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CA Foundation · Business Laws · The Companies Act, 2013

Kapoor Traders Ltd's Articles contain a clause that conflicts with a mandatory provision of the Companies Act, 2013. A director argues that the Articles should prevail because members approved them. What is the legal position?

The Companies Act prevails, and the conflicting clause in the Articles is void to the extent of the inconsistency. Articles are subordinate to the Act and cannot override its mandatory provisions, even if members approved them by a special resolution.

  1. AThe Act prevails and the conflicting clause is void to that extentCorrect
  2. BThe Articles prevail since members agreed to them
  3. CBoth are valid and the board may choose between them
  4. DThe clause is valid if approved by a special resolution

Explanation

Articles are subordinate to the Companies Act. Any provision in the articles that contravenes the Act is void to the extent of the conflict. Even a special resolution cannot validate it, so the option favouring members' approval is wrong.

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