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CA Intermediate · Corporate and Other Laws · Incorporation of Company and Matters Incidental Thereto

Ritu, a director of Lotus Products Ltd, claims that the company's Articles of Association can override a mandatory provision of the Companies Act, 2013 relating to the quorum for general meetings. Which statement correctly states the legal position?

Articles of Association are subordinate to the Companies Act, 2013, so any article contrary to a mandatory provision of the Act is void to that extent. Neither a special resolution nor the company being private can validate it, so Ritu's claim fails.

  1. AArticles prevail over the Act if members approve them by special resolution
  2. BArticles can override the Act if the company is a private company
  3. CArticles cannot contain any provision contrary to the Act, and any such provision is void to that extentCorrect
  4. DArticles prevail over the Act for matters of internal management only

Explanation

The Articles are subordinate to the Companies Act and the Memorandum. Any provision in the Articles that conflicts with the Act is void to the extent of the conflict, whether the company is private or public and regardless of a special resolution. Option D is wrong because internal management matters are still subject to mandatory provisions.

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