of the board of
directors conferred by these documents, and thus he cannot enforce it,
not-withstanding the fact that he performed in good faith and money was
applied for the company’s purposes (Xalxo. A, 2016).

In other case of Re Jon Beauforte (London)
Ltd, there is a
firm is manufacturing the clothes, however it had instead to carry on the
business of veneered panels (LawTeacher, 2018). The company was
conducted this combination of actual knowledge of the business and also of the constructive
notice of its objects caused in wholly but then there is one creditor who was
claimed as ultra vires (LawTeacher, 2018). Thus, the court found
that the impact of this rule is that where the company was executing the
business were known to the third party and whether he is ultra vires or not, he is failure to sue the company (LawTeacher,
2018).