# Legal Effect of Memorandum and Articles of Association (Section 10)
## The Statute
Subject to the provisions of the Act, the memorandum and articles, when registered, shall bind the company and the members to the same extent as if they had respectively been signed by the company and by each member, and contained covenants on their parts to observe all the provisions of the memorandum and articles.
All monies payable by any member to the company under the MOA or AOA shall be a debt due from him to the company.
## The Four Binding Equations
| # | Binding direction | Status |
|---|
| (a) | Company to Members | Yes — bound |
| (b) | Members to Company | Yes — bound |
| (c) | Members to Members inter se | Normally NOT bound directly (only through the company) |
| (d) | Company to / by Outsiders | NOT bound — the MOA/AOA do not bind the company to outsiders |
## Why 'Outsiders' are Excluded
The MOA/AOA form a contract between the company and its members in their capacity as members. A solicitor, a supplier, or a third-party manager named in the articles cannot enforce the articles, because they are not a party to the statutory contract.
## Quasi-Member Twist (Rayfield v Hands principle)
Where members happen to also hold positions like directors, a duty cast on them in their character as members (e.g., 'directors who are members must buy retiring members' shares') can be enforced — because the obligation is on them as members, not as directors.
### Example 1
Example (Member ↔ Company) — Borland's Trustee v Steel Bros & Co Ltd: Articles of Steel Bros & Co Ltd provided that on a member's bankruptcy his shares would be sold to a person and at a price fixed by the directors. Borland was adjudicated bankrupt. His trustee in bankruptcy contended that he was not bound by these articles and could sell the shares at true value. Held: the articles formed part of the original incidents of the shares. Having bought the shares on those terms, Borland (and through him, his trustee) was bound to comply.
### Example 2
Example (Company ↔ Member) — Wood v Odessa Waterworks Co: The articles of Odessa Waterworks Co provided that 'the directors may, with the sanction of the company at general meeting, declare a dividend to be paid to the members.' Instead of cash, the company resolved to pay dividend by debenture bonds. Mr. Wood, a member, sued to restrain the directors. Held: 'to be paid' prima facie means in cash; debenture bonds are not cash. The company was bound by its articles in favour of the member.
### Example 3
Example (Member ↔ Member) — Rayfield v Hands: Mr. Rayfield held shares in a company whose Article 11 required him to inform the directors of his intention to transfer his shares; the directors (who were themselves members) were to take the shares equally between them at a fair value. When Rayfield gave such notice, the directors refused, arguing the articles could not bind them in their capacity as directors. Held: they were treated as members under the article, and were compelled to take Rayfield's shares at fair value. Thus, even though members are not generally bound to each other through the articles, a clause that creates an obligation on them qua members will bind them.