Q.2 a. What kinds of rights are considerable under consumer rights? [5 marks]

b. Distinguish between Memorandum of Association and Articles of Association. [6

marks]

The Memorandum of Association sets out the company's name, where its registered office is situated (which must be in England and Wales), the fact that the liability of members is limited, its share capital and the purpose for which the company is set up (its objects and its powers).

The Articles of Association of the company are the internal rules of the company. They create a contract between the members or owners of the company and the company itself. If no Articles of Association are filed when the company is incorporated a statutory standard form of articles will apply. In practice, the statutory articles are amended to suit a company's specific requirements. The Articles deal with such matters as the creation, issue, allotment and transfer of shares, the company's borrowing limits and the powers and duties and regulations of directors.

With effect from 1 October 2009, the Companies Act 2006 will introduce major changes to these documents. As a result of the changes the importance of the Memorandum of Association will be greatly reduced. This document will be little more than confirmation of the fact that the initial shareholders wish to form the company and that they have consequently agreed to become members of that company. Revised model forms of Articles of Association will also be introduced which, for private companies in particular, will be much simpler than the existing model form to reflect the simplified legislative framework introduced by the Companies Act 2006

Difference between Memorandum and Articles of Association`



Basis
Memorandum
Articles

1. Purpose
Lays down the charter of the company
Provides the rules and regulations for the internal administration of the company

2. Scope
States the objects and powers of the company
States the way to achieve the objectives stated in the Memorandum of Association

3. Status
It is the basic document of the company
It is the supplementary document or secondary document of the company.

4. Relationship
It defines the relationship of the company with outside world
It mainly guides the relationship between the company and its shareholders.

5. Whether Compulsory or not
Memorandum of Association is compulsory document. Every company should have its Memorandum of Association
A public limited company can opt for the model set of Articles given as Table A of the Companies Act. They need not have separate Articles of Association.

6. Legal effect
Acts done beyond the scope of memorandum are void, or the company cannot ratify such acts
Acts done beyond the scope the Articles can be ratified

7. Alteration
Alteration of Memorandum is a lengthy process
Alteration of Articles of Association is relatively easier