It is infact a charter of a company.
"The memorandum defines the limitations of the powers of the companyit contains in it, both that which is affirmative and that which is negative. It states affirmatively the ambit and extent of vitality and powers which by law are given to the corporation, and it states negatively, if it is necessary to state, that nothing shall be done beyond that ambit.
"It sets out the constitution of the company, it is so to speak the charter of the company, and provides on which the structure of the company is built. The importance of the memorandum lies in the fact that it defines the scope of companies' activities as well as its relation with the outside world. Its purpose is to enable the shareholders, creditors and those who deal with the company to know what its permited range of its enterprise.
The Articles of Association of a company are the internal regulations which govern the management of the internal affairs of a company. The articles are meant to regulate the internal affairs of a company. The members have full control and may by resolution alter them as they think fit so long as they do not exceed the limits defined by the memorandum or the Companies Act.
The Companies Act defines Articles of Association as: "Articles means the articles of association of a company as originally framed or as altered from time to time in pursuance of any previous companies for this Act."
Thus it would be seen that the "Articles of a company are its bylaws or rules and regulations which govern its internal affairs and the conduct of its business. They are of vital importance to the company in as much as they deal with the rights of the members of the company in Ash bury Railway carriage and iron Ltd v Riche (1875) LR 7HL 653 in the following words:
"The articles play a part subsidiary to the memorandum of association. They accept the memorandum as the charter of incorporation of the company, and so accepting it, the articles proceed to define the duties, rights and powers of governing body as between themselves and the company at large, and the mode and form in which it business of the company is to be carried on, and the mode and form in which changes in internal regulations of the company may from time to time be made.
The scope of the so called statutory contract under section 20, Companies Act, has been as Lord Greene M.R said